TaxTMI 
TaxTMI 
1987 (2) TMI 131
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....t value as on the date of gift, the Gift-tax Officer valued them on yield basis. Aggrieved by the above orders of the GTO, the assessee filed appeals before the Commissioner (Appeals) who held that only in cases where no dividend is declared or where there was no other method possible, yield method is taken in preference to other methods. In the absence of any reason to show, by the break-up value does not represent the real worth of the shares, he directed the GTO to recompute the value of the gifted shares on the basis of break-up value method. 2. The Revenue is now in appeal before us contending that the Commissioner (Appeals) was not correct in holding that the shares in question should be valued only on break-up value method and not o....
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.... be the price which, in the opinion of the Gift-tax Officer, it would fetch if sold in the open market on the date on which the gift was made. This is subject to the provisions of sub-section (3) of the same section wherein it is enacted that where the value of the property cannot be estimated under sub-section (1) because it is not saleable in the open market, the value shall be determined in the prescribed manner. It is claimed that Rule 10(2) of the GT Rules lays down that where the articles of association of a private company contain restrictive provisions as to the alienation of shares, the value of the shares, if not ascertainable by reference to the value of the total assets of the company, shall be estimated to be what they would fe....
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....icable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation. Again in the case of Smt. Kusumben D. Mahadevia, the Supreme Court held that in the case of a company which is a going concern and whose shares are not quoted on the stock exchange, the profits which the company has been making or should be capable of making or, in other words, the profit-earning capacity of the company would ordinarily determine the value of its shares. The break-up value would not be appropriate for valuation of shares of such a company because among the factors which govern the consideration of the buyer and the seller, where the one desires to purchase and the other wishes to sell, th....
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.... case of a private limited company, which is going concern which is not ripe for liquidation, and regarding which there are no exceptional circumstances, the break-up method cannot be applied; the profit-earning method is the only method which can be adopted for valuation of its shares. The Supreme Court affirmed that the valuation of the shares of the company such as this can be validly done under the provisions of section 6(1) of the GT Act. It ruled out the applicability of any other method including the break-up method. The decisions sought to be relied upon by the learned counsel for the assessee, in our opinion, do not advance his case any further. In the case of Mammen Mathew, the Court held that the Gift-tax authorities have no auth....