It is not every question of law, that is
required to be referred
Commissioner of Gift Tax, Bombay v. Smt. Kusumben D. Mahadevi
AIR 1980 SC 769: 1980 Tax LR 297: 122 ITR 38
JUDGES: P.N. Bhagwati and R.S. Pathak, JJ.
Date of Decision: 5-12-1979
The appeals in special leave raised as to whether a reference should have been called for by the High Court in each of the cases. Some of these cases were under the Gift-tax Act and others were under the Wealth-tax Act. These relate to the valuation of the ordinary shares of a private limited company called Mafatlal Gagalbhai Pvt. Ltd., which was an investment company. The assessee in these cases claimed in the course of assessment to Gift-tax or Wealth-tax, as the case, might be, that the value of shares should be taken to be the figure arrived at by M/s. C.C. Chosky & Co. chartered accountants, by applying the profit earning method of valuation of shares without making an adjustment in the profits of the company.
The Gift Tax and Wealth Tax Officers did not accept the figures of valuation given by the assesses on the basis of the profit earning method and valued the shares at much higher figures by applying the break-up method. This naturally involved the assesses in higher tax liability and hence they preferred appeals to the Appellate Assistant Commissioner (AAC). The Appellate Assistant Commissioner applied what had been described in record as “Rule of Three” and reduced the valuation of the shares but the figures determined by the Appellate Assistant Commissioner were still higher than those claimed by the assesses. Hence an appeal was preferred to Tribunal.
The only controversy before the Tribunal was that which method should be followed for valuing the shares of the company. The Tribunal accepted the contention of the assesses and adopted the valuation of the shares made by M/s. C.C. Chosky and Co. by applying the profit earning method. Therefore the applications were made to the Tribunal for referring to the High Court.
Whether the Tribunal was right in holding that the shares of an investment company had to be valued only on the basis of the yield without taking into account the assets owned and reflected in the Balance Sheet. Said to arise out of the orders of Tribunal.
The sole question that arose before the Supreme Court for determination in the appeals, was whether any question of law arising out of the order of Tribunal which needs to be referred to the High Court. It was held that, there must be a question of law arising out of the order of the Tribunal before a reference could be made but it was not, as was held, every question of law that is required to be referred by the Tribunal to the High Court. Further, where the answer to the question of law is self-evident or is concluded by a decision of Supreme Court, it would be futile to make reference and in such a case the Tribunal would be justified in refusing to refer the question to the High Court.