Decided on July 24,1982



V. Balasubramanian, Vice President - (1.) THE assessee owns certain shares of Nirmal Commercial Ltd. through the Sameer S. Somaiya Trust. THE assessee had valued the shares of this company at Rs. 5 starting with a value of fixed assets at Rs. 91,84,875 and deducting liabilities of Rs. 83,51,205 due to the shareholders against premises allotted. Under the break-up method, the break-up value of the share was computed at Rs. 8.65 and since there was no dividend declared on equity shares for six years and more, the market value was worked out at Rs. 6.50 being 75 per cent of the break-up value. Rounding it off, the assessee valued the assets at Rs. 5. THE WTO revalued these assets. In so doing he did not accept the assessee's contention that a sum of Rs. 83,51,205 deposits from shareholders were refundable to them. THE WTO worked out the break-up value at Rs. 475.20 and having regard to the non-declaration of dividends for six years fixed the market value of the shares at Rs. 356.40. THE assessee, who is the owner of 270 shares in this company, had calculated the excess of assets over expenditure in respect of these assets at Rs. 99,070. THE value of the shares themselves was returned at Rs. 1,350. Valuing these shares at Rs. 356.40, the WTO worked out the market value of these shares at Rs. 94,878. He also added the sum of Rs. 1,31,500, the non-refundable fixed deposit due to the Nirmal Commercial Ltd. from the assessee, thus, with a small adjustment arriving at a figure of Rs. 2,26,270 to be added to the net wealth. In effect the WTO revalued the shares of Nirmal Commercial Ltd. by treating the non-refundable fixed deposit at Rs. 1,31,500 as not a liability in the first instance and also added to the value of the shares worked out by him the sum of Rs. 1,31,500, again as a deposit held by the assessee with the company. On appeal, the Commissioner (Appeals) confirmed the computation made by the WTO. In this regard both the valuation of the shares and the addition of Rs. 1,31,500 as an extra asset was confirmed. THE present appeal is against the above order of the Commissioner (Appeals).
(2.) The learned counsel for the assessee has pointed out that even apart from the question of considering the non-refundable deposits as such, there is a double addition in this case, the result of an inconsistent view held by the authorities below. While computing the break-up value of the shares, the WTO and the Commissioner (Appeals) treated the refundable deposit of Rs. 1,31,500 as really non-refundable so as to increase the assets of the company. While computing the net wealth of the assessee himself, they again added the sum of Rs. 1,31,500 as an amount the assessee has to get from Nirmal Commercial Ltd. If the latter proposition was correct, according to the learned counsel, certainly the first proposition was incorrect and vice versa. It is pointed out that though originally the sum of Rs. 1,31,500 was treated as a non-refundable deposit by an appropriate resolution passed by the company, this view was revised and the amount was treated as a refundable deposit. The valuation by the break-up method of the shares given by the assessee should, therefore, be accepted. The assessee has no objection in including the sum of Rs. 1,31,500 as extra amount due to the assessee from the company. For the department stress is laid on the orders of the authorities below.
(3.) THE assessee has been taking, according to the learned counsel for the department, an inconsistent stand that this amount was non-refundable in the first instance and refundable subsequently. This was a purely private limited company confined to a group of persons who could adjust their financial relations the way they liked. In fact even taking an adjustment for non-declaration of dividend for six years and restricting the value of the shares to Rs. 6.50, the assessee returned the actual value only at Rs. 5 which shows the very casual manner in which the valuation has been made.;

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