Law: Estate Duty Act, 1950

Section: 38,39

Estate Duty Act (X of 1950)---Ss. 38 & 39-Valuation of assets of deceased-Shares of deceased in private company-Section 38 does not apply to shares of private company Articles of which restrict alienation of shares--Controller of Estate Duty under legal obligation, under S. 39, to proceed on basis of balance-sheet of company-Held, market value basis not to be adopted in valuing shares of private company. ORDER MUHAMMAD MAZHAR ALI (MEMBER).-This Appeal is directed from th6 order of the learned Deputy Controller of Estate Duty, . . . . . The deceased A . . . . . died at K . . . . on 6-5-1976. He, inter alia, held 82 shares of the face value of Rs. 1,000 each share of S . . . Textile and Printing Mills Ltd. The accountable persons declared the value of shares at Rs. 82,000 whereas the Deputy Controller of Estate Duty through notice under section 58-A of the Estate Duty Act, proposed its value at Rs. 1,08,486, i.e. at the rate of Rs. 1,323 per share as per Balance-Sheet for 30th June 1976. While calculating break up value of these shares at Rs. 1,323 each share, the Deputy Controller of Estate Duty enhanced the value of assets as shown in the Balance-Sheet by Rs. 2,93,930 besides adding a sum of Rs. 58,740 towards appreciation of closing stock and another sum of Rs. 22,189 for taxation reserve. Assailing the order, the appellant's Authorised Representative drew our attention to section 39 of the Estate Duty Act, which enacts that "Where the Articles of Association of a private company contain restrictive provisions as to the alienation of shares, the value of shares, if not ascertainable by reference to value of total assets of the company, shall be estimated to be what they would fetch if they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the Article but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded' and contended that in the instant case admittedly the value of the shares was ascertainable by reference to the value of the total assets of the company. But in his submission the Deputy Controller of…

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