M.V.R. Prasad, J.M. - (1.) THESE three appeals are filed by the assessee. They are directed against separate orders of the CGT(A)-III, Hyderabad, dt. 28th Jan., 2000, for the asst. yr 1992-93. As common points are involved in these appeals, they are being disposed of by this common order, for the sake of convenience.
(2.) Smt. A Uma Devi is wife of Dr. A.J. Prasad, and Smt. Kavita Prasad is. their daughter. They were having shares in Hyderabad Batteries, a closely-held limited company, and its subsidiary. They formed a partnership witnessed by a deed dt. 11th Nov., 1991, and they introduced their various sharesholdings in various companies, such as Hyderabad Batteries as their capital. The following shares, at face value, were brought into the firm, M/s Beaver Engineering, at the inception of the firm : JUDGEMENT_5484_TLIT0_20010.htm The shares allotted to the original three partners in the profits/losses of the firm are as under : JUDGEMENT_5484_TLIT0_20011.htm It may be observed that the profit-sharing ratio is more or less proportionate to their capital contributions. Subsequently, there was a change in the constitution of the firm on 26th Dec., 1991, and four more persons, individuals, were taken as partners. This partnership of seven persons was converted into a limited company, which was registered on 30th March, 1992, under Part-IX of the Companies Act, 1956. By virtue of this conversion, the firm, M/s Beaver Engineering changed its legal form and has become M/s Beaver Engineering (P) Ltd. and all the assets belonging to the firm as on the date of incorporation of the company have become vested in the company by virtue of Section 575 of the Companies Act. The partners of the firm got the shares of M/s Beaver Engineering (P) Ltd. against the actual credit balance appearing in their accounts in the books of the firm.
(3.) FOR the valuation date, 31st March, 1991, the three appellants disclosed for wealth-tax purposes, the break-up value of their shares in various companies, like M/s HBL Ltd. which were introduced, as mentioned before, by way of capital into the firm, M/s Beaver Engineering. FOR the subsequent valuation date, i.e., 31st March, 1992, they disclosed the value of their equity holding in M/s Beaver Engineering (P) Ltd. at cost price or face value. Thus, while as on 31st March, 1991, the value of the shares of the three appellants in M/s HBL Ltd. and its subsidiaries, were shown at break-up value and they were subsequently introduced by way of capital into M/s Beaver Engineering firm, at Rs. 2,75,70,289, the value of the collective holdings of the three appellants in M/s Beaver Engineering (P) Ltd. as on 31st March, 1992, was shown only at cost at Rs. 29,00,300. The huge difference between the value of the shareholdings of the three appellants as on 31st March, 1991, and the value of the shares as on 31st March, 1992, prompted the AO to initiate the gift-tax proceedings under Section 4(1)(a) of the GT Act. He found that there is a substantial difference between the break-up value of the shares held by the three appellants in Hyderabad Batteries Ltd. and other companies; and their face value, at which they were introduced as capital into the firm, M/s Beaver Engineering. The details of the shares introduced by way of capital by the three partners, and the values at which they were introduced are furnished in para 2 above, and they were also noted by the CGT(A) in his detailed order in the case of Dr. A.J. Prasad, in para 2(ii) thereof. The break-up value of those shares in as under : JUDGEMENT_5484_TLIT0_20012.htm ;