TaxTMI 
TaxTMI 
1978 (3) TMI 47
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.... 23.85 per share. The surplus was sought to be taxed as capital gains. In the relevant assessment year the assessee had also claimed development rebate in respect of certain capital items like coal tubs, cast iron pipes, winding and guiding ropes, etc. Under the relevant rules, the assessee was entitled to allowance of the entire cost of replacement of such items as and when old stock was worn out. The ITO refused to allow the development rebate on these items on the ground that depreciation was not allowable in respect of the same. Being aggrieved by the order of assessment, the assessee went up on appeal before the AAC, who held that neither the break-up value nor the maintainable profits method can be adopted as the sole guide for determining the price of the said shares. Taking the mean of the break-up value of the said shares computed on the basis of the balance-sheet of the company as on the 31st December, 1956, and the market price of the shares, he determined the value of the said shares at Rs. 15 per share. On the question of development rebate, the AAC agreed with the ITO and held that the assessee was not entitled to such rebate on the items concerned as depreciati....
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.... the present reference and under s. 66(2) of the I.T. Act, 1922, this court has directed the Tribunal to draw up a statement of case and refer the following questions: " 1. Whether, on the facts and in the circumstances of the case, and according to the proper method of valuation, the Tribunal was right in holding that no capital gain arose on the sale by the assessee of the shares of J.K. Collieries Ltd. ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to development rebate in respect of capital items like coal tubs, C.I. pipes, winding and guiding ropes, etc., subject to the assessee's compliance with the requirements of law in respect of appropriate reserve ? " At the hearing, Mr. B. L. Pal, learned counsel for the revenue, drew our attention to a decision of the Supreme Court in CWT v. Mahadeo Jalan [1972] 86 ITR 621 (SC), which laid down the law as follows : " An examination of the various aspects of valuation of shares in a limited company would lead us to the following conclusion: (1) Where the shares in a public limited company are quoted on the stock exchange and there are deali....
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....ill be applicable to the facts of each case. But, one thing is clear, that market value, unless in exceptional circumstances to which we have referred, cannot be determined on the hypothesis that because in a private limited company one holder can bring it into liquidation it should be valued as on liquidation by the break-up method. The yield method is the generally applicable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation but none the less is one of the methods." Mr. B. L. Pal drew out attention to the observations of the Supreme Court in the said judgment at page 628. These observations are as follows : " Leaving aside any distress sales, the factors which in our view are likely to determine the fixation of a share on any particular day or at any particular time is, firstly, the profit-earning capacity of the company on a reasonable commercial basis ; secondly, its capacity to maintain those profits or a reasonable return for the capital invested, and in special cases such as investment companies, the asset-backings, the prospects of capitalisation of its earning in the shape of declarati....
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....ibunal has chosen one method resulting in a lower tax cannot be the reason why it should be erroneous. In this context, he cited a decision of the Supreme Court in CIT v. Simon Carves Ltd. [1976] 105 ITR 212 where it was laid down that if the ITO adopted a permissible method of computation resulting in a lower tax liability compared with other permissible methods, the same would not be a case where income could be said to have escaped assessment. The Supreme Court disapproved the view that unless the revenue exercised the power in a manner most beneficial to the revenue and consequently most adverse to the assessee they should be deemed to have not exercised power in a proper and judicious manner. Mr. Murarka contended further that even if the disputed items were not machinery within the meaning of the Supreme Court decision in the case of Mir Mohammad Ali [1964] 53 ITR 165 the same certainly came within the category of plant. As an authority Mr. Murarka cited a decision of the Supreme Court in CIT v. Taj Mahal Hotel [1971] 82 ITR 44, where it was held that even sanitary and pipeline fittings in a hotel fell within the definition of "plant" in s. 10(5) of the Indian I.T. Act, 1922,....