ORDER
M.A. Bakshi, J.M.
1. The appeal of the assessee is directed against the order dt. 7th February, 1992, of CIT(A), Mumbai. Rival contentions have been heard and records perused.
2. The relevant facts in this case are that the assessee, who is daughter of Dr. Mohanlal Piramal, was having 81,150 shares of face value of Rs. 10 each in M/s. Piramal Rassayan Ltd. (hereinafter referred to as PRL). Other members of Piramal family were also having shares of the said company and the total shares of the company aggregating to 2,70,600 equity shares were owned by the family members and associate concerns as under :
Name of the shareholder No. of shares
Dr. Mohanlal Piramal 14,200
Mrs. Vijaya N. Piramal 12,150
Mrs. Alka M. Shah 78,150
Mrs. Archana Bhawnani 11,150
Miss Alpana M. Piramal 81,150
M/s. Piramal Spg. & Wvg. Mills Ltd. 73,000
---------- Total 2,70,000 ----------
3. The father of the assessee viz. Dr. Mohanlal Piramal, acting on her behalf and on behalf of the other shareholders, entered into an agreement with M/s. Akshar Investments (P) Ltd. and M/s. Anusandhan Investments (P) Ltd. for sale of 2,70,600 shares owned by the family members and associate concerns on 1st November, 1985 and the consideration for transfer of shares was fixed at Re. 1 to the six shareholders described above irrespective of number of shares held by them. The further consideration for transfer of shares was described in cl. 2 and cl. 3 of the agreement. A company named as M/s. Piramal Spinning & Weaving Mills Ltd. (hereinafter referred to as PSWML) which is the family concern of Piramal family had advanced a loan to PRL and as on 31st of March, 1986, the outstanding stood at Rs. 61,89,030.56. Another company, viz. M/s. Alpana Investments (P) Ltd. had also advanced loan to the said PRL and the outstanding as on the end of the previous year was Rs. 1,57,944.41. The purchasers agreed to repay the loans to the aforementioned companies. The repayment of loan to these companies was also considered as consideration for transfer of shares.
4. The head of the family viz. Dr. Mohanlal Piramal had given personal guarantees to the financial institutions and banks in respect of the loans to PRL. As part of the consideration for transfer of shares the purchasers had agreed to replace the guarantees given by the head of the family described as vendor. In cl. 4 of the agreement it was provided that the purchasers would vacate the premises by removing the registered office and surrender the tenancy in respect of the premises and vacate the possession of the premises. The owner of the premises is the associate concern of the shareholders viz. PSWML. The stamp duty relating to the transfer of shares was also to be borne by the purchasers. It may be pertinent to mention that PRL had taken office premises on rent from PSWML on a monthly rent of Rs. 1,920 as per the terms and conditions of the lease agreement. The area of the premises was 222.96 sq.mts. It is a matter of fact that the purchasers have surrendered the premises to PSWML.
5. The assessee had returned the capital loss of Rs. 8,11,499 on the transfer of shares. The AO invoked s. 52(2) on the ground that the consideration of Re. 1 for the transfer of shares was far less than the fair market value of the shares. It was found by the AO that the market value of the shares as per quotations in the Stock Exchange was Rs. 23 per share. He accordingly worked out the long-term capital gain on the sale of shares at Rs. 11,36,100. Deduction under s. 80T was allowed.
6. Initially the permission of Dy. CIT for invoking s. 52(2) had not been obtained. The assessee appealed to the CIT(A) and one of the grounds raised was that provisions of s. 52 have been invoked without the prior approval of Dy. CIT. The CIT(A)-XVIII set aside the assessment with the direction that the deficiency of lack of approval from the Dy. CIT should be rectified and assessment completed thereafter.
7. The AO made fresh assessment after obtaining the approval of the Dy. CIT. The only difference in quantification was relating to the value adopted for sale shares. In the first assessment the AO had adopted the value at Rs. 23 per share being the maximum rate on the date of transfer. However, while making the fresh assessment on the directions of the CIT(A) the AO adopted the average rate of the day, which was between Rs. 23 and Rs. 21.50 as on 1st November, 1985. The long-term gain was determined at Rs. 9.94.087 as under :
Value of shares of PRL @ Rs. 22.25 each 81150 x 22.25 = 18,05,587
Less : Face value of shares @ Rs. 10 each 8,11,500
Long-term capital gain 9,94,087
8. The total income of the assessee was computed at Rs. 6,21,194. The CIT(A) confirmed the decision of the AO by holding that the decision of the Supreme Court in the case of K.P. Verghese vs. ITO (1981) 131 ITR 597 (SC) and the decision of the Bombay High Court in the case of Babubhai M. Sanghavi vs. CIT (1974) 97 ITR 213 (Bom) were distinguishable on facts. It was pointed out by the CIT(A) that the consideration of Re. 1 per shareholder (wrongly mentioned Re. 1 per share) was not the only consideration but in fact something more than that. It has been pointed out that the assessee and all other family members have received from the purchasers not just Re. 1 per shareholder but certain other advantages and benefits referred to in the agreement. He has accordingly confirmed the assessment.
9. The assessee is aggrieved. Several grounds of appeal have been raised before us. Ground Nos. I.1, I.2, I.3 and I.4 which are reproduced hereunder are dismissed as not pressed :
I.1. The learned CIT(A) erred in not quashing the order of the ITO as being void ab initio, illegal or otherwise bad in law to the extent it takes recourse to the provisions of s. 52(2) of the IT Act, 1961 (“the Act”) after seeking statutory approval of the Dy. CIT Range-I and thereby taking market value of the shares as the consideration received.
I.2 He further erred in making certain incorrect, immaterial and/or irrelevant observations in particular the following :
“The first ground raised thus in substance seeks to challenge the validity of the order passed by the CIT(A) XVIII and I have no powers under s. 246 to go into such a ground. Second, even on merits, I do not think that the appellants contention is acceptable. It is true that a prior approval an essential condition, but non-obtaining of such approval was a deficiency which could be corrected when the original assessment was itself set aside”.
I.3. He failed to appreciate and ought to have held that :
(a) Obtaining the prior approval of the IAC was an essential prerequisite in invoking of the provisions of s. 52(2) of the Act.
(b) The non-obtaining of the said prior approval of the IAC would render the entire subsequent proceedings ad initio void, illegal or otherwise bad in law.
(c) The non-obtaining of the said prior approval of the IAC is not a deficiency, which can be subsequently rectified.
I.4. The appellant prays that the order of CIT(A) confirming the order of the ITO under s. 143(3) of the Act insofar as it takes recourse to the provisions of s. 52(2) of the Act be quashed as being ab initio void, illegal or otherwise bad in law.
10. The only other ground that survives for consideration is as to whether the AO was justified in assessing the capital gains on the sale of shares as against the claim of loss made by the assessee.
11. The learned counsel for the assessee contended that the provisions of s. 52(2) are not attracted in this case. The AO has wrongly invoked the said section as the consideration received by the assessee has been disclosed in the agreement. It was further contended that the AO has considered various factors, which in his opinion constituted benefits derived by the shareholders as a result of transfer of shares. It was contended that the factors considered by the AO could in noway be considered as an additional consideration for the transfer of shares. According to the learned counsel there was a simple case of transfer of shares for the apparent consideration of Re. 1. The learned counsel pointed out that the purchasers had admittedly agreed to repay the loans to the concerns of Piramal family. That was an obligation of the debtor towards the creditor. That obligation being discharged may not amount to any benefit conferred upon the creditor. It was accordingly contended that the repayment of the loan could not be considered as a benefit derived by the vendors of shares. Similarly guarantee was given by Dr. Mohanlal Piramal in his individual capacity and replacing the guarantor by releasing Dr. Mohanlal Piramal from the obligation does not confer any monetary benefit upon him and in any case no benefit has accrued to the assessee in this behalf. The learned counsel pointed out that as per the Indian Contract Act the surety is entitled to recover the amount of the debt paid by him as guarantor from the debtor. In view of this right under the Indian Contract Act it cannot be said that a benefit had accrued to the guarantor by releasing him from the guarantee.
12. With regard to the premises which was agreed to be vacated the learned counsel contended that as per the Bombay Hotels and Lodging Control Act, it is not lawful to recover any money for surrender of tenancy rights as per s. 19(1) of the said Act. Reliance was also placed on the decision of the Bombay Bench of the Tribunal in the case of WTO vs. Premchand Jain (1985) 14 ITD 44 (Bom) at p. 57 in support of the contention that for purposes of wealth-tax tenancy rights cannot be assessed as a valuable right.
13. The learned counsel quoted from English decision in the case of Re Selectmove Ltd. 66 Tax Cases 552 (C.A.) at p. 557. In this case it was held ‘that “all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce demand of the whole”. Yet it is clear that the House of Lords decided that a practical benefit of that nature is not good consideration is law.’ In the light of the aforementioned decision the learned counsel contended that the shareholders might have considered it beneficial to get the refund of the loan but there is no benefit in terms of money or in the eye of law. As such the factor of the repayment of the loan having been agreed by the purchasers ought not to have been considered by the Revenue authorities as part of the consideration for transfer of shares, contended the learned counsel for the assessee.
14. The learned counsel further contended that s. 52 can be invoked only if there is an undeclared amount received by the assessee. Merely because there is a difference of opinion about the actual consideration received, provisions of s. 52 do not get attracted. Relying upon the decision of the Supreme Court in the case of K.P. Verghese (supra), it was contended that the assessee should have actually received the consideration in excess of what has been disclosed. It was further reiterated that the three items, which have been taken into consideration by the Revenue, have no relevance to the actual consideration received. The AO has not valued the benefit of the three factors referred to by him in the assessment order but has adopted the value of shares as prevailing in the stock market on the date of transfer. According to the learned counsel the assessee had not received the consideration as per the market quotations on the date of transfer and, therefore, s. 52(2) has no application. It was further contended that the value of shares varies from time to time. It was pointed out that the rate of shares was around Rs. 13 per share on several occasions. Therefore, the AO was not justified in adopting the rate of Rs. 22.25 per share.
15. The learned counsel further pointed out that after the taking over of company by the purchasers the assets of PRL have been revalued as on 31st of March, 1986 and the entire loss of more than Rs. 2 crores reflected in the balance sheet got wiped out. Therefore, the chances of repayment to the creditors were quite high and there was no risk involved to the shareholders. Thus the repayment of loan to the associate concerns of the shareholders do not give any benefit and in any case not a monetary benefit so as to invoke s. 52 of the Act. By paying the loans the purchasers had discharged the legal obligation and no monetary benefit was conferred upon the shareholders.
16. In response to our query as to what was the reason to sell 81,150 shares in consideration of Re. 1 for the whole lot when the market value of each share was more than Rs. 22 per share, it was stated that the company had incurred huge losses which were accumulated to more than Rs. 2 crores. Reliance was also placed on the decision of the Supreme Court in the case of CIT vs. George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC) in support of the contention that the “full value of the consideration for which the sale, exchange or transfer of the capital asset is made” in s. 12B(2) does not mean the market value of the asset transferred but the price bargained for by the parties to the sale, etc. It was accordingly contended that the addition made by the AO may be deleted and the loss claimed by the assessee may be allowed.
17. The learned Departmental Representative on the other hand contended that as per the agreement between the shareholders and the purchasers it is specifically mentioned that the consideration for transfer of shares is not only Re. 1 to each shareholder but further considerations described in other clauses of the agreement. It was pointed out that cl. 1 of the agreement specifically provides that the benefits as per cl. 2 and cl. 3 form part of consideration for the transfer of shares. The assessee had disclosed the consideration for the transfer of shares at Re. 1 for the whole lot. It was contended that the assessee is a major shareholder in the company styled as PSWML. The said company had a great risk in recovery of the loan. The shareholders had ensured the recovery of the loan as a result of which a benefit accrued to them. It was further contended that the benefit in regard to the tenancy rights had also accrued to the shareholders as PSWML are the owners of the premises, which was under the tenancy of PRL. The learned Departmental Representative further placed reliance on the findings of the CIT(A) at p. 6 of his order in support of the contention that it was for the assessee to discharge the burden to establish that no benefit had been derived from the factors described in the agreement and that the assessee had suffered a loss on account of sale of shares. It was further contended that the AO had no means to assess the value of the benefits received by the assessee and other shareholders. In such circumstances he was justified in adopting the value as per the Stock Exchange quotations which the market value of the shares on the date of transfer. The learned Departmental Representative contended that the assessee having received four benefits which are clearly described in the purchase agreement of shares the AO was justified in invoking s. 52 of the Act.
18. We have given our careful consideration to the rival contentions. The issue in this case is as to whether the AO was justified in assessing the long-term capital gain in the sale of shares at Rs. 11,36,100 subject to deduction under s. 80T as against the returned loss of Rs. 8,11,499. The facts have been given in the preceding paragraphs and need not be repeated. As per the sale agreement the consideration as per monetary terms is Re. 1 per shareholder irrespective of number of shares held by them. It is not disputed that the shares are quoted in the Stock Exchange and on the date of execution of the agreement for the sale of shares the market quotation was between Rs. 23 to Rs. 23.15 per share. The assessee was the owner of 81,150 shares. If these shares had been sold in the market, there is a presumption that the assessee could have realised a sum of Rs. 18,66,450. As against the market value of the shares of Rs. 18,66,450 the consideration in monetary terms has been shown at Re. 1 for the entire lot. To say that Re. 1 is the consideration as per the fair market value does not appeal to commonsense. Then what is the consideration for which the shares have been transferred ? There is no evidence on record to establish that the assessee has received more than what is stated in the agreement. However, a perusal of the sale agreement reveals that the assessee has received certain benefits as described in the sale agreement for the transfer of shares. Before proceeding further we consider it necessary to find out if the value of the benefits which accrue to the assessee as per the agreement can be taken as part of consideration for determination of capital gains. In this connection it will be useful to refer to some of the provisions of the IT Act, 1961. Sec. 2(47) defines transfer in relation to a capital asset to include the sale, exchange or relinquishment of asset. In this case the shares have been transferred to lieu of cash consideration and transfer of certain other assets/benefits.
19. Sec. 48 of the Act provides for mode of computation of capital gains. The section reads as under :
“48. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto;
Provided …………………………….”
Sec. 48 reproduced above provides for deduction of any expenditure incurred wholly and exclusively in connection with the transfer and cost of acquisition of the assets and cost of any improvement thereto from the full value of consideration received or accruing as a result of transfer of the capital asset. In other words, in computing the capital gains it is not only the full value of consideration received which is to be taken into account but also the full value of consideration accruing as a result of the transfer of capital asset. This view is also supported by the decision of the Supreme Court in the case of George Henderson & Co. Ltd. (supra). In this case it was held that full value of consideration for which transfer of capital asset is made does not mean the market value of assets transferred but the price bargained for by the parties to the sale. However, in this very case it was further held that the consideration for the transfer of a capital asset is what the transferor receives in lieu of assets he parts with, i.e. money or monies worth. It has further been held that the Act provides that the amount of capital gain shall be computed after making certain deductions from the “full value of the consideration for which the sale, exchange or transfer of the capital asset is made”. In the case of a sale the full value of consideration is the full sale price actually paid. The legislature had to use the words “full value of consideration” because it was dealing not merely with sale but with other types of transfers such as exchange, where the consideration would be other than money. In the light of the provisions of the Act and the aforementioned decision of the Supreme Court, it is evident that for purposes of consideration it is not meant only the money received for the transfer but also includes the value of assets exchanged. In the present case the assessee (group) transferred shares in consideration of Re. 1 per shareholder and certain benefits as per the agreement for sale. In the light of the proposition of law described above it is necessary to ascertain the value of the benefits that accrued to the assessee by virtue of the sale agreement in consideration of the sale of shares.
20. In this connection following clauses of the agreement are relevant and in our view important for deciding the issue. It will be useful to reproduce these clauses hereunder for the sake of facility :
1. The vendor has sold and the purchasers have purchased the said 2,70,600 equity shares of Piramal Rasayan Ltd. more particularly described in the First Schedule hereto free from encumbrances, lien and charges. These shares are sold on the basis of spot delivery transaction for a token consideration of Re. 1 to each shareholder named in the First Schedule hereto and in further consideration described in cls. 2 and 3.
2. the Purchasers agree to arrange for repayment of the said deposits/loans as specified in the Second Schedule hereto (together with interest thereon to the date of repayment) by the company by bringing in fresh deposits from their nominees, in the company for this purpose, simultaneously with the transfer of shares.
3. The vendor has given his personal guarantees and undertaking to the financial institutions and banks in respect of loans to the company. The purchasers shall arrange for release/replacement of the guarantees given by the vendor in respect of loans of the financial institutions and banks to the company within 4 months from the date hereof. In the meantime and until the Vendor is freed and discharged from all liabilities and undertakings from the said personal guarantees and undertakings, the purchasers agree to indemnify and keep indemnified the vendor from all obligations, liabilities, claims, actions and demand made under or arising out of or in connection with each and every pone of the aforesaid personal guarantees and undertakings.
4. The registered office of the company is at present situated at Piramal Bhavan, Ganpatrao Kadam Marg, Bombay 400 013, the purchasers shall forthwith cause to remove the said registered office in other place of the choice of the purchasers and also further cause the company to surrender the tenancy in respect of the said premises and give vacant possession of the premises.
21. A perusal of cl. 1 of the agreement reproduced above reveals that the consideration for transfer of shares is token consideration of Rs. 1 for the entire lot of each shareholder and further consideration described in cl. 2 and cl. 3. Clause 2 makes it obligatory upon the purchasers to liquidate the loans together with interest thereon to the date of repayment. These loans are indicated in the Second Schedule to the agreement which may be indicated hereunder :
1. Piramal Spg. & Wvg. Mills Ltd. Rs. 61,89,030.56 (including interest upto date after deducting tax at source)
2. Alpana Investments (P) Ltd. Rs. 1,57,944.41 (including interest upto date after deducting tax at source)
22. An important question has been raised before us as to whether the repayment of a loan can be considered as a benefit arising to the shareholders. Before we proceed further, it may be pertinent to mention that the assessee is one of the shareholders of the two companies viz. M/s. Piramal Spg. & Wvg. Mills Ltd. and M/s. Alpana Investments (P) Ltd., who received their money along with the interest as part of the consideration for the transfer of shares. Reverting back to the issue as to whether the repayment of loan can be considered as any benefit to the shareholders in monetary terms. The contention on behalf of the assessee that after all what is being returned to the companies is their own money along with interest which had accrued upto the date of repayment, seems attractive. But one has to take into account the uncertainty of the repayment of loan and interest once the shares are transferred in the name of other persons. The covering of the risk involved in the unsecured loan is the benefit that was derived by the assessee in securing the repayment of loans and the interest thereon. Having held that a benefit had accrued to the assessee by repayment of loans to the companies along with interest, the question still remains as to what is the value of such benefit derived by the assessee. In our considered view it is not difficult to determine the issue. A debt is a valuable right and its market value is determinable. In determining the market value of a debt, the hazards of litigation and the chances of recovery and other factors are taken into account. The fair market value of the debt would be a sum at which a willing person would buy the same if offered for sale. After taking into account the factors which have been referred to above, the market value of the debt can be determined. The difference between the market value of the debt and the actual sum received by the assessee would be the value of the benefit received by the vendors (considered as a group).
23. This takes us to cl. 3 of the agreement. As per this clause the purchasers had undertaken to release the vendor from all the personal guarantees in respect of the loans of financial institutions and banks. It was argued before us that in law a surety is entitled to recover the money from the debtor and therefore, the release as a guarantor would not constitute any benefit to the vendors. Again the contention advanced on behalf of the assessee seems attractive but not well founded. The hazards of litigation involved in recovering the amount from the debtor for whom the guarantee has been given are involved. Therefore, a benefit has accrued to the vendors (considered as a group) in terms of money to the extent of the value of such hazards of litigation.
24. Though we have held that as per cls. 2 and 3 of the agreement valuable benefits have accrued to the assessee in lieu of the transfer of shares, yet it appears that the value of such benefits may not be substantial. However, the substantial benefit derived by the assessee, in our view, is as per cl. 4 of the agreement. As per cl. 4 of the agreement reproduced elsewhere in this order, the vendors got vacant possession of the premises at Piramal Bhavan, Ganpatrao Kadam Marg. Bombay. Before we proceed further, it may be necessary to deal with the issue as to whether the benefits derived by the assessee under cl. 4 of the agreement is permitted to be treated as part of the consideration as it is not so described in the agreement. It is well-settled principle of law that in order to construe an agreement one has to look to the substance or the essence of it rather than to its form. A party cannot escape the consequences of law merely by describing an agreement in a particular form though in essence and in substance it may be a different transaction. This view is supported by the decision of the Supreme Court in the case of CIT vs. Panipat Woollen and General Mills Co. Ltd. (1976) 103 ITR 66 (SC). Since the main benefit derived by the assessee group is as per cl. 4 of the agreement, the non-inclusion of it as part of the consideration is of no consequence. Having gone through the agreement and surrounding circumstances we are of the view that the benefit derived under cl. 4 of the agreement is also part of the consideration for the transfer of the shares and, therefore, the value of the same accruing to the assessee is to be taken into consideration in determining the capital gains.
25. Now we proceed to consider the value of the benefits as per cl. 4 of the agreement. Whereas as per s. 19(1) of Bombay Hotels and Lodging Control Act it may not be lawful to recover any money for surrender of tenancy rights, yet it cannot be disputed that the assessee got the vacant possession of the property which can yield substantial income by way of rent, deposit, pugree, etc. Therefore, a benefit accrued to the vendors by getting the vacant possession of the premises at Piramal Bhavan, Ganpatrao Kadam Marg, Bombay. The bar under the Bombay Hotels and Lodging Control Act not to recover any money for surrender of tenancy rights is not relevant in this case as we are not to consider the benefits derived by the vendees of shares but the value of benefits which accrued to vendors. The issue is as to whether the assessee got any benefit by receiving the vacant possession of the premises in question. We have held in affirmative. In this view of the matter the consideration for transfer of shares is the sum total of the benefits as per cls. 2, 3 and 4 of the agreement in addition to Re. 1 as stated in cl. 1 of the agreement.
26. The next question that arises for our consideration is as to what is the value of the benefits accrued to the vendors as per cls. 2, 3 and 4 of the agreement.
27. One of the methods for determining the value of benefits is to make an enquiry or refer the same to valuers but that method may be cumbersome. Another method is to find out the market rate of the shares and adopt the same as value of benefits accrued to the vendors. As already pointed out, the shares are quoted in the Stock Exchange. The market value of the shares is known as on the date of transfer. A prudent person would always enter into a bargain, which is most beneficial to him. Keeping in view the market value of shares on the date of sale it will not, in our view, be unreasonable to presume that the value of the benefits that accrued to the shareholders as per cls. 2, 3 and 4 of the agreement was atleast to the extent of the market value of the shares. If the vendors had sold the shares in the market they would have realised near about the value as per the quotations in the Stock Exchange. The contention of the assessee that the benefits as per cls. 2, 3 and 4 are Nil is not well founded. The explanation of the assessee that since the accumulated losses in the case of the company were more than Rs. 2 crores, therefore, the shareholders liquidated the shares in consideration of low price is bereft of reasons. In para 14 of this order we have referred to the contention advanced by the learned counsel for the assessee that the purchasers had revalued the assets on 31st of March, 1986 and the entire loss of more than Rs. 2 crores reflected in the balance sheet was wiped out. Thus, it is evident that there was no reason for the assessee to sell the share for a pittance. It may be pertinent to mention that in law it is permissible for the Revenue to consider the surrounding circumstances and to apply the test of human probabilities in order to arrive at a fair conclusion. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) their Lordships of the Supreme Court held that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality of recital in a document. This principle has been reiterated by the Supreme Court in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC). Keeping in view the market value of the shares on the date of transfer it is fair to hold that the benefits accruing to the shareholders as per cls. 2, 3 and 4 of the agreement are equivalent to the market value of shares on the date of transfer.
28. This brings us to the final stage of determining the market value of the shares for the purpose of valuation of benefits accruing to the shareholders. The only evidence on record of the market price of shares on the date of sale is the quotation in the Stock Exchange. However, the contention of the assessee is that if the shares are sold in the market in bulk then the prices are bound to fall. Since the sale of shares has taken place in bulk the benefit of downward market fluctuation should in our view be available to the assessee. In our considered view the fluctuation of 10 per cent downwards on the sale quotation on Stock Exchange on the date of transfer should be given to the assessee in working out the capital gains. The AO is therefore, directed to recompute the capital gains on the basis of adopting the sale value at Rs. 20 per share and work out the full value of consideration as under :
Cash consideration for 2,70,000 shares Rs. 6
Full value of other benefits accruing to the 2,70,000 x 20 group as per cls. 2, 3 and 4 of the agreement = 54,00,000 --------------- Total consideration per share 54,00,006 2,70,000 = 20.000022
Value for 81,150 = 81,150 x 20.03 16,23,00,170
Say 16,23,000
29. Before we wind up, we may clarify that the decision of the Supreme Court in the case of K. P. Verghese (supra) and that of the Bombay High Court in the case of Babubhai M. Sanghavi (supra) are inapplicable to the facts of this case. It has been established from the records that apart from monetary consideration described in the agreement certain other benefits have accrued to the assessee group which forms part of full consideration for purposes of determination of capital gains. As such the decisions referred to above are not applicable.
30. In the result, the appeal of the assessee is partly allowed.