Law:

Section:

Section 36 of the Estate Duty Act, 1953 - Valuation of estate - In computing break up value of shares, Assistant Controller did not allow any deduction for proposed dividend which was shown as liability in balance sheet of company and took valuation of goodwill of company at 4 years purchase of annual super profit - Tribunal however found that value of goodwill at four years purchase of annual super-profits was too high and it took value of goodwill at Rs. 50000 on basis of two years' purchase of annual super profits - Tribunal also allowed proposed dividend as a deduction in arriving at break up value of shares - Whether Assistant Controller adopted correct principle in valuing goodwill by finding out super profit and multiplying same by four years - Held, yes - Whether further, in determining break up value of shares, proposed dividend as provided in balance sheet of company was not an allowable deduction - Held, yes - Whether therefore, order of Tribunal was not justified - Held, yes FACTS The deceased held 440 ordinary shares of the face value of Rs. 100 each in a company the total of ordinary shares issued by said company was 2,020 shares of Rs. 100 each fully paid up. In determining the value of the shares held by the deceased, the Assistant Controller proceeded to determine the break-up value of the shares on the basis of the net assets of the company as disclosed in the balance-sheet as on 18-6-1958. In the said process, he computed the net assets of the company, without allowing any deduction for proposed dividend, which was shown as liability in the balance-sheet and added the value of the goodwill to the value of the net assets of the Company. The Assistant Controller thus arrived at the figure Rs. 5,15,034 for 2,020 issued shares and found that the break-up value of such share might be taken at the round figure of Rs. 250. The value of the shareholdings of the deceased, namely, 440 shares at Rs. 250 per share, was thus taken at Rs. 1,10,000. On appeal, Tribunal adopted value of goodwill at Rs. 50000 on basis of two years purchase of annual super profits and allowed proposed dividend as a deduction in computing the break up value of shares. On…

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