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2022 Supreme(SC) 1048
SUPREME COURT OF INDIA
Sanjiv Khanna, J.K. Maheshwari, JJ.
Deputy Commissioner of Gift Tax, Central Circle-II – Appellant
Versus
M/s BPL Limited – Respondent
Civil Appeal No. 3265, 3272 of 2016
Decided On : 13-10-2022
For the Appellant(s) : Mr. Nikhil Nayyar, Sr. Adv. Mr. Gautam Narayan, AOR Ms. Asmita Singh, Adv. Mr. Dhananjay Bayal, Adv. Mr. Raj Bahadur Yadav, AOR
For the Respondent(s): Mr. Raj Bahadur Yadav, AOR Mr. Gautam Narayan, AOR
The main legal point established in the judgment is that the method of valuation prescribed in Schedule III of the Wealth Tax Act is mandatory and must be followed for the valuation of shares for the purpose of gift tax.
Headnote:
Valuation - Gift Tax Act - Section 43, Section 64 - Summary of Acts and Sections
Fact of the Case:
The case involves the valuation of shares of two companies gifted by the respondent-assessee to another company. The shares were under a lock-in period and were not freely transferable. The issue raised relates to the valuation of these shares for the purpose of gift tax.
Finding of the Court:
The court found that the shares under the lock-in period were not 'quoted shares' as they were not quoted in any recognized stock exchange with regularity from time to time. The court also held that the method of valuation prescribed in Schedule III of the Wealth Tax Act is mandatory and cannot be deviated.
Issues: The main issue was the valuation of shares under a lock-in period for the purpose of gift tax.
Ratio Decidendi: The court interpreted the provisions of the Gift Tax Act and the Wealth Tax Act, specifically focusing on the method of valuation of shares under a lock-in period. The court emphasized that the valuation method prescribed in Schedule III of the Wealth Tax Act is mandatory and must be followed.
Final Decision: The court dismissed the appeal by the Revenue and held that the shares in question were to be valued as per the method prescribed in Schedule III of the Wealth Tax Act.
JUDGMENT :
SANJIV KHANNA, J.
The issue raised in these appeals relates to the valuation of 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, which were gifted by the respondent-assessee, M/s. BPL Limited, to M/s. Celestial Finance Limited on 2nd March 1993. The 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, allotted to the assessee on 17th November 1990 and 10th July 1991, were under a lock-in period up to 16th November 1993 and 25th May 19941[There appears to be some discrepancy in the date, which need not be authoritatively commented as it is not material for adjudication of the present appeals], respectively.
2. As per the provisions of the Gift Tax Act, 19582[For short, “G.T. Act”], 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[4. Gifts to include certain transfers. – (1) For the purpose of this Act, – (a) where 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:
Provided that nothing contained in this clause shall apply in any case where the property is transferred to the Government or where the value of the consideration for the transfer id determined or approved by the Central Government or the Reserve Bank of India;
xx xx xx] 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[6. Value of gifts, how determined.– (1) Subject to the provisions of sub-section (2), the value of any property, other than cash, transferred by way of gift shall for the purpose of this Act, be its value as on the date on which the gift was made and shall be determined in the manner laid down in Schedule II.
(2) Where a person makes a gift which is not revocable for a specific period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable.] 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 applicable in the context of the present case. It is an accepted position that the machinery provision relating to the method of valuation in Schedule II of the G.T. Act is mandatory and cannot be deviated.5[See decisions of this Court in relation to the method of valuation when stipulated under the rules or the Schedule in S.N. Wadiyar (Dead) through Legal Representative v. Commissioner of Wealth Tax, Karnataka, (2015) 15 SCC 38; and Commissioner of Wealth Tax, Meerut v. Sharvan Kumar Swarup & Sons, (1994) 6 SCC 623]
3. Schedule II to the G.T. Act, which incorporates the rules for determining the value of a gifted property, states that the value of any property, other than cash, transferred by way of gift, subject to the modifications as stated, shall be determined in accordance with the provisions of Schedule III of the Wealth Tax Act, 19576[For short, “W.T. Act”]. Therefore, we are required to refer to and apply the provisions of Part C of Schedule III of the W.T. Act, which lays down the me
