Per Shri F.C.Rustagi, Judicial Member - The appeal by the revenue and the cross-objection by the assessee under the Gift-tax Act, 1958 (the Act), since are in respect of one and the same assessment year 1974-75, both the matters were heard together and are disposed of by this consolidated order for the sake of convenience. - (1.)
(2.) The revenue in its appeal has contested the action of the AAC setting aside the assessment for valuation to be made as per the Supreme Court decision in the case of CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 in order to determine the value of shares sold by the assessee-trust in respect of which deemed gift was subjected to tax by the GTO whereas the assessee in its cross-objection originally supported the order of the AAC but at the time of hearing before us, came forward with a newly raised legal plea that the assessee being a recognised charitable trust under the Income-tax Act, 1961 (the 1961 Act), enjoys exemption under the 1961 Act as the same is not applicable to it as per section 45(e) of the Act and the assessment, therefore, should be annulled. The new contention raised before the tribunal was purely legal and the same as such was permitted to be forwarded. The facts and the background pertaining to the issue are that the assessment year involved is 1974-75. The assessee, Mohan Devi Oswal Public Charitable Trust, owned 2,400 equity shares of Oswal Woollen Mills Ltd. and it sold 1,400 shares at the paid-up value of Rs. 12.50 per share. The GTO referred the matter to the Valuation Officer under section 55A of the 1961 Act. The Valuation Officer by applying the method of valuation provided under rule 1D of the Wealth-tax Rules, 1957, valued the shares at Rs. 55.45 per share. The difference between the fair market value determined by the official valuer (sic) and the same price was assessed to income-tax under section 52 of the 1961 Act as capital gains. Further, the same difference has been treated as deemed gift under section 4(1) of the Act and was assessed to gift-tax. While framing the gift-tax assessment, the GTO, after issuing necessary notice and the return having been filed for nil was enhanced to an amount of Rs 74,130 as deemed gift (sic) and the same was subjected to tax.
(3.) WHEN this action of the GTO came to be disputed by the assessee-trust before the AAC, the first objection raised by the assessee was that the revenue had nothing with it to constitute a reasonable belief that the shares sold at Rs. 12.50 per share actually had higher value and the method of valuation adopted by the GTO as well came under challenge, wherein the assessee contended that the valuation should have been done in accordance with the principles of valuation laid down by the Supreme Court in the cases of CWT v. Mahadeo Jalan [1972] 86 ITR 621 and Smt. Kusumben D. Mahadevia (supra). The AAC after considering the contentions from paras 3 to 6 of his order, came to a finding that rule 1D was not mandatory but directory in nature and restored the matter back to the file of the GTO with a direction to make a first assessment by valuing the shares according to the principles of valuation laid down by the Supreme Court in the above referred two judgments.;