TMI Blog2010 (10) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... share holder of the company. These shares were transferred to the assessee and thereafter she became member share holder. The shares of the company were in physical form only. The Assessing Officer further observed that in the return of income the assessee has shown the computation of long term capital gain as under :- Statement of Long term Capital gain on sale of shares Details of shares sold Name of the company:- The Mysore Arts Woods Works Co. Pvt. Ltd. No. of shares sold 80 Nature of share sold Ordinary shares. Name of buyers : Mr. Mohammed Sayeed Kadli Mrs. Sameena Abdul Kadli Date of Acquitsition No. of Shares 18/12/1956 Date of sales 10/01/05. Calculation of Capital gain: 80 1) Sale consideration 2) value as on 01/04/1981 698080 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 5,00,000/- in the bonds of Rural Electrification Corporation Ltd. and claimed the benefit of provisions of section 54 EC of I.T. Act. In the submission in respect of the capital gain on shares the assessee himself relied on the break up method which is most suitable. Vide order sheet noting dated 28.09.07 the assessee was asked to explain as to why the value of shares should not be adopted as per the provisions of Rule 1D of Wealth Tax Act on the basis of the balance sheet as on 01.04.81. In response to the same the assessee submitted that : As per section 55(2)(b) the cost of shares sold shall be at the option of assessee the fair market value of the shares as on 01.04.81. The assessee has determined fair market value of the shares on the basis of values of the assets of the company as per the report of the approved registered valuer given the value of assets on 01.04.81 and copy of the valuation report has already submitted by assessee. The assessee has taken the fair market value as per proper and scientific manner of calculating fair market value. This method is most proper and scientific. This is based on knowledge and science of valuation of shares of unquoted compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2494.17 Furniture Fixture Current Assets 128.96 (i) Rent due 39437.82 (ii) Others 2800.00 (iii) Cash 49.45 (iv) Bank 910.57 (v) Sundry Deposits 1106.37 (vi) Advance Income Tax 10676.89 (vii) Preliminery exp. 1060.62 (A) 64780.82 Profit Loss A/c. (Loss) 171028.30 (B) Liabilities (a)Unsecured loans (b)Current liabilities 81890.27 i. For expenses 1615.00 ii. For Advance received 24303.85 107808.27 Net surplus over liabilities = (A) (B) = 64780.82 107808.27 = (-) 43027.45 Total No. of fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f being heard to the appellant. 5. At the time of hearing the ld. Counsel for the assessee submits that he does not want to press the above ground which was not objected to by the ld. DR . This being so, and in the absence of any supporting material, the ground taken by the assessee is, therefore, rejected. 6. Ground No.2.1, 2.2 and 3.1 read as under :- 2.1 The ld. CIT(A) erred in confirming the action of the Assessing Officer in which the Assessing Officer had substituted the fair market value, as adopted by the appellant, by the value as per Rule 1D of the Wealth Tax Rules, 1957. 2.2 It is submitted that in the facts and the circumstances of the case and in law, no such substitution was called for. 3.1 Without prejudice to the above, the ld. CIT(A) erred in not calculating the tax liability of the assessee in a proper manner as per the provisions of the Income tax Act, 1961. 7. At the time of hearing, the ld. Counsel for the assessee while reiterating the same submissions as submitted before the Assessing Officer and the ld. CIT(A) further submits as under :- Mysore Arts and Wood Works Co. Pvt. Ltd. [ the Company ] was incorporated on dated 06.09.1941 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 ITR 727 (Cal)] CIT v/s. General Assurance Society Ltd. (v) [(1997) 223 ITR 25 (AP)] CGT v/s. Smt. K.V. Rajyalakshmi C. In any case, Rule 1D was not in Statue Book during the previous year. In fact, even Schedule III, Part C Shares in or debentures of Companies has been omitted by Finance Act, 1992, w.e.f. 01.04.1993. 3. Reliance was also placed on the following decisions:- 1. Dy. CIT v/s. Rohtas Project Ltd. {(2006) 100 ITD 113 (Luck) (TM)} 2. Sixth Wealth tax Officer v/s. B.R. Shelly-{(1986) 16 ITD 76 (Bom)} 3. Shanti Complex v/s. ITO {(1997) 63 ITD 181 (Pat) (TM)} 4. Smt. Neena Syal v/s. ACIT {(1999) 70 ITD 62 (Chd)} 5. CGT v/s. Smt. Kusumben D. Mahadevia {(1980) 122 ITR 38 (SC)} 6. Addl. CIT v/s. Smt. Indira Bai {(1985) 151 ITR 692 (AP)} 7. CIT v/s. Rajiv Gupta {(2007) 292 ITR 263 (Del)} 8. ACIT v/s. Mariwala Family (No.2) Trust {(2006) 8 SOT 38 (Mum)} 9. Smt. B. Subhadra v/s. ITA {(2005) 92 ITD 285 (Hyd)} 10.Smt. Madhu Tyagi v/s. Dy. CIT {(2008) 19 SOT 612 (Del)} 11.G.L. Sultania and Anr. v/s. SEBI {(AIR 2007 SC 2172)} 12.ICBI (India) (P.) Ltd. v/s. JCIT {(2008) 166 Taxman 123 (Bang) (Mag.)} 13.Calculation of fair m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bentures was also omitted by the Finance Act, 1992 w.e.f. 1.4.1993, therefore, the same is also not applicable in the assessee's case pertaining to the assessment year 2005-06. Per contra the case of the revenue is that in view of the decision of the Tribunal in Ayesha Ashok Soni (supra), the valuation of fair market value of unquoted shares as on 1.4.1981 can be made as per Rule 1D of the I.T. Rules. 10. After considering the arguments of both the sides we do not find merit in the plea of the ld. DR that the valuation of fair market value of unquoted shares as on 1.4.1981 can be made as per Rule 1D of the Wealth tax Rules as the same i.e. Rule 1D has been omitted by the (Second Amendment) Rule, 1989 w.e.f. 1.4.1989 and Schedule-III of the Wealth tax Act has been omitted by the Finance Act 1993, w.e.f. 1.4.1993, therefore, the same cannot be applicable to the assessee's case for Assessment Year 2005-06. 11. In the case relied on by the ld. DR in Ayesha Ashok Soni (supra) it has been observed and held by the Tribunal that for determining fair market value of unquoted equity shares as on 1st April, 1981, for the purpose of computing capital gains, the breakup method as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute. 14. Applying the ratio of the above decisions to the facts of the present case we find that the fair market value of the shares as on 1.4.1981 is to be worked out as per relevant provisions of the Income tax Act. Since the Assessing Officer has failed to apply the correct method of valuation of fair market value of shares as on 1.4.1981 and has not considered the net worth certificate filed by the assessee and also failed to consider the valuation report of the valuer valuing the land and building of the company at ₹ 112.21 lacs, we are of the view that in the interest of justice the matter should go back to the file of the Assessing Officer and accordingly we set aside the orders passed by the revenue authorities on this account and send back the matter to the file of the Assessing Officer who shall decide the same afresh in the light of our observations herein above and according to law after providing reasonable opportunity of being heard to the assessee . The gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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