Deemed gift valuation of unquoted shares depends on the balance-sheet available on the transfer date, not a later statement.

Shares sold to family members were treated as a deemed gift under section 4(1)(a) of the Gift-tax Act, but the break-up value of unquoted shares had to be determined with reference to the balance-sheet actually available on the date of transfer. The relevant balance-sheet was the latest one available on that date, namely 31 March 1978, not the later 31 March 1979 balance-sheet. On that basis, the valuation adopted by the first appellate authority was upheld and the Revenue's challenge failed.

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Issues: Whether the shares sold to family members could be treated as a deemed gift under section 4(1)(a) of the Gift-tax Act, and whether the break-up value of the shares had to be determined with reference to the balance-sheet available on the date of sale.

Analysis: The transaction was treated as a sale to family members attracting the deemed gift provision, but the valuation of the shares depended on the balance-sheet actually available on the date of transaction. For that date, the latest available balance-sheet was the one as on 31 March 1978, and not the later balance-sheet as on 31 March 1979. Applying the view favourable to the assessee, the valuation based on the earlier balance-sheet was upheld.

Conclusion: The valuation adopted by the first appellate authority was sustained and the Revenue's challenge failed.

Final Conclusion: The substantive controversy on valuation was decided in favour of the assessee, while the cross-objection was not entertained for delay.

Ratio Decidendi: In determining the break-up value of unquoted shares for deemed gift purposes, the balance-sheet available on the date of transfer is the relevant basis of valuation.

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