COMMISSIONER OF GIFT TAX, BOMBAY ETC. versus SMT. KUSUMBEN D. MAHADEVIA ETC.

Citation: [1980] 2 S.C.R. 357 · Decided: 05-12-1979 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Dismissed

Judgment (excerpt)

.. , 
35'7 
COMMISSIONER OF GIFT TAX, BOMBAY ETC. 
I'. 
SMT. KUSUMBEN D. MAHADEVIA ETC. 
December 5, 1979 
JP. N. BHAGWATI AND R. S. PATHAK, JJ.J 
Gift Tax and Wealth Tax Act-The Tribunal refused to refer the case to 
the High Court and the High Court refused to call for reference on the ground 
that the question was decided by the Supreme Court-Question of law not raised 
before the Tribunal and not dealt with by it-if could be said to arise out of 
Its order. 
,. The Chartered Accountants of the assessee company, which was an invest-
ment company, valued its shares by applying the profit earning method of valua-
tidn of shares without making any adjustment in the profits of the company. 
The Gift Tax and '\'ealth Tax Officers did not accept this method and valued 
che shares by applying the break-up method. The Appellate Assistant Com-
B 
c 
missioner applied a different method called "the rule of three" and reduced the 
l> 
valuation of the shares; but the figures determined by him were still higher 
than those clain1ed bv the """e':oee. 
The Revenue preferred an appeal against 
the ordei of the Appe11ate Assistant Commissioner becaqse the valuation of the 
shares ma.de by the Gift Tax and Wealth Tax Officers was reduced by him : 
the assessee preferred an appeal against the order of the Appellate Assistant 
Commissioner becau.;:e he did not accept the valuation put forward 
by 
the 
assessee. 
The Tribunal accepted the valuation made· by the <:::bartered Accountants and 
rejected the Revenue's appeal. The Department's request for n1aking refereflce 
to the High c·ourt wa~ rejected on the ground that no referable question of law 
arose out of the order of the Tribunal. Tue High Court refused to call for a 
reference. 
It was contended on behalf of the assessee before this Court that the deter-
inination of this question was completely covered by the decision of this Court 
in Comn1fa5ioner of JVealth Tax v. Mahadeo JaJan and no µseful purpose would 
be served by calling for a reference. 
On. the other hand the Revenue contended that ( 1) the decision in Mahadeo 
Jalan's case laid do"'n no more· than broad guidelines which did not eliminate 
the necessity of finding out the appropriate method of valuation in each case 
and therefore it was necessary to make a reference so that the proper method 
tof valuatiQn of shares could be determined by the High Court. 
(2) 
The 
' break up method according to rule 10(2) of the Gift Tax Rules is the primary 
method to be applied for arriving at the valuation of the shares and since 
in 
this case the articles of association contained a restrictive provision as to the 
alienation of the shares, the Tribunal was wrong in determining the value of 
the shares by applying the profit earning method so far as the valuation under 
the Gift Tax Act was concerned. 
E 
F 
G 
H 
\ 
358 
SUPREME COURT REPORTS 
[19801 2 S.C.R. 
A 
Dismissing the appeals, 
'F 
HELD : 1. It is not every question of law that is required to be referred by 
the Tribunai to the High Courl Where the answer to the question of law is 
self-evident or is concluded by a decision of this Court no reference would be 
justified. [J61C-D] 
The answer to the question of law relating to the 
method 
adopted 
for 
valuation of shares in the company was clearly concluded by the decision 
in 
Mahadeo Jalan's case and the High Court was justified in refusing to call for 
a reference on this question. 
[367 A-B~ 
Jn the instant case the assessee was a private limited company which was 
a going concern. 
It was neither ripe for 
liquidation 
nor 
·,vere 
there 
any ,-I
exceptional circnmstances which should attract the applicability of the 
break 
up method. Tho profit earning method was, therefore, the only method which _ 
could properly be applied for arriving at tho valuation of the >hares 
in the/ '[
comp3.ny and the Tribunal was right in accepting the figures of valuation in the -i 
report of the Chartered Accountants based on the application of the profit '""-.
earning method. [366G-H, 367A] 
2. It is well settled that no question can be referred to the High Court unless 
it arises out ·of the order of the Tribunal. A question of law can be said to 
arise out ,of the order of the Tn"bunal only if it is dealt with by the Tribunal or 
is raised before it, though not decided by tho Tnbunal. A question of law not 
-raised before the Tribunal and not dealt with by it in its order cannot be saidt, 
to arise -out of its order, eve

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