S. 48 : Capital gains-Computation-Sale of shares-Fair market value as on 1-4-1981-Capital asset-Valuation based on valuation report-Department is not justified in rejecting the valuation adopted on the basis of approved valuer-On the peculiar facts of this case the Tribunal uphold the plea of the assessee, and direct the Assessing Officer to adopt the valuation of Rs 3,833 computed by the assessee on the basis of the fair market value of the net assets. [S. 2(22B) 45, 49, 55]

During the relevant previous year, the assessee sold 930 equity shares held by her in Somani & Co. Pvt. Ltd. (SCPL, in short) for a consideration of Rs.8,46,30,000, but these shares were acquired in three lots, out of which the first lot of 225 equity shares was admittedly acquired prior to 1st April 1981. While computing the capital gains on the sale of these shares, the assessee took the cost of acquisition of Rs. 100 each for the SCPL equity shares acquired after 1st April 1981, but, so far as the 225 equity shares acquired prior to 1st April, 1981 are concerned, the cost of acquisition was taken as fair market value as on 1st April 1981 which was stated to be Rs.3,833. This valuation was done by dividing the net fair market value of the assets of the SCPL (i.e. Rs.7,66,80,100/-) by the total number of equity shares (i.e. 20,000). The fair market value of the shares, as on 1st April 1981, was duly supported by the report of Shah & Shah, Government Approved Valuers, for the valuation of land held by the company- which was its most valuable asset. The Assessing Officer, however, rejected this claim which was affirmed by the CIT(A). On appeal the Tribunal held that the intrinsic value of the shares on the basis of net assets divided by the total number of equity shares is most appropriate. On given the fact that the most important asset held by this company, as a perusal of the valuation report read with the balance sheet- copies of which is placed before us in the paper book, is land, and the value of this asset is a dominant factor in the valuation of the entire company, the course adopted by the assessee does appeal to us. The provisions of Rule 1 D, so much relied upon by the learned CIT(A), were no longer in existence at the relevant point of time, and nothing, therefore, turns on the same, nor can these provisions, therefore, be pressed into service as of now. No doubt, the provisions of rule 1 D of the Wealth Tax Rules could, at best, be of good guidance, but that is still a step short of the legal force. In any event, if the Assessing Officer had any doubts on the correctness of valuation, it was open for him to refer the matter to the Departmental Valuation Officer, but that exercise has not been done, and the relevant financial period is more than a decade old. On the peculiar facts of this case the Tribunal uphold the plea of the assessee, and direct the Assessing Officer to adopt the valuation of Rs.3,833 computed by the assessee on the basis of the fair market value of the net assets. (ITA No. 5795/Mum/2016, AY. 2012-2013, Bench “G” dt. 26-8-2022)
Sushiladevi R. Somani v. ACIT (Mum.)(Trib.) www.itatonline.org

[Coram : Hon’ble Shri Pramod Kumar, Vice President and, Hon’ble Smt. Kavitha Rajagopal, Judicial Member]