TMI Blog1977 (11) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... and not as at Rs. 134.82 per share ? " T. C. No. 595 of 1975 " Whether, it has been rightly held that shares of M/s. T.V. Sundaram Iyengar Sons (P.) Ltd. should be valued for gift-tax assessment at Rs. 107.58 per share and not as at Rs. 133.63 per share ? " The year of assessment in T.C. No. 588 of 1975 is 1971-72 and that in T.C. No. 595 of 1975 is 1973-74. Two gift deeds are the subject-matter which gave rise to these references, one dated March 22, 1971, in the earlier case and the other dated March 28, 1973, in T.C. No. 595 of 1975. These gifts dealt with shares in M/s. T. V. Sundaram Iyengar Sons (P.) Ltd. It will be noticed that the gift deeds were executed almost at the end of the years 1970-71 and 1972-73. The assessees s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be valued at the lower figures that we have mentioned earlier. A reference has been made at the instance of the revenue and it was contended before us that the Tribunal has erred in applying the lower figures and the value of the shares should have been fixed at the higher figures. We shall now turn to the statutory provisions in the Gift-tax Act and the Rules. Section 6 dealing with the method of determination of value of gifts is in these terms : " (1) The value of any property other than cash transferred by way of gift shall, subject to the provisions of sub-sections (2) and (3), be estimated to be the price which in the opinion of the Gift-tax Officer it would fetch if sold in the open market on the date on which the gift was made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in its articles of association regarding the transfer of shares. The fact that the company is a private limited company and that there is not the freedom to deal with the shares held in such a company will not affect the question as to the possible value the shares would fetch had they been sold in the open market on the date of the gift, for the principle has been laid down that even in such cases, it should be assumed that the shares were capable of being sold freely in open market and that there would be purchasers for the same. Therefore, it is necessary to ascertain what the shares, even of a private limited company, would fetch, if sold in a hypothetical market which may not really exist. This has been laid down by the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company. Others who are desirous of dealing with shares as frequently as fancy takes them or those who want to deal with shares with a view to make profits as occasion demands will certainly fight shy in investing in shares in a private limited company. In other words, the effortlessness with which the shares held in a good concern which is not a private limited company can be transferred will not be available in the case of shares held in a private limited company; such shares cannot so easily be transferred. If we do not take this fact into consideration, we will be making an unrealistic approach and courts have not been guilty of such an approach for there is a wealth of case law on the subject that this factor must be borne in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the figures Rs. 107.34 and Rs. 107.58 had been reached. The Tribunal has accepted these figures apparently without noticing the double depreciation adjustment that has been claimed. The question whether the value given in the balance-sheet as existed at the time of the gift deeds should be taken as the market value and if so, what depreciation, if any, should be made on those figures are matters which have to be decided by the Tribunal after taking into consideration all the relevant factors. We are, therefore, unable to answer the questions that have been referred to us and in view of the fact that the Tribunal has not considered these matters before passing the orders in the cases, we consider that we should adopt the principle that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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