DEPUTY COMMISSIONER OF GIFT TAX, CENTRAL CIRCLE-II versus M/S BPL LIMITED

Citation: [2022] 14 S.C.R. 938 · Decided: 13-10-2022 · Supreme Court of India · Bench: SANJIV KHANNA · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 14 S.C.R.
DEPUTY COMMISSIONER OF GIFT TAX,
CENTRAL CIRCLE-II
v.
M/S BPL LIMITED
(Civil Appeal No. 3265 of 2016)
OCTOBER 13, 2022
[SANJIV KHANNA AND J. K. MAHESHWARI, JJ.]
Gift Tax Act, 1958 – ss.4, 6 and Schedule II – Wealth Tax
Act,1957 – Schedule III, Part A r.2(9) & r.2(11); Part C, rr.9 & 11;
and Part H, r.21 – “Quoted” shares and “unquoted” shares – Equity
shares in lock-in-period – Valuation of – Respondent-assessee gifted
29,46,500 shares of M/s. BPL Sanyo Technologies Limited and
69,49,900 shares of M/s. BPL Sanyo Utilities and Appliances Limited
to M/s. Celestial Finance Limited –Shares of M/s. BPL Sanyo
Technologies Limited and M/s. BPL Sanyo Utilities and Appliances
Limited, both public limited companies, were listed and quoted on
the stock exchanges – However, these gifted shares being promoter
quota shares were under a lock-in period up to 16th November
1993 and 25th May 1994 respectively – In the impugned judgment,
the High Court observed that the equity shares under the lock-in
period were not ‘quoted shares’ – A general circular issued by SEBI
however stated that shares under the lock-in period can be
transferred inter se the promoters – Issue whether such restricted
transfer would convert the equity shares in the lock-in-period into
‘quoted shares’ as defined vide sub-rule (9) to r.2 of Part A of
Schedule III of the W.T. Act – Answering in negative, the Court
held: The restricted transfer would not make the equity shares in
the lock-in period into “quoted shares” as the lock-in shares are
not quoted in any recognised stock exchange with regularity from
time to time and it is not possible to have quotations based upon
current transactions made in the ordinary course of business – The
shares in question being “unquoted shares” have to be valued in
terms of r.11 of Part C of Schedule III of the W.T. Act as a standalone
valuation method – This would be in accord with sub-section (1) to
s.6 of the G.T. Act, which states that the value of a property, other
than cash, transferred by way of gift, shall be valued on the date
on which the gift was made and shall be determined in the manner
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[2022] 14 S.C.R. 938
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as laid down in Schedule II of the G.T. Act, which makes the
provisions of Schedule III of the W.T. Act applicable – Valuation
cannot ignore the limitations attached to the shares – r.21 of Part H
of Schedule III of the W.T. Act permits valuation and ascertainment
of the market value as per provisions of Schedule III of the W.T.
Act, but does not state that valuation will be done by disregarding
the restrictions, or by enhancing the rights which have been
transferred, or by revaluation of the asset when provisions of
Schedule III are invoked for purpose of valuation of an asset under
the W.T. Act.
Shares and Securities – Wealth Tax Act,1957 – Explanation
to r.2(9) of Part A, Schedule III – Effect of – Held: Explanation to
r.2(9) of Part A, Schedule III of the W.T. Act does not prohibit the
authority, tribunal or the court from examining whether a particular
share, be it equity or preference share, is a “quoted share” or an
“unquoted share” in terms of sub-rules (9) and (11) of r.2 of Part A
of Schedule III of the W.T. Act – This right which is conferred on the
authorities under the W.T. Act or the G.T. Act is not delegated to the
stock exchange – A decision of the authority is however amenable
and can be examined when challenged in an appeal – Gift Tax Act,
1958.
Dismissing the appeals, the Court
HELD:1.1. As per the provisions of the Gift Tax Act, 1958
, as it was applicable on the date on which the gift was made, gift
tax at the applicable rate is chargeable on the value of the taxable
gift. Sub-section (1)(a) to Section 43 of the G.T. Act states that
where a property is transferred otherwise than for adequate
consideration, the amount by which the market value of the
property, at the date of the transfer, exceeds the value of the
consideration, shall be deemed to be a gift made by the transferor.
Sub-section (1) to Section 64 of the G.T. Act states that the value
of any property, other than cash, which is transferred by way of
gift, shall be its value on the date on which the gift was made and
shall be determined in the manner as laid down in Schedule II of
the G.T. Act. Sub-section (1) to Section 6 is subject to the
provisions of sub-section (2) to Section 6 of the G.T. Act, which
sub-section need not be elucidated as it is not 

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