S. VIJI versus COMMISSIONER OF GIFT TAX

Citation: [1997] SUPP. 6 S.C.R. 62 · Decided: 02-12-1997 · Supreme Court of India · Bench: S.C. SEN · Disposal: Dismissed
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Judgment (excerpt)

A 
S. VIJI 
\'. 
COMMISSIONER OF GIFf TAX 
DECEMBER 2, 1997 
B 
[SUHAS C. SEN AND V.N. KHARE, .JJ.) 
Gift Tax Act, 1958: Section 6(3). 
Unquoted share:i~Transfer of-Valuation--Balance Sheer-Preceding 
C or following the date of tramfe1~Retevancy of - AY 1973-74---Unquoted 
shares transferred on 28-3-1973-Held : Though the balance sheet of 
31.3.1973 was the latest one available on the date of tramfer it bei11g more 
proximate, was more realistic to asce1tai11 the break-up value of the shares as 
011 28-3- 1973--Howevei; the assessee is e11titled to poi11t out any valiation of 
assets of company betwee11 28.3. 1973 and 31.3.1973. 
D 
Unquoted shares of a company were transferred on 28- 3.1973 to the 
appellant-assessee during the assessment year 1973-74. The dispute was in 
relation to the valuation of these unquoted shares. Both the revenue and 
the assessee agreed that the valuation should be made following the 
E 
break-up method as provided in Section 6(3) of the Gift Tax Act, 1958. 
The assessee contended that these shares must be valued by refer-
ring to the balance sheet figures of the company as on 31.3.1972 which was 
the latest available balance sheet as on the date of transfer of the shares. 
The revenue contended that the valuation must be made with reference to 
F 
the balance sheet figures as on 313.1973 which was the closest proximate 
date from the date of making of the gift. The High Court rejected the 
contention of the assessee. Hence this appeal. 
G 
Dismissing the appeal, this Court 
HELD : 1. The balance sheet figures as on 313.1972 give the picture 
of the value of the various assets of the company up to that date. The 
company may have flourished thereafter and the value of the assets may 
have increased. ft is also possible that during that period the fortune of 
the company languished and the value of its assets had decreased. In either 
H event, when a valuation of shares is to be made as on 283.1973, it will be 
62 
.I.. 
S.VIJI v. COMMR.OFGIFfTAX[SEN,J.] 
63 
unrealistic to ignore the balance sheet for the year ended on 31.3.1973. The A 
figures of the balance sheet of the year ended on 31.3.1973 will give a n:iore 
realistic picture of the value of the assets of the company than the figures 
as on 31.3.1973. The assessee, of course, is entitled to point out that 
between 28.3.1973 and 31.3.1973, the value of the assets of the company has 
increased. If so, such variation in the value of the assets will have to be B 
ignored. But the basis of the valuation will have to be the balance sheet as 
on 31.3.1973. [65-D-F] 
CGT v. K Ramesh, 141 ITR 462 (Mad.), approved. 
CWT v. S. Ram, 147 ITR 278 (Mad.), referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6239 of 
1990. 
From the Judgment and Order dated 18.12.81 of the Madras High 
c 
Court in T.C. No. 1182 of 1977. 
D 
A.T.M. Sampath and S. Balaji for the Appellant. 
Ranbir Chandra, Hemant Sharma and B.K. Prasad for the Respon-
dent. 
The Judgment of the Court was delivered by 
SEN, J. The following question of law was referred by the Tribunal 
to the High Court under Section 26(1) of the Gift Tax Act, 1958 : 
E 
"Whether, on the facts and in the circumstances of the case, the 
F 
Balance Sheet figures as on 31.3.1972 should be taken for ascer-
taining the break-up value of the shares gifted and not the balance 
sheet figures as on 31.3.1973?" 
The assessment year involved is 1973-74. The dispute relates to G 
valuation of unquoted shares of a Company which were transferred on 
28.3.1973. Section 6 of the Gift Tax Act lays down the method of valuation 
of gifts. Sub-section (3) provides that where the value of the property 
cannot be estimated because it is not saleable in the open market, the value 
shall be determined in the prescribed manner. There is no dispute that the 
shares are unquoted and are not saleable in the market. There· was a H 
64 
SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R. 
A 
restriction on the sale of shares in the market by the Articles of Association 
of the Company. Both the department and the assessee agree that the 
valuation should be made by following the break-up method. The dispute, 
however, is as to the balance sheet on the basis of which the break-up value 
will have to be calculated. 
B 
The case of the assessee is that these shares must be valued by 
referring to the balance sheet figures of the Company as on 31.3.1972 which 
was the latest available balance sheet on the date of the transfer of shar
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