TMI Blog2012 (10) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... given under Rule 11, we are neither treating the shares as unquoted shares, nor are we ignoring the fact that the company's shares are quoted shares. Though the assessee is not in a position to show what could be the depreciated value of the restriction on the transfer, even invoking Rule 21, as had been done by the Revenue, we find that Rule 11 could only be a plausible method to arrive at the depreciated value of a quoted share, which suffers a lock-in period, by reason of it being allotted as a promoters' quota. Appeal decides in favour of revenue & case remand back to AO - Tax Case (Appeal) Nos. 1498 to 1502 of 2005, 123 to 126, 164, 165, 1156 & 1161 of 2006 - - - Dated:- 13-7-2012 - Mrs. Chitra Venkataraman and K. Ravichandrabaabu, JJ. T.R. Senthil Kumar for the Appellant. C.V. Rajan for the Respondent. JUDGMENT Mrs. Chitra Venkataraman, J.- The following are the substantial questions of law raised in these Tax Case Appeals filed by the Revenue as against the order of the Tribunal. (i) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the shares owned by the assessee could not be valued as per the rate quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the price which the said property would fetch, if sold in the market on the valuation date, should be adopted. Thus the value of the property on the valuation date will prevail over the purchase price and any restrictive covenant thereon on the dealing of the property would have to be ignored. The Commissioner pointed out that when a share is quoted in the stock exchange, the quoted price would be normally taken in valuing the share (Refer Rule 9). Rule 9A provides for exception to Rule 9. However, where the stock exchange quotations are not available, in the sense that the shares are unquoted shares, Rule 11 of the Schedule would be the relevant Rule for the purpose of arriving at the value of the shares. In the given situation, the Commissioner of Wealth Tax (Appeals) pointed out that once the stock exchange quotations are not applicable to the particular lot of promoter quoted shares held by the assessee, the proper course would therefore be Rule 11 of the III Schedule. Thus, the Commissioner pointed out that the valuation taken in the Income Tax Act proceedings could not be adopted as such for the Wealth Tax Act in view of the concept of "fair market value" of the asset as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertained on the basis of break-up method has to be further depreciated to some extent, keeping in mind the restriction contained in the Articles of Association. Learned counsel appearing for the assessee pointed out that considering the lock-in period, the assessee had the disadvantage of dealing with the shares in the open market. Hence, the question of considering the free transferability as in the case of shares available in the market did not arise. Consequently, there could be no question of adopting the value quoted in the stock exchange. 8. Heard learned counsel appearing on either side and perused the material placed on record. 9. In the decision in S. Venu Srinivasan's case (supra), which, in turn, followed the decision in R. Rathinasabapathy Chettiar's case (supra), this Court had an occasion to consider the case of a Private Limited Company and there were restrictions incorporated in the Articles of Association regarding the transfer of shares. On the question as to whether such restriction would result in the reduction of the value of the shares, this Court pointed out that the fact that the company is a Private Limited Company and there was no freedom to deal wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company. Rule 10 deals with valuation on unquoted preference shares. Rule 11 is about valuation of unquoted equity shares in companies other than investment companies. Part H makes provision for valuation of assets which are not covered under Rules 3 to 19. Rule 20 provides for valuation of assets whose price or consideration are covered by restrictive covenants in any instrument of transfer. As already seen in the preceding paragraphs, the decision in Addl. CIT v. Seth Devi Chand Sons [1978] 111 ITR 724 (All.) clearly pointed out that the mere fact that the restrictions on the transferability of the shares would not affect the question as to the possible value that the shares would fetch, had they been sold in the open market. While holding that even though market value as a concept would hold good even in respect of shares suffering restriction on their transferability, this Court pointed out the need for assigning a depreciated value to such market value. This Court pointed out that since these shares, in reality, would not fetch the same amount of price as the shares enjoying easy transferability, the shares could not be treated on par more or less with the shares which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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