Capital gains valuation turns on true market value, with composite transaction consideration apportioned between shares and managing agency rights.

For computing capital gains under section 12B(2), the full value of consideration must reflect the true market value of the capital asset transferred, not an artificial price fixed in a composite arrangement. Where a share sale is coupled with the transfer of managing agency rights, the consideration must be apportioned between the two elements according to their real value. On that basis, the share price was taken at market value rather than the higher contractual figure, and the assessee could also rely on the proviso to section 12B(2) where substitution of fair market value for actual cost was applicable.

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Issues: Whether, for computing capital gains under section 12B(2), the sale price per share had to be taken at Rs. 65 stated in the agreement or at the market value of Rs. 46.

Analysis: The agreement was not an ordinary sale of shares alone but a composite arrangement under which the purchasers obtained both the shares and the relinquishment of managing agency rights. The statutory expression "full value of the consideration" refers to the true value of the capital asset transferred, not an artificial value assigned by the parties for a composite transaction. Since the shares had an ascertainable market value, the portion of the consideration attributable to the shares had to be separated from the amount paid for the managing agency rights. The assessee was also entitled to rely on the proviso to section 12B(2) for substitution of fair market value as actual cost where applicable.

Conclusion: The sale price per share had to be taken at Rs. 46 and not Rs. 65, and the issue was answered in favour of the assessee.

Ratio Decidendi: For computing capital gains under section 12B(2), the full value of consideration must reflect the true market value of the capital asset transferred, and in a composite transaction the consideration must be apportioned so that an artificial price assigned to the asset cannot be treated as its sale price.

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