The main legal point established in the judgment is that the revenue must establish that the consideration actually received by the assessee is more than what is declared before invoking section 52(2) of the Income Tax Act, 1961.

Headnote:
Tax Appeal - Income Tax - 52(2) of Income Tax Act, 1961 - The judgment discusses the applicability of section 52(2) of the Income Tax Act, 1961 in determining the full value of consideration received on the transfer of shares. The court held that the revenue must establish that the consideration actually received by the assessee is more than what is declared before invoking section 52(2). The court also emphasized that compliance with the terms of the sale agreement constitutes actual consideration, and the revenue is entitled to adopt the fair market value of the shares if it is established that the assessee received additional consideration beyond what is declared.
Fact of the Case:

The assessee sold shares of a company for Re. 1 per share and declared the same in the return of income. The Assessing Officer invoked section 52(2) of the Income Tax Act and adopted the market value at Rs. 24 per share as sale price, assessing the long term capital gain income of the Assessee accordingly.
Finding of the Court:

The court held that the revenue must establish that the consideration actually received by the assessee is more than what is declared before invoking section 52(2). The court also emphasized that compliance with the terms of the sale agreement constitutes actual consideration, and the revenue is entitled to adopt the fair market value of the shares if it is established that the assessee received additional consideration beyond what is declared.
Issues: The main issue was whether the revenue was justified in adopting the market value at Rs. 24 per share as sale price under section 52(2) of the Income Tax Act, 1961.
Ratio Decidendi: The court held that the revenue must establish that the consideration actually received by the assessee is more than what is declared before invoking section 52(2). Compliance with the terms of the sale agreement constitutes actual consideration, and the revenue is entitled to adopt the fair market value of the shares if it is established that the assessee received additional consideration beyond what is declared.
Final Decision: The appeal was disposed of with the court holding that the revenue has established that the fair market value of the shares sold by the assessee were more than Rs. 20 per share as against the full value of Re. 1 declared by the assessee, and the revenue has established that apart from the declared value of Re. 1, the assessee has received additional consideration. Therefore, the valuation of shares under section 52(2) of the Income Tax Act, 1961 was justified.

JUDGMENT - DEVADHAR J.P., J.:---This Tax Appeal is filed by the appellant/assessee under section 260-A of Income Tax Act, 1961 relating to Assessment Year 86-87.

2.According to the assessee, the following substantial questions of law do arise out of the order of the Tribunal. They are:

(1) Whether in determining the capital gains chargeable to tax can the Assessing Officer have regard to a so called notional benefit in determining the full value of the consideration that accrues or arises as a result of the transfer?

(2) Whether capital gains would be chargeable only on the full value of the monetary consideration accruing or arising to an assessee and whether any incidental or remote benefit which benefit does not flow directly to the appellant is to be ignored in determining the chargeability to tax of the capital gains?

(3) Whether on the facts and in the circumstances the Tribunal was justified in holding that the full value of the consideration accruing to the appellant on the transfer of the shares of Piramal Rasayan Limited would be Rs. 16,23,000/- and not rupee 1/- which was the amount that the appellant received as a result of the transfer:

(4) Whether the Tribunal having found that there was no evidence brought on record to justify that the appellant had received any monetory consideration in excess of rupee one was yet justified in determining the full value of the consideration at Rs. 16,23,000/-.

3.The assessee in an individual belonging to the Piramal family (Piramal Group for short). The said Piramal Group consisted of 6 family members including the petitioner. The Piramal Group had controlling interest in the company M/s. Piramal Rasayan Limited as they were holding 2,70,600 equity shares out of 7,40,000 equity shares of the company. Out of 2,70,600 equity shares held by the Piramal group, 81,150 shares belonged to the Assessee.

4.By an agreement dated 1st November, 1985 Dr. Mohanlal Piramal (father of the assessee), head of the Piramal Group transferred the controlling interest of the Piramal Group in Piramal Rasayan Limited, by selling the entire 2,70,600 equity shares held by the Piramal Group to Akshar Investments Private Limited and Anusandhan Investments Private Limited (Purchasers for short) for a consideration of Re. 1/- per share-holder (irrespective of number of shares held by each shareholder). Thus, by the aforesaid transaction, 2,70,600 equity shares having face value of Rs. 10/- each were sold for total consideration of Rs. 6/- (at the rate of Re. 1/- per shareholder). Accordingly, the assessee a member of the Piramal group received cash consideration of Re. 1 on sale of 81,150 equity shares of Piramal Rasayan Limited and declared the same in the return of income.

5.The Assessing Officer (A.O. for short), during the course of assessment proceedings called upon the Assessee to furnish further particulars of the sale transaction. On perusal of the sale agreement, the A.O. noticed that in addition to Re. 1/- per shareholder several benefits were received by the Piramal Group as sale consideration and, therefore, the A.O. invoked section 52(2) of the Income-Tax Act and adopted the market value at Rs. 24/- per share as sale price of the shares and assessed the long term capital gain income of the Assessee accordingly.

6.On appeal filed by the assessee, the C.I.T. (A) set aside the assessment on the ground that prior approval of I.A.C. was not obtained by the A.O. before invoking the provisions of section 52(2) of the Income-Tax Act. Thereupon the A.O., obtained requisite approval from the I.A.C. and passed a fresh assessment order under section 143(3) of the Income Tax Act determining the long term capital gains income on sale of shares by taking the consideration at market value of Rs. 22.25 ps. per share. On appeal filed by the Assessee, the C.I.T. (A) upheld the assessment. On further appeal filed by the Assessee, the Tribunal confirmed the order passed by the authorities below, but directed the A.O. to rec

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