Procedural valuation amendment upheld for unquoted shares; fair market value basis sustained for deemed gift computation.

The amendment to section 4(1)(a) of the Gift-tax Act was treated as procedural because it changed only the valuation method for unquoted shares and did not create the concept of deemed gift. In valuing shares transferred for inadequate consideration, the Revenue could rely on recognised valuation principles, including Wealth-tax Act methods where the Gift-tax Act had no special rule, to determine fair market value. The assessee's own wealth-tax valuation, company profitability, and other material supported the higher valuation, so the deemed gift computation was upheld.

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Issues: Whether, for assessment year 1990-91, the value of unquoted shares transferred for inadequate consideration had to be determined under the post-1 April 1992 valuation method in section 4(1)(a) of the Gift-tax Act, and whether the Assessing Officer was justified in treating the difference between the market value and consideration as a deemed gift.

Analysis: The amendment to section 4(1)(a) introduced by the Finance (No. 2) Act, 1991 was held to be procedural in character, because it altered only the method of valuation and did not create the concept of deemed gift for the first time. The charging framework of the Gift-tax Act already included deemed gifts under section 4, and valuation of unquoted shares was treated as a matter of procedure rather than substantive right. The assessee's own valuation for wealth-tax purposes, together with the profitability of the company and the valuation material on record, supported the adoption of a higher fair market value. The Tribunal also held that where no special valuation rule exists under the Gift-tax Act, the principles used under the Wealth-tax Act may be applied to ensure uniformity in valuation.

Conclusion: The amendment applied as a procedural valuation rule, the fair market value adopted by the Revenue was upheld, and the deemed gift addition was sustained.

Final Conclusion: The appeal failed because the Revenue's valuation approach and the consequent assessment of taxable deemed gift were confirmed.

Ratio Decidendi: An amendment that prescribes the method of valuation without altering the charging provision or the substantive liability is procedural, and in valuing unquoted shares for deemed gift purposes, the Revenue may rely on recognized valuation principles to determine fair market value.

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