TMI Blog2005 (6) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... hare." 3. On the sale of 51,252 equity shares of a company known as Panchmahal Steel Ltd. the assessee in its return of income has shown a long-term capital loss at Rs. 1,08,27,497, computation of which is as under:- Sale consideration of 51,252 Equity shares @ Rs.150 per share Rs.76,87,8000 Less: Cost of acquisition of equity shares acquired by the company prior to 1-4-1981. The fair market value of shares is substituted under section 55(2)(b)(i) of the Income-tax Act, 1961. The FMV of shares as on 1-4-1981 works out at Rs. 162 per share as per valuation certificates of M/s. Amal Dutta Associates, Chartered Accountants approved valuer Rs. Rs.1,85,15,297 (51252 equity shares X 162 FMV X 223 (index for 1992-93) -------------------------------------------------------- 100 (base cost index) ---------------- Rs. 1,08,27,497 ----------------- The said shares were acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,26,25,903-(B) --------------- Net surplus of assets over liabilities (A) minus (B) 2,45,33,613-(C) Total No. of fully paid up equity shares 3,00,000-(D) Break-up value of each fully paid equity Share (face value of Rs. 10) 2,45,33,613 --------------- 3,00,000 = Rs. 81.78 Market value of each share: Rs. 81.78 @75% = Rs. 61.33 i.e., 75% of break-up value COST OF ACQUISITION AS ON 1-4-1981 = Rs. 61.33 of equity shares of Panchmahal Steel Ltd." Thus the Assessing Officer worked out long-term capital gain of Rs. 6,78,274 as against long-term loss computed by assessee at Rs. 1,08,27,497. For arriving at a conclusion that the method of valuation shown by the valuer of the assessee would not be accepted in preference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mani Steels Rs. 10 Rs. 12.00 5. Mukund Iron Rs. 10 Rs. 22.00 6. Modela Steels Rs. 10 Rs. 18.00 7. Gujarat Mini Steel Rs. 10 Rs. 28.00 8. Kanara Steels Rs. 10 Rs. 11.00 9. Bhoruka Steel Rs. 10 Rs. 68.00 10. Anil Steel Rs. 10 Rs. 13.00 11. Andhra Steel Rs. 10 Rs. 15.00 The above few citations of shares quoted on the stock exchanges at Bombay and Ahmedabad gives the picture that none of the steel company's shares were quoted as high as of Rs. 162 as valued by the Regd. Valuer. Even the most leading Steel Giant in India i.e., Tata Steel Iron's shares were quoted at Rs. 142.45 (face value of Rs. 100). Thus, there is no justification in valuing the shares at Rs. 162 of Panchmahal Steel Ltd., even on the basis of yield method. Therefore, the most appropriate method to value the shares is available by applying Rule 1D of the Wealth-tax Rules, which is prescribed for valuing the un quoted shares of any Company (other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Bharat Hari Singhania Rule 1D was mandatory. Therefore, he pleaded that the order of CIT(A) should be reversed and that of Assessing Officer should be upheld. 5. Against the pleadings of ld. DR, the ld. counsel of the assessee placed before us the decision of this Tribunal for assessment year 1993-94 in the case of Minaxi B. Patel v. Dy. CIT [IT Appeal No. 2922 (Ahd.) of 1996, dated 29-8-2002]. He contended that a similar question had come before the Tribunal wherein the Assessing Officer had adopted the value of unquoted shares as on 1-4-1981 on the basis of yield method at Rs. 5.8 per share as against assessee's claim for break up method and the value as per Wealth-tax record which was Rs. 18.94 per share. This Tribunal after reproducing the quotation from the decision of Hon'ble Supreme Court in the case of Bharat Hari Singhania has observed in para 2 as under:- "2. The first issue in this appeal is relating to ascertainment of the market value of shares as on 1-4-1981 for exercise of option under section 55(2). The Assessing Officer adopted Rs. 5.8 per share based on yield method as against assessee's claim for break up method and the value as per wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not adopt either, the method favourable to the assessee should be adopted We also find a direct decision of the Madras High Court rendered in connection with computation of capital gain under section 55(2) itself in CIT v. S. Balasubramanian 159 ITR 288 accepting the break up method as appropriate. There are some decisions which state that a rule prescribed under one enactment can be adopted for the other. Rule 1D was applied in Estate Duty by the Mysore High Court in the case of CED v. J.K. Krishnamurthy 96 ITR 87, Madhya Pradesh High Court in the case of Shyam Sukh Card v. CED 63 CTR 35. We, therefore, direct the Assessing Officer to adopt the break up method as was adopted in wealth-tax assessment of the assessee in assessment year 1980-81 and work out the value of the shares in accordance therewith." Read from italics portion he vehemently contended that according to the conclusion of the Tribunal in the aforementioned case, the method favourable to the assessee should be adopted and the yield method being favourable to assessee should have been upheld. Pointing out to the decision of Hon'ble Supreme Court in the case of Bharat Hari Singhania he pleaded that those obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rule 1D should not be disturbed. 8. We have carefully considered the rival submissions in the light of material placed before us. The limited question to be decided in this appeal, is that what should be the method for valuation of relevant unquoted shares as on 1-4-1981 for the purpose of computing capital gain/loss. According to the department, the legal and valid method is only Rule 1D as prescribed in Wealth-tax Rules. As against this claim of revenue the case of assessee is that yield method should be adopted. According to the assessee the decision given by the Hon'ble Supreme Court in the case of Bharat Hari Singhania has no application on Income-tax Act. For substantiating this plea the main reliance of the assessee is on the decision of Hon'ble Andhra Pradesh High Court in the case of Smt. K.V. Rajyalakshmi wherein considering the decision of Hon'ble Supreme Court in the case of Bharat Hari Singhania it was held that same cannot be applied to gift tax proceedings. Taking the same analogy it is the plea of the assessee that similarly the said decision could not be applied to income-tax proceedings. For same analogy assessee has relied on the decision of the Tribunal, De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. In view of the above discussion, our answer to question referred to us is in the negative i.e. in favour of the Revenue and against the assessee. 7. The reference accordingly stands disposed of: 9. According to rule of precedence every Subordinate Court and Tribunal is bound by the decision of Jurisdictional High Court. Even if there is a contrary decision by some other High Court the decision of Jurisdictional High Court will prevail. According to the Jurisdictional High Court rule 1D of Wealth-tax Rules, 1957 is mandatory and according to the same valuation of unquoted shares has to be done by break up method as against yield method. For holding so they have referred the decision of Hon'ble Supreme Court in the case of Bharat Hari Singhania. In this view of the situation, respectfully following the decision of Hon'ble Jurisdictional High Court, we hold that the method adopted by Assessing Officer being mandatory is an appropriate method for valuation of unquoted shares. The Assessing Officer was right in computing the value of unquoted shares as on 1-4-1981 as per rule 1D. No defect in such computation was brought to our notice by the ld. counsel of the assessee despite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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