SENGUPTA ,J. - (1.) In this reference made at the instance of the assessee, the following questions have been referred by the Tribunal under s. 26(3) of the GT Act, 1958 ('the Act'): "1. Whether, on the facts and in the circumstance of the case, the Tribunal was justified in law remanding the case to the GTO for the valuation of the shares? 2. Whether, on the facts and in the circumstances of the case, in respect of the shares of Surendra Overseas Ltd. which is a public limited company the Tribunal was justified in law in remanding the case to the GTO for the valuation of the said shares for the purpose of the GT Act, 1958? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not deciding the question as to whether the provisions of r. 10(2) of GT Rules, 1958 are directory or mandatory and without deciding the question was further justified in remanding the case to the GTO?"
(2.) THE facts as found by the Tribunal are as under: This case relates to the gift-tax assessment of the assessee-HUF for the asst. yr. 1977-78. In course of income-tax proceedings it was found that the assessee-HUF had claimed a short-term capital loss on sale of 3,500 shares of Surendra Overseas Ltd. and 6,696 shares of Associated Wires Accommodation (P) Ltd. The shares of both these two companies were unquoted. The GTO determined the fair market value of 3,500 shares of Surendra Overseas Ltd. on the date of sale, namely, 2nd April, 1956 at Rs. 1,54,350 based on r. 10(2) of the GT Rules, 1958 ('the Rules') as against their sale price of Rs. 35,000 only, He, therefore, as the fall out effect of such valuation computed the deemed gift in the sum of Rs. 1,19,350 under s. 4(1)(a) of the said Act in relation to sale of shares of Surendra Overseas Ltd. by the assessee-HUF. Similarly, the fair market value of 6,696 shares of Associated Wires and Conductors Ltd. on the date of sale was determined by the GTO based on r. 10(2) in the sum of Rs. 7,00,859 as against the sale price thereof amounting to Rs. 1,88,996 only. The GTO, therefore, determined the deemed gift in the sum of Rs. 5,11,863. In response to a notice issued under s. 15(2) of Act, the assessee stated that it did not make any gift during the relevant previous year corresponding to the asst. yr. 1977-78. It was inter alia, contended that the fair market value of the shares should be determined on the yield method following the decision of the Supreme Court in CGT vs. Smt. Kusumben D. Mahadevia (1980) 14 CTR (SC) 360 : (1980) 122 ITR 38 (SC) and that the provisions of r. 10(2) were directory and not mandatory. The GTO however, took the view that the fair market value of the shares is required to be determined according to r. 10(2). He, therefore, assessed the deemed gift of Rs. 6,31,213 under s. 4(1) in the hands of the assessee-HUF in respect of the asst. yr. 1977-78.
(3.) ON appeal, the CGT (A) found that the shares of both the companies were required to be valued on yield method of following the decision of the Supreme Court in Smt. Kusumen D. Mahadevia's case (supra) and that the provision of r. 10(2) were only directory and not mandatory. The CGT (A) found that if the shares of the two companies concerned were valued on yield method, there was no deemed gift since such value did not exceed the sale price in the case of shares of Surendra Overseas Ltd. and in the case of shares of the other company, namely, Associated Wires & Conductors (P) Ltd. The difference between the fair market value determined on yield method and the sale price was Rs. 4,094 only which was less than the minimum exemption limit as laid down in the Act. The CGT (A) accordingly cancelled the assessment made by the GTO and held that there was no deemed gift chargeable to tax in this case.;