COMMISSIONER OF GIFT TAX Vs. MADANLAL PATODIA

JUDGEMENT

(1.) In this reference under Section 26(3) of the Gift-tax Act, 1958, for the assessment year 1980-81 the Tribunal has referred the following question for our opinion :

(2.) Shortly stated, the facts leading to this reference are as follows : The Gift-tax proceedings were initiated by the Gift-tax Officer in the hands of the assessee for the assessment year in question as the Gift-tax Officer was of the opinion that the gifts chargeable to tax had escaped assessment. The facts relating to the initiation of proceedings under Section 24 of the Gift-tax Act, 1958, were that Sri Madanlal Patodia and Sri Brijilal Patodia (now deceased) gifted 1,000 and 800 shares of GTN Textiles Ltd. on April 24, 1979 and April 27, 1979, at their face value.

(3.) The Commissioner of Income-tax (Appeals) found that while the Gift-tax Officer took the value of the shares at Rs. 102.50 for the purpose of gift-tax assessment, the assessee himself had shown the value of each share of GTN Textiles Ltd., in the assessment year 1980-81, at Rs. 633.44. This prompted him to issue the notice dated May 13, 1986, calling upon the assessee to show cause why the assessment order as passed by the Gift-tax Officer should not be set aside for suitable modification as the same order was erroneous in so far as it was prejudicial to the interests of the Revenue, the value of the shares gifted being taken at too low a price. The assessee submitted that the break-up value of the shares worked out to Rs. 633.44 each and that value was shown in the wealth-tax return as per Rule 1D of the Wealth-tax Rules. According to the assessee, for the purpose of gift-tax, the provisions of the Wealth-tax Rules were not applicable and Rule 1D of the Gift-tax Rules required the valuation to be made on yield method which well justifies the value adopted by the Gift-tax Officer. The assessee also submitted that the said shares were eventually sold by the Union Bank of India and the State Bank of India at the rate of Rs. 102.50 and Rs. 101 each, respectively. But the Commissioner of Gift-tax held that since the assessee even after the said sale by the banks showed the value of the shares at Rs. 633.44 for wealth-tax, the Gift-tax Officer should have taken that as the value of each of the gifted shares. He, therefore, set aside the assessment.