TaxTMI 
TaxTMI 
1986 (8) TMI 88
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.... 1-10-1984." 2. The assessee is a HUF. The assessment year is 1983-84 and the relevant previous year is Samvat year 2038. 3. Under an indenture dated 18-3-1982, Shri Shrenik Kasturbhai, as the karta of the assessee, settled in a trust Rs. 500 for the benefit of Master Punit Sanjay Lalbhai. The said trust was not revocable for a period of 73 months. During the relevant previous year, the assessee had, inter alia, gifted the following shares of public limited companies to the said trust: Name of the company No. of shares (1) Arvind Mills &nb....
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....l and has no connection with the commercial rate of return after taking into account various other factors. In our opinion, the just, reasonable and appropriate rate of capitalisation would be 15 per cent because, at present, the prime money rates for advances by the banks are between 16 per cent to 18 per cent. The rule which prescribes the rate of capitalisation at 4 per cent ignoring the reality, is not supported on the basis of income-earning capacities of the fund. Therefore, we request you to please accept the rate of discount at 15 per cent adopted by us while determining the capitalised value. Our above submissions are supported by rule 1BB of the Wealth-tax Rules which prescribes the capitalisation rate at 12 per cent in respect of immovable properties. For valuation of the life interest under the Wealth-tax Rules, rate of interest prescribed is 6.5 per cent. The rates adopted for capitalisation under gift-tax and for determining the life interest under wealth-tax were enacted many years earlier when the lending rate was 12 per cent per annum. Rule 1BB which was enacted subsequently when the lending rate was high prescribes the rate of capitalisation at 12 per cent. Acc....
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....e purpose of advance tax. According to the assessee, the income should be capitalised as per rule 11, read with section 6(2) of the Gift-tax Act, 1958 ('the Act'). But the rate for the purpose of discounting should be adopted at the rate of 12 per cent instead of 4 per cent mentioned in the said rule. Reliance was placed on the decision in the case of Smt. Kusumben D. Mahadevia v. N.C. Upadhya [1980] 124 ITR 799 (Bom.) and CWT v. Mahadeo Jalan [1972] 86 ITR 621 (SC). Adverting to section 6(3) it was submitted that since the right to receive the income under a revocable trust for a specific period can be sold in the open market, its value can be estimated depending on the prevailing rate and, therefore, one need not go to the rule prescribed under the Act. 7. The Commissioner (Appeals), however, upheld the action of the GTO, as under : "6. I do not agree with the contentions of the learned representative of the appellant. As stated by the Gift-tax Officer, the assessee has made gift to a revocable trust. This gift is, however, not revocable for 6 years. According to section 6(2) of the Gift-tax Act, 1958, where a person makes a gift which is not revocable for a specified perio....
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....made. (2) Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalised value of the income from the property gifted during the period for which the gift is not revocable. (3) Where the value of any 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." and submitted that since there is no reference to the 'prescribed manner' in sub-section (2), there is no need to go to rule 11. In this connection, he submitted that since under sub-section (2), the method of valuing the property gifted is stipulated, viz., 'capitalised value of the income from the property gifted during the period from which the gift is not revocable', we have to value such property as per the recognized principles of valuation. According to the learned counsel for the assessee if under sub-section (2), the value was to be done according to the prescribed manner, the Parliament would have spelt so as is done in sub-section (3). He also invited the attention of the Tribunal to section 7 of the Wealth-tax Act, 1957 with a view to stress hi....
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....e the commercial rate of return ruling in the market, say between 15 per cent to 20 per cent per annum. He, therefore, urged that the GTO should be directed to accept the value of the shares gifted by the assessee at Rs. 1,15,084 as declared in its return. 11. The learned representative for the department, on the other hand, strongly supported the orders of the gift-tax authorities. In this connection, he stated that the provisions of section 6 as well as rule 11 have to be read along with the provisions of section 46(1) and 46(2)(a) of the Act. Inviting the attention of the Tribunal to section 46(2)(a) he stressed the point that under the said section, the Board is empowered to make rules for 'the manner in which the market value of any asset may be determined'. He, therefore, submitted that in order to value the shares gifted, one cannot ignore the provisions of rule 11, as sub-rule (1) clearly states that 'property referred to in sub-section (2) of section 6 of the Act'. He, therefore, urged that the learned counsel for the assessee was not correct in stating that the provisions of the said rule are redundant. Further, he submitted that once it is accepted that the provisions....
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....r construction is possible apart from the strict literal construction, then that construction should be preferred to the strict literal construction. He, further submitted that where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational result. According to him, since the strict interpretation of the provisions of section 6, read with rule 11 would hit the taxpayers, like the assessee in the instant case, which was never intended by the Parliament, we can substitute the rate of discounting to a higher percentage than that mentioned in the said rule. 13. We have carefully considered the rival submissions of the parties and we can appreciate the hardship of the assessee. However, it is a trite law that where the provisions of a statute are clear and unambiguous, there is no scope for importing into the statute words which are not there, for such importation would amount to amending the statute and not construing it. Even if there be a casus omissus the de....
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....ty of anything previously done under that rule." The relevant portion of rule 11 is reproduced below: "(1) In the case of property referred to in sub-section (2) of section 6 of the Act, the capitalised value of the income shall be taken to be the product of the number of complete years included in the period for which the gift is not revocable and the average of the income received from the property during the three years or such lesser period of complete years in which such property was in existence, preceding the previous year for the year of assessment after discounting it at a rate of 4 per cent per annum:" 15. Section 6 has already been reproduced in paragraph 8 above. On the plain reading of sub-section (2) of section 6 and rule 11, it would be seen that both of them talk of valuing the property gifted which is not revocable for a specific period. Again, both of them talk of 'the capitalised value of the income'. Therefore, it is not possible for us to accept the submissions made on behalf of the assessee that the provisions of the said rule are redundant for that they should be ignored. In order to carry out the purposes of the Act, under section 46 the Board has b....