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1998 DIGILAW 297 (MAD)

Commissioner of Income Tax v. S. Viji

1998-02-26

N.V.BALASUBRAMANIAN, R.JAYASIMHA BABU

body1998
Judgment :- N. V. BALASUBRAMANIAN J. At the instance of the Revenue, the following question of law has been referred to us for our consideration by the Income-tax Appellate Tribunal "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding and had valid materials to hold that discount of 30 per cent. should be given while valuing the shares under break-up value method ?" The year of assessment with which we are concerned is 1973-74. The assessee is an individual. She gifted during the course of the previous year relevant to 1973-74, 4, 500 shares held in the company, T. V. Sundaram Iyengar and Sons Private Limited, and 240 shares held in the company, Southern Roadways Private Limited. She made the gift on March 28, 1973, to Miss Niveditha Ram. While completing the assessment for the assessment year 1973-74, the Gift-tax Officer valued the shares by applying the break-up value method by taking the balance-sheet as on March 31, 1973, which was nearer to the date of gift. On appeal, the Appellate Assistant Commissioner and the Appellate Tribunal held that the balance-sheet as on March 31, 1972, has to be taken into account for the purpose of assessment. The Revenue took the matter to this court and this court in T. C. No. 1182 of 1977 by a judgment dated December 18, 1981, held that the relevant balance-sheet that has to be taken into account will be the balance-sheet dated March 31, 1973, and directed the Appellate Tribunal to determine the value of the share on the basis of the balance-sheet as on March 31, 1973. The apex court in the case reported in S. Viji v. CGT has affirmed the judgment of this court On the basis of the direction of this court, the matter went back to the Appellate Tribunal. At the time of passing of the order by the Tribunal to give effect to the orders of this court, the assessee raised a plea that the discount of 30 per cent. should be given to arrive at the break-up value of the shares. The Tribunal following its earlier order in G. T. A. No. 24/Mds of 1974-75 dated March 15, 1978, held that the assessee was entitled to the discount of 30 per cent. should be given to arrive at the break-up value of the shares. The Tribunal following its earlier order in G. T. A. No. 24/Mds of 1974-75 dated March 15, 1978, held that the assessee was entitled to the discount of 30 per cent. of the value of the share and held that the value determined by applying the break-up value method should be further reduced to determine the taxable value of the gifted share gifted by the assessee. The Revenue challenged the order of the Income-tax Appellate Tribunal and the question of law set out earlier has been referred to us for our considerationMr. C. V. Rajan, learned counsel appearing for the Revenue, submitted that as per the Wealth-tax Rules which are adopted in the gift-tax case, the discount of 15 per cent. of the value of shares should be given and it is not open to the assessee to claim 30 per cent. as discount on the value of gifted share Mr. S. A. Balasubramanyan, learned counsel appearing for the assessee, relied upon two decisions of this court in the case of CGT v. Sundaram Industries Ltd. and another one in the case of CGT v. K. Mahesh wherein it was held that the view of the Tribunal granting discount of 30 per cent. of the value of the shares was upheld by this court. Therefore, learned counsel submitted that the Tribunal was justified in holding that the assessee would be entitled to the discount of 30 per cent. of the value of the share We have carefully considered both the submissions of learned counsel. Under the provisions of the Wealth-tax Rules, which it is not disputed was applied to determine the value of the shares gifted by the Gift-tax Officer, the Wealth-tax Officer determined the market value of the share and granted 15 per cent. of the value as a discount. Under the relevant provisions of the Wealth-tax Rules, a deduction of 15 per cent. of the value of the share is granted towards the restriction found against free transferability of share. However, the discount of 15 per cent. of the value, can be increased further in a gradual manner provided there was no declaration of dividend by the company during the earlier years before the end of the accounting year and the maximum amount of further discount provided under the rule 1D is 25 per cent. However, the discount of 15 per cent. of the value, can be increased further in a gradual manner provided there was no declaration of dividend by the company during the earlier years before the end of the accounting year and the maximum amount of further discount provided under the rule 1D is 25 per cent. of the value, if there was no declaration of dividend during the period of six accounting years. The Tribunal in the instant case has followed an earlier order, but that order is not included as a part of the statement of the case. The order of the Appellate Tribunal in the instant case does not indicate whether there was a declaration of dividend or not in the earlier year and it is also not clear how the Tribunal came to the conclusion that discount of 30 per cent. of the value of the shares was warranted by the facts of the case. The Tribunal has not even indicated anywhere about the non-declaration of dividend during the period of six years prior to the relevant valuation period and in the absence of any material how the table appended to the rule 1D was applied, we are not in agreement with the view of the Tribunal that 30 per cent. of the value of the share should be given as a discount to arrive at the value of the shares. Since the Tribunal has not discussed the matter, we are of the opinion that the Tribunal at the time of re-hearing the appeal should determine the question and it is open to the assessee to establish how the discount of 30 per cent. was warranted on the facts of the case. It is also made clear that it is always open to the Appellate Tribunal to ascertain whether there was any declaration of dividend during the earlier accounting years and determine the question in the light of the two decisions of this court in the case of CGT v. Sundaram Industries Ltd. in the case of CGT v. K. Mahesh 1997 (225) ITR 765. Since the Tribunal in the absence of any material has come to the conclusion that the discount of 30 per cent. Since the Tribunal in the absence of any material has come to the conclusion that the discount of 30 per cent. of the value of share should be granted, we answer the question of law referred to us in favour of the Revenue, but leaving the matter open to the Tribunal to consider the question again in the light of the materials that may be produced at the time of hearing of the appeal by the Tribunal. We answer the question of law referred to us in the negative, against the assessee and in favour of the Revenue, subject to the direction given above, but, in the circumstances, there will be no order as to costs.