Delhi High Court
Commissioner Of Income-Tax vs Rajiv Gupta on 20 March, 2007
Bench: M B Lokur, V Gupta
JUDGMENT
1. The Revenue is aggrieved by a consolidated order dated July 14, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "C", in a batch of appeals.
2. We are concerned only with I.T.A. No. 1207/Del/99 relevant for the assessment year 1995-96 decided by the Tribunal.
3. The assessed had purchased some shares of a company by the name of M/s. Metal Rod (Pvt.) Ltd. The shares were not listed in the stock exchange. The face value of the shares was Rs. 10. The Assessing Officer was of the view that on the break up value of the shares, the market price of the shares came to Rs. 16.40 and, therefore, the assessed had obtained a benefit of Rs. 6.40 per share which was considered as a perquisite. In coming to this conclusion, the Assessing Officer relied upon a circular issued by the Central Board of Direct Taxes being Circular No. 710 dated July 24, 1995 (see ). According to the Assessing Officer, the following sub-clause of the circular was relevant and this reads as follows (page 27):
Where the shares have been offered only to the employees, the value of perquisite will be the difference between the market price of the shares on the date of acceptance of the offer by the employee and the price at which the shares have been offered.
4. The Assessing Officer also relied upon the decision of the Supreme Court in Bharat Hari Singhania v. CWT to the effect that if a share is not listed, then its break up value is to be taken as the fair market value. We may at once notice that the Supreme Court was concerned with the valuation of unquoted shares for the purposes of determining wealth-tax with reference to Rule 1D of the Wealth-tax Rules, 1957.
5. The assessed preferred an appeal before the Commissioner of Income-tax (Appeals) who relied upon Rule 5 of Schedule II to the Gift-tax Act for the purposes of calculating the break-up value of the unquoted equity shares. Applying the principles laid down in the rule and deducting the miscellaneous expenditure incurred, the Commissioner came to the conclusion that the break-up value of the shares was Rs. 7.68 per share and, therefore, there is no question of any addition to be made in the income of the assessed.
6. On further appeal by the Revenue before the Tribunal, the view taken by the Commissioner of Income-tax (Appeals) was upheld. It was held by the Tribunal that there was no market value of the shares since they were not listed in the stock exchange and, therefore, the break-up value arrived at by the Assessing Officer cannot be considered or termed as the market price of the shares. The Tribunal further concluded that the Commissioner had correctly found the break-up value of the shares by excluding miscellaneous expenditure not written off and on this basis had correctly assessed the value of the shares at Rs. 7.68 per share.
7. We are of the opinion that no fault can be found in the view taken by both the Commissioner of Income-tax (Appeals) as well as by the Tribunal. Both the authorities have chosen to rely on Rule 5 of Schedule II to the Gift-tax Act for arriving at the break-up value of the shares that are not quoted in the stock exchange. The admitted position is that there is no method of calculating the value of unquoted equity shares under the Income-tax Act, 1961.
8. The view taken by the Assessing Officer by relying upon the Bharat Hari Singhania may have been relevant for the assessment of wealth-tax but not for the assessment of income-tax. Moreover, reliance upon the circular issued by the Central Board of Direct Taxes is also inapposite and it would be difficult to say that the break-up value of the shares would be the market price of the shares, more particularly since the shares are not listed in the stock exchange. In any event, if two views are possible for calculating the break-up value of the shares and the appellate authorities have taken one view, it would not be proper for us to substitute their view with ours.
9. Under the circumstances, we are of the opinion that no substantial question of law arises for our consideration.
10. Dismissed.
