TaxTMI 
TaxTMI 
1983 (1) TMI 107
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.... basis for the valuation. The Asstt. Controller found that the company had shareholdings of certain other companies and partnership shares. Taking into account the value of goodwill etc., the Asstt. Controller revalued the shares at Rs. 513 per share which was upheld by the Appellate Controller. Hence the appeal by the Accountable Person before the Tribunal. The ld. counsel for the Accountable Person has pointed out that in the case of a company, which is a going concern, the shares are to be valued on the basis of profitability either on the yield or the earning method. The Supreme Court in the case of Mahadeo Jalan has clearly held that the shares are not to be valued on the basis of the break up or assets method where there was no immedi....
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.... department, the ld. Counsel has relied on the points made out in the orders of the authorities below. The valuation adopted in the present case has fully taken in to account the contingencies. Only the value of the assets and liabilities of the company could give a correct value due to the market value of the shares. According to the ld. Counsel, the Supreme Court themselves have laid down that there is no hard and fast rule applicable to all cases. 4. The subject of valuation of shares of private limited companies has been the focus of such discussion and judicial reasoning. But the only consensus appears to be that no hard and fast rule applicable to all the cases can be laid down for such valuation. Some of the well-known methods of ....
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....oportion of profits. (3) In the case of a private limited company also where the expenses are incurred out of all proportion to the commercial venture, they will be added back to the profits of the company in computing the yield. In such companies the restriction on share transfers will also be taken into consideration as earlier indicated in arriving at a valuation. (4) Where the dividend yield and earning method break down by reason of the company's inability to earn profits and declare dividends, if the set-back is temporary then it is perhaps possible to take the estimate of the value of the shares before set-back and discount it by a percentage corresponding to the proportionate fall in the price if quoted shares of companies whi....
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....ants which go into it. In both these method the total profit, dividend declarability and the number of years for which these are to be taken into account for average etc. figure. More than an important aspects is that in private companies by proper manipulation of the accounts the company can alter the yield dividend or earnings to suit their purposes. Both in the yield and earnings methods, the trend of the business has to be seen its vicissitudes over the time. For instance if a company had managing agencies of several good companies, after the abolition of the managing agency system this source being lost, the yield and earnings will definitely go down. Likewise, note has to be taken of changes in fashion, technological advances or retar....