GTR No. 1 of 1984 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
G.T.R .No. 1 of 1984
Date of decision 9.1.2009
The Commissioner of Gift Tax, Jalandhar ...Petitioner
Versus
Mr.Ripan Kumar ... Respondent
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE H.S. BHALLA
Present: Mr. Vivek Sethi ,Advocate for the petitioner.
1. Whether Reporters of local papers may be allowed to see the judgement ?
2 To be referred to the Reporter or not ?
3 Whether the judgement should be reported in the Digest ?
M.M.KUMAR, J.
The Commissioner of Gift Tax, Jalandhar has approached this
Court with a prayer for adjudication on the following question of law:
” Whether on the facts and in the circumstances of the case, the
Tribunal was right that in valuing the unquoted shares of M/s
Kakkar complex P. Ltd. for the purposes of working out the
value of the deemed gift on 20.3.1979 and 31.3.1979, reference
should be made to the balance sheet of the said company as on
31.3.1978 and not with reference to the balance sheet as on
31.3.1979 ?”
It has been claimed that the afore-mentioned question has arisen out
GTR No. 1 of 1984 2
of the order of the Tribunal dated 6.2.1984 rendered in GTA No. 3 of 1983.
Brief facts which emerge from the statement prepared by the
Commissioner are that the assessee had sold during the accounting year
relevant to the assessment year 1979-80, 150 shares (100 shares to Ripan
Kumar son the Karta of the assessee joint family and 50 shares to Ms. Ekta,
another member of the family). He had sold shares @ Rs. 1000/- per share.
According to the Gift Tax Officer the shares were sold at value of Rs.
2086/- per shares which was not the full market value. He has applied the
break up formula to reach the value of the share. The full consideration of
the share according to him was calculated at Rs. 3,12,900/- but the shares
have been sold for a consolidated consideration of Rs. 1,60,000/-. There was
short fall of Rs. 1,62,900/- in the consideration. Therefore, the short fall was
considered as deemed gift under the provisions of Section 4(1)(a) of the Gift
Tax Act, 1958. He assessed the deemed gift at Rs. 1,52,900/- and assessed
the taxable gift accordingly. On appeal, the Commissioner Gift Tax did not
feel persuaded by the argument of the assessee that it was a bona fide sale
which had no element of deemed gift and that the Gift Tax Officer did not
take into consideration the balance sheet of the company as on 31.3.1979.
He did not consider the explanation (1) to Rule 1(D) of the Wealth Tax
Rules, 1957. The balance sheet which was in existence for the year ending
31.3.1978 and the same was required to be taken into account. Accordingly,
the Commissioner found the break up value of the share of M/s Kakkar
Complex with reference to the balance sheet as on 31.3.1979 at Rs.1,115/-
instead of Rs. 2,086/-. He modified the quantum of gift and granted relief to
the assessee.
The Revenue felt aggrieved and challenged the order of the
GTR No. 1 of 1984 3
Commissioner before the Tribunal. However, the Tribunal upheld the
finding of the Commissioner and dismissed the appeal of the Revenue as is
evident from the perusal of para 4 which reads thus:
” We, first take up the appeal of the Revenue for disposal. We
are not moved by the plea that it was a transaction of sale only
and there is no element of gift involved in it, because the sale
was made to the members of the family. The respondent
assessee has not been able to rebut this presumption that the
sale of shares at Rs.1000/- per share could be made only to a
member of the family and not to a third party. If there had been
any sale made to a third party at Rs. 1000/- per share, the
assessee could have controverted the plea that the sale to the
members of the family were not coloured by the element of
personality. But, having rejected the plea of the assessee, that
the transaction was one relating to the sale, which had no
element of gift involved in it, we cannot accept the contention
of the departmental representative that the CGT had
misdirected himself in working out the break up value with
reference to the balance sheet as on 31.3.1978 and not with
reference to the balance sheet as on 31.3.79. No doubt, he
supported his plea with the Madras High Court decision
reported in CGT v. K.Ramesh 141 ITR 462 Kerala High Court,
on similar facts, have held out in CGT v. H.H.Sethu Parvathi
Bai 145 ITR 124 that in valuing the shares, the provision
contained in Explanation (1) could not be ignored. According
to the provision, the balance sheet to be referred to was that
GTR No. 1 of 1984 4which was available on that date, either indicating the assets
and liabilities as on the date of sale or the one indicating the
position of assets and liabilities on a transfer prior to the date of
the transaction. One balance sheet which was here available on
23.3.1979 was the balance sheet relating to the date, which fell
on 31.3.78. It was only with reference to this balance sheet that
the two parties concerned with the sale, could have reached a
finding about the valuation of the shares. Accordingly,
following one of the two views, the Kerala view favourable to
the assessee, we find no error in the finding of the CGT who
had reached a break up value of the shares with reference to the
balance sheet as on 31.3.78. We accordingly, uphold finding of
the CGT and reject the plea of Revenue to the contrary as of no
substance and merit.”
Mr. Vivek Sethi, learned counsel for the Revenue has made an
attempt to attack the order of the Tribunal by asserting that the Gift Tax
Officer had rightly assessed the gift tax by applying the break up method.
However, he was not able to explain the view taken by the Division Bench
of this Court in the case of Commissioner of Gift Tax v. Shakuntla Devi
(2001) 250 ITR 677. The Division Bench by following the view taken by
the Kerala High Court in the case of CGT v. H.H.Sethu Parvathi Bhai
(1984) 145 ITR 124 (Ker.) has decided the question of law in favour of the
assessee and against the Revenue. Mr. Sethi, learned counsel for the
Revenue has not been able to cite any contrary view so as to enable us to
differ with the view taken by the learned Division Bench in Shakuntala
Devi’s case (supra). Therefore, we answer the reference in terms of the view
GTR No. 1 of 1984 5
taken by the Division Bench in Shakuntala Devi’s case (supra) in favour of
the assessee and against the Revenue.
(M.M.Kumar)
Judge
(H.S. Bhalla )
9.1.2009 Judge
okg