9911796707
TMI Blog1974 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ich right he renounced in favour of his minor daughter was not includible in the assessee's net wealth under section 4(1)(a)(ii) of the Wealth-tax Act, 1957 ? " The relevant assessment years are 1958-59 to 1962-63 and the valuation dates corresponding thereto are the last dates of the respective preceding calendar years. Krishan Mohan, the assessee, was a shareholder in Motor General Finance Ltd. The said company proposed to increase its subscribed capital by allotment of further shares which it offered to the existing shareholders. The assessee became entitled to a " right " to acquire further shares at their face value of Rs. 10 per share. The assessee got this " right " on two occasions. On both occasions, he renounced his " right " in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his court, was also dismissed by the Tribunal. On his application, this court, however, framed the above question and directed the Tribunal to state the case and refer it under section 27(3) of the Act. Mr. R. H. Dhebar, the learned counsel appearing on behalf of the revenue, contended that what the minor unmarried daughter acquired were the assets worth Rs. 40 per share, out of which she paid Rs. 10 only from out of her own funds. The assets held by her on the valuation date of the balance value to the extent of Rs. 30 per share were held under a transfer from the assessee to her otherwise than for adequate consideration. This, therefore, said Mr. Dhebar, was a clear case which attracted clause (ii) of section 4(1)(a) of the Wealth-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company proposes to increase its subscribed capital by allotment of further shares is governed by section 81 of the Companies Act, 1956. According to clause (b) of its sub-section (1), the offer of further share is required to be made by notice limiting a time, not being less than 15 days from the date of the offer within which the offer if not accepted is deemed to have been declined. Under the relevant part of clause (c) of the said sub-section, the offer aforesaid is deemed to include a right exercisable by the person concerned to renounce the shares offered to him in favour of any other person. Under sub-section (2) of section 81, nothing in clause (c) of sub-section (1) is deemed to extend the time within which the offer should be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, and then on June 20, 1959. There is no dispute that on the last day of the calendar year, which is the valuation date for each of the assessment years in question, these rights had already been exercised, and the shares offered had been purchased. The "right ", thus, had been exhausted and extinguished and did not exist. There was, therefore, nothing, on the valuation date, of the said "right to acquire further equity shares ", which had been transferred by the assessee to his unmarried minor daughter, which could be said to be still held by her. The said "right " had been extinguished by its exercise, and the question of its valuation cannot arise. Mr. Dhebar contended that section 4 has introduced a legal fiction and, therefore, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly shows that the value has to be ascertained of " such assets " as have been transferred by the assessee to the minor and which are held by the minor on the valuation date. In this case, the minor was holding shares and not the " rights " which the assessee had transferred to her. The two are basically different in nature and are quite distinct and different from each other. The mere right to acquire further shares may never be exercised and may become of no value after a given time, if it is not exercised during that time. The shares, on the other hand, have a permanence and do not have such a transitory value. The assets held by the minor on the valuation date were, therefore, entirely different from the assets which had been transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for inclusion in his net wealth, the value of "the equity shares" purchased by the daughter. Mr. Dhebar's contention, accordingly, is not sound. The Tribunal, in our opinion, was, therefore, right in holding that on the valuation date " the right " had ceased to exist and the same was exhausted on the minor acquiring the shares. There was, therefore, no asset in the hands of the minor daughter, which had been transferred to her by the assessee and which required to be valued for the purpose of inclusion in his net wealth. The question referred to us, therefore, has to be and is answered in the affirmative, that is, in favour of the assessee and against the revenue. In the peculiar circumstances of the case, however, there shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
