1981 PLP (Trib (PTD)

However, there can be no denying the fact that as per section 42 of the E. D. Act, it is the responsibility of the Controller to ascertain the value of any property for purpose of estate duty. And hence, I think he did not fall into an error in accepting the break‑up value of the shares as per balance- sheet of the company as on 30‑6‑1975 as communicated by the Management of the company to the Accountable Persons vide their letter dated 6‑1‑1977. Lastly, I would also like to put it on record that the contents of the wealth tax returns and the orders in wealth tax proceedings for the years 1973‑74, 1974‑75 and 1975‑76, which are reported to have become final also go a long way to demolish the plea of the appellant inasmuch as in those proceedings the value of these very shares was admittedly determined and assessed on the break‑up value basis anti it is, therefore, definitely open to us to place reliance upon That material which is obviously relevant for deciding the issue in hand under the Estate Duty Act. However, while doing se, I do not feel persuaded to hold that the same value as estimated there should be accepted here also that the simple reason that the appellants have, as already stated, usually failed to pin point any mistake or calculational error in working out the break‑up value of shares as per relevant balance-sheets of the company. For the foregoing reasons, I would hold that the correct period of valua tion of the shares of the company is the 'break up value method" and not the 'open market method'. In the result, I would dismiss the appeal on this issue and direct the Deputy Controller of Estate Duty to pass appropriate order in accordance with law. As the matter spay not be allowed to rest here, I would express my views on the residuary method of valuation of shares of private company laid down by section 39 of the 'E. D. Act for what they are worth. For valuing the shares of private company on open market valuation basis, the law requires us to proceed on certain presumptions, suppositions and expectations by this connection, firstly, section 39 of E. D. Act itself provides a definite basis and then the decided cases long way to furnish the most dependable and marked guidelines to understand the implications of the law and legal problem with which we are faced. I think it would be advisable if I first reproduce hereunder some excerpts from celeberated authorities relevant to the issue in hand. While considering section 7(5) of the Finance Act, 1894 which is in these terms :‑- "The principal value of any property shall be estimated to be the price which in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased." the House of Lords, in Inland Revenue, The Commissioner v. Cross-man ((1937) A C 26) held that the shares must be valued on the basis of hypothetical sale on the date of the death of the deceased in a hypothetical open market between the hypothetical willing vendor and a hypothetical willing purchaser on the hypo thesis that no one is excluded from buying and that the purchaser would be registered as the hold of his shares but would then hold them subject to the Articles of Association of the Company including the restriction on transfer.' In Finlay's Trustees v. Inland Revenue, Commissioner ((1938)22 A T C 43) Lord Flaming of the Court of section said :‑

‑ "In estimating the price which might be fetched in the open market for the goodwill of the business it must be assumed that the transaction takes place between a willing seller and a willing purchaser and that the purchaser is a person of reasonable prudence who has informed himself with regard to all the relevant facts such as the history of the business, its present position, its future prospects and the general conditions of the industry ; and nisei that he had access to the accounts of tine business for a number of years." And a little later, the same Lord Justice said at page 573 of the report: "What the Act says that the sale is to be treated as an open market sale, that is to say, the restrictions on transfer are to be ignored for the purpose of hyputhetical Sale which is to fix the price, but I cannot see why the hypothetical sellers are not to be treated as being what they are, namely, directors in possession of the information which a pur chaser would reasonably requires and which or: the evidence he would have obtained if he were to be a willing purchaser." I would now quote front the speech of Widgery, L. J. delivered In re; Lynall (decd.), and appears at page 576 of the above report :‑ Section 7(5) of the Act of 1894 applies to all forms of property passing on a death. It makes the hypothetical market price the test .of values, and prescribed only two of the conditions to which the sale is subject, namely, that it must be a sale in open market and conducted at the time of the death of the deceased. In so far as other conditions need to be inferred, the court must supply those which will give effect to the intention of the section. Thus it is established that the sale is wholly hypothetical one conducted between hypothetical parties." Now keeping in view the provision of section 39 of E. D. Act and the principles of law as emunicated by the above‑cited rulings, there can be no denying the fact that it would be contrary to the spirit anti the relevant pro vision of law to presume or hold, as argued by the learned counsel for the appellant, that there was absolutely no likelihood of any buyer coming for ward looking to the circumstances prevalent at the time of the death or the deceased. The contention of the learned counsel for the appellant that only the "published information", which was available at the time of the death of the deceased, could only he taker, note of and not the unpublished informa tion is, in my humble opinion contrary to what has been Held unanimously by the Court of Appeal In re: Lynali which has been relied upon by appellant's counsel. No doubt Polowman, J. In re, Lynall was favourably inclined to adopt the view that published information alone ought to be taken into account. But he felt constrained to follow the decision of Dauokberts, J. In re Holt ((1953) 1 W L R 148) wherein it is held that besides published documents the purchaser must be taken to be in possession of all such further information (if any) as member of the Board would have afforded, but the Court of Appeal, however, allowing the appeal held : "That it must be assumed that the purchaser would make all reasonable enquiries which a prudent purchaser would wish to make and that he would receive true and factual answers to such enquiries ; that in the present case such enquiries would have disclosed the Category 'B' documents and those documents were therefore, admissible." (Quoted from head‑notes). The Category 'B' documents, it may be noted, consisted of the interim monthly statements in possession of directors and facts known to the Board to show the prospectus or the likelihood of the company going public. The submissions of Mr. Ahmed Shuja Khan, the learned counsel for the appellant are thus without substance. Their Lordships of Mysore High Court in Controller of Estate Duty v. J. Krishna Murthy ((1974) 96 I T R 8) if I may say with all humility at my command, have wrongly observed that the view of Polowman, J. In re : Mrs. Lynell was affirmed by the House of Lords. He has advanced his arguments, so far (is I could see on the presumptions that the buyer is neither willing buyer nor is he a prudent man. He has completely overlooked all the important facts and circumstances which would have made a prudent and willing purchaser to purchase the shares in question after obtaining all el necessary information which would have been made available to him by a willing seller. The learned counsel for the appellant was also wrong in considering that the Act of 1973 had placed restriction on the transfer of shares of the private limited companies or that there was, in fact, any such restriction existing at the time of death of the deceased. What is provided for in Subsection (2) of section 5 of the Act of 1972 is that 'where the Federal Government makes an order under subsection (I) in respect of the shares of any company, no dealing or business relating to such share shall he transacted on any Stock Exchange and no transfer of such share shall be registered in the Share Register of the company for a period of 90 days from the date of such order of such shorter period as may be notified by the Government.' The Federal Government did not admittedly make any order under subsection (1) in respect of the shares of the the company" before the date of the death of the deceased. The learned counsel for the appellant also did not pay due heed to the provisions of the Act of 1973 which ensure the payment of minimum annual rate of return equal to 2 % above the bank rate and the payment of compensation on the acquisition of shares on the basis of the price set out in she Schedule attached to the Act. However if I were to hold that the open market bash was to be adopted in this case for estimating the value of the shares in question. I would have preferred to remit the cost to the D. C. E. D. for passing de novo orders since he had neither adjudicated upon nor estimat ed the open market value of the shares of the company. [28‑1‑1979].‑

The appeal stands finally disposed of in respect of all the issues discussed and decided by the order of the Accountant Member save that of valuation of 1,3,250 shares of United Industries Limited, Lyallpur. As we differ about the method of valuation of the said shares as well as their estimated value, we direct that the case be laid before the learned President for obtaining a third' Member's opinion on the following points :‑ Whether the shares of the U . . . .I. . . .L. . . .L. . . . are to be asses sed on the basis of the market value method as envisaged by section 39 of the E. D. Act ? If so, whether their open market value was to be assessed at Nil, or the matter may be referred back to the D. C. E. D. for further enquiry and determination of their market value on the date of the death of the deceased. ABRAR HUSSAIN NAQVI (MEMBER).‑--This estate duty case has been referred to me for my opinion as the learned JIM and learned AM, who heard the appeal, had differed to their views on the following questions:--‑ (1) Whether the shares of the U. I. L. L. are to be assessed on the basis of the market value method as envisaged by section 39 of the E. D. Act? (2) if so, whether their open market value was to be assessee at Nil or the matter may be referred back to the D. C. E. D: for further enquiry and determination of their market value on the date of the death of the deceased. (3) Whether the D. C. E. D should accept as correct the liability of the deceased in respect of affairs of U. I. L. L. to the extent these were adjusted by the G. C. P. out of the sum due on account of minimum Guaranteed Return. Originally questions Nos. 1 and 2 above were referred vide order of the Bench dated 28‑1‑1979. Subsequently a miscellaneous application was moved before the same Bench for rectification of a mistake. According to the said application the question in regard to minimum guaranteed return, though argued, was left out of consideration by the Bench. Consequently that mistake was rectified and both the learned Members have expressed their views on that issue. But they differed on that issue as well and question No. 3 was framed and referred to me for my opinion.

2. The brief facts of the case under which the aforesaid question arose, at the cost of repetition but for convenience are restated. One Mr. A. H. M. died on 14‑5‑1976 leaving behind considerable property including 131250 shares in a private limited company known as U. I. L. The shares had the face value of Rs. 10 each. This private limited company was in fact a family affair and the entire paid up capital of Rs. 35,00,000 divided into 35,00,000 shares of the face value of Rs. 10 each was owned by Mr. A. H. M. and his family members. In 1973 Hydrogenated Vegetable Oil Industry (Control and Development) Act, 1973 (hereinafter referred to as HVOI Act) was promulgated and under section 5 of the said Act the Government was empowered, (i) to take over the management of any Establishment of the kind of the deceased's company and (ii) to acquire whole or a portion of the shares from all, or any of the share‑holders of such a company: Con sequently in exercise of these powers and the Federal Government took over the management of the company of the deceased on 2‑9‑1973. On taking over the management on the same date a proprietary audit report was prepared which showed a loss of Rs. 42,59,

569. According to this report the break‑up value of each share was worked out Rs. 9.58. This report was submitted to the Punjab Industrial Development Board on 18‑9‑1974 (This has wrongly been stared by the learned A. M. that it did not see the light of day till 12‑6‑1976 when it was approved). Since it was not a statutory audit report, no approval was necessary and in any case it has been submitted to the Government on 18‑9‑1974 and, as has been stated by the learned counsel for the assessee, it became a published document and thus available to general public. The statutory audit reports and balance‑sheet were prepared by the auditors as on 31‑10‑1973, 30‑6‑1974 and 30‑6‑1915. The last rioted balance- sheet was drawn up on 17‑11‑

975. All these reports and balance‑sheets however were approved on 12‑9‑1976. The break‑up value of the shares on the basis of the balance‑sheet as on 3‑6‑1975, was worked out at Rs. 25.11 per shares were. The shares ultimately acquired by the Federal Government under section 5 of the HVOI Act on 31‑7‑1976 i.e. after the death of the deceased on 4‑5‑1976. Compensation had to be paid to the share holders after acquisition which was determined by the Government on 11‑11‑1976 at the rate of Rs. 23,586 per share. Finally after making certain adjustment of the liabilities the compensation was worked out by the Government at Rs. 30,65,

922. The Accountable Persons declared Nil value of these shares but the assessing officer did not accept this plea and held the shares having been passed on of the accountable persons and worked out the value of the shares as under:

Capital Rs. 3,50,000 shares of Rs. 10 each. Rs. 35,00,000 Reserves Rs. 55,57,626 Less adverse balance Rs. 2,86,491 Total assets Rs. 87,71,135 Break up value @ Rs. 25.11 per share value of 131250 Shares Rs. 32,95,685 The assessing officer however, did not adopt the figure worked out by him on the ground that ultimately compensation of Rs. 30,95,622 had been received by the accountable persons consequently this amount of Rs. 30,95,622 was added to the Principal value of the estate. The case of the Accountable persons before the assessing officer as well as before the Tribunal was firstly, that this being a private Limited Company and its Article of Association contained restriction of alienation of shares, section 39 of the Estate Duty Act was applicable for determination of the value of the shares. There has been no dispute between the two learned members on the application of this section. This section provides:-- "that the value of the shares if not ascertainable by reference to value of total assets of the Company, shall be estimated by What they would fetch if they could be sold in the open market." The learned A. M. has accepted the plea of the assessee firstly that the value of the shares was not ascertainable in this case and that for various circum stances the market value of these shares was Nil. The learned J. M. on the other hand has held that the value of these shares was ascertainable. It has further been held by him that in the alternative if the value is to be determined on the basis of oven, market basis the case has to be remitted back to the D. C. E. D. as he has not ascertained open marked value of the shares of the Company. Under section 26 of the HVOI Act it has been provided that in, case where the Government, has taken over management of establishment it would guarantee to the share holders the minimum annual rate of return equal to 2 % above the bank rate. Consequently in accordance with this section the Government worked out the amount of Rs. 4,07,786 Ns minimum guaranteed return which was to be paid to the deceased for the period 2‑9‑1973 (date of taking over the management) to 31‑7‑1976. However out of this total amount the G. C. of P. adjusted liabilities to the extent of Rs. 3, 73,001 and only balance of Rs. 33,887 was paid to the accountable persons on 8‑2‑1978. The assessing officer has however, included the entire' amount of Rs. 4,07,788 while calculating the total assets of she deceased. The case of the assessee before the Tribunal was firstly that it was not a property passing on the death of the deceased as this amount had been paid after the death of the deceased. On this point both the Members had agreed that the amount which was to be paid as minimum guaranteed return was includable in the deceased's assets. Both the learned Members also agreed on two more points that the minimum guaranteed return related to the period from 2‑9‑1973 to 31‑7‑1976 although the deceased had died on 4‑5‑1976. Therefore proportionate adjustment was to be made so as to include the amount calculated up to 4.5‑1976. Secondly‑out of the liabilities the amount of Rs. 2,59,261 was due to U.

1. L. out of which accountable persons had already availed of claim at Rs. 11,956 and therefore this amount was to be adjusted. But the learned Members have differed on the point as to whether the liabilities determined and adjusted by the G. C. of P. were to be assumed as correct and should be given credit or the D. C. E. D. should first satisfy himself as to whether the alleged debits in question warranted allowance in terms of section 45 of the Estate Duty Act. While the learned A. M. has held that the liabilities determined by the G. C. of P. should be accepted as correct the learned A. M. has held that the D. C. E. D. should come to an independent conclusion and should not accept the liabilities without satisfying himself in this regard. Since, according to learned J.M. specific opportunity of adducing evidence had not been provided to the accountable persons in his view the case should be remitted back to the D. C. E. D. so as to allow the accountable persons an opportunity to adduce evidence to prove the alleged debits of the deceased. Issue No. 1 The entire case of the accountable persons has been built up on one point i.e. since no balance‑sheet from the date of taking over the management to the date of death of the deceased has been approved therefore the value of the shares could nut be ascertained. The argument of the A. R. was that it is only the published information on the basis of which the value of the shares could be ascertained and that the unpublished information is in admissible and could not be taken into account for the purpose of ascertain ing the value of the shares of a private limited company. In support of this contention the learned A. R. relied upon a number of cases which I would presently discuss. The leading case on which the learned A. R. has based his arguments is the case of Lynall and another v. Inland Revenue ((1972) I T R 563), decided by House of Lords. Thus case would be discussed at length when I would discuss the question of market value of the shares. For the present moment this case has been cited in support of the contention that only a published information could be taken into consideration for ascertain ing the value of the shares. But from the aforementioned case I could not find even the slightest support to the contention of the learned A. R. so far as it relates to ascertainment of the value of the shares. In this case the factors and circumstances which could influence the market value of the shares have been discussed but nowhere it has been stated that non‑publishing of accounts and balance‑sheet would be in any way relevant for consideration as to whether the value of the shares could be ascertained or not. On the contrary Lord Donovan observed in his judgment as follows:-- "I concur in the view that' confidential information ought not to be regarded as available to a hypothetical purchaser under 'section 7(5) of the Finance Act, 1894, though I would think it right not to treat as confidential information for this purpose accounts of the Company already prepared and awaiting presentation to the share holders. I have in mind the accounts of the present Company for the year to July 31, 1961. In that case, almost in similar circumstances, the balance‑sheet and the accounts had been prepared up to July 31, 1961 before the death of the deceased on 21‑5‑1962 but this balance‑sheet was passed on 7‑6‑1962 1. e. 17 days after the death of the deceased. In the present case as well as the balance‑sheets on 31‑10‑1973, 30‑6‑1974 and 10‑6‑1975 though prepared earlier were approved after the death of the deceased on 12‑9‑1976. Under section 39 of the Estate Duty Act market value of shares of a private limited Company having restriction to the transfer of shares can only be determined if it is not ascertainable by reference to the value of the total assets of the company. I am in full agree ment with the learned J. M. when he says that no iota of evidence is available on record to show that the value of the, shares could not be ascertained with reference to the value of the total assets of the company. This is condition precedent to coming to the second mode of valuation on the basis of open market value. The learned A. R. could not clear this hurdle so as to base his claim on the second method of valuation. In order to prove that the value of the shares was not ascertainable it has to be first established that the value of the total assets of the company could not be ascertained: If by some method value of the total assets of the company could be ascertained the value of the shares could obviously be determined. The learned A. R. argued that the deceased and after his death the accountable persons had no knowledge about the affairs of the company and thus the value of the shares the company was not available to them. The value of a, thing is not dependent on the knowledge of a particular person. For instance if 'A' dies without knowing that he had inherited certain property which is subsequently discovered to the accountable persons, can it be said that the said property did not pass or did not have any value because the deceased had no knowledge of it.? Similarly a deceased owning a house at the time of his death might not necessarily had the knowledge of the true value of the house. Can it be said that since the deceased did hot know the value of the house therefore the value could not be ascertained or it should be taken as NIL. Again supposing a person owns a valuable diamond but he has no idea about its value till his death. Can it be said that the value of the diamond could not be ascertained ? Here the question arises who is to ascertain the value and therefore whose knowledge is relevant 7 Obviously it is neither the deceased nor the accountable persons. Ascertainment of value is to be done by the authorities which have been created under the Estate Duty Act. Therefore it is the knowledge of these authorities which is relevant. The question therefore is whether the D. C. E. D. had any material before him to ascertain the value of the shares in a private limited company within the meaning of section

39. If the D. C. E. D. had some material and information on the basis of which value of the shares could be determined and ascertained, the fact that some information and material was not available to the deceased before his death or to the accountable persons after his death, is entirely irrelevant. The object of the Estate Duty Act is to charge duty on the assets of a person who has died. It has not been the case of the accountable persons that the shares of the deceased were not included in the assets. The case of the accountable persons is that the shares had Nil value. Section 4 of the Estate Duty Act creates charge on the value of all properties which pass on the death of a person. Obviously the shares of the deceased were property, and since they were acquired after his death they‑did pass to the accountable persons. Section 39 only provides the method of valuing such shares. This method is for the guidance of the assessing officer and not for the deceased or the accountable persons. In the present case the latest balance‑sheet as on 30‑6‑1975 which was drawn up on 25‑11‑1975 was available and according to which the value per share was Rs. 25.11. The learned A. R. wanted the Tribunal to believe that notwithstanding the fact that such value was ascertainable this should be treated as Nil merely on the ground that this balance‑sheet was approved after the death of the deceased. The learned A. R. could not quote any authority to support his view. As I have stated above the learned A. R. has unnecessarile played up the point that unpublished information is inadmissible for the purpose of ascertainment of the value of the shares. In the leading case, of Lynall and another v. Inland Revenue Commissioners (noted above) no such observation which could be helpful to the learned A. R. can be found. On the contrary at page 752 of the Judgment of the House of Lords relied s contrary view had been expressed. In that case the balance‑sheet had been drawn up to 31‑7‑1961 between thin date and the date of death the trading had been done for about 10 months and during that period sales had Arisen and profit bad increased. The question arose as to whether in fixing the market value of the shares the information in regard to current financial position could be said to be available to a hypothetical purchaser. In that context it was held that higher figure could be adopted only on the basis that hypothetical purchaser would be in possession of Information contained in category. B document as well as information concerning the current financial position of the company. In that case it was never disputed that the account of the company for the year ending July 31, 1961 though approved after the death of the deceased, were not relevant con sideration. What was disputed was that the current financial position, namely after closing of the accounts on 31‑7‑1961 till the date of death, could not be a relevant factor for determination of the market value of the shares. In the present case, since the assets of the company could be valued therefore the value of the shares could also be ascertained from the material on record. I may venture to say with utmost respect, that the learned A. M. has not given any cogent reasons for holding the view that the value of the shares was not ascertainable with reference to the assets of the company. The reasons which he has advanced are: (i) It was not possible to draw balance‑sheet as the management of the company had been taken over by the Government on 2‑9‑1973. (ii) After, taking over the management no balance sheet or proprietary audit report was available at the time of death of the deceased. (iii) because the shareholders had no knowledge of the real state of affairs of the company nor they could obtain the final accounts or the balance‑sheet. The proprietary audit report was approved in a general meeting of the company held on 12th September, 1976 and gazetted on 31‑12‑19,76, (iv) The value of the assets of the company was not information to the public at large and not even to the shareholders. None of the above reasons, are relevant to see as to whether the value of the shares could be ascertained with reference to assets of the company. It may in cidentally be pointed out that it is factually incorrect that no proprietary report was prepared after taking over the management of the company which was in fact prepared on 2‑9‑1973 and the report was submitted to the Punjab Industrial Development Board on 18‑9‑1974. Since it was not a statutory audit report it did not require any approval nor in fact it was approved on 12‑9‑1976. As I have stated above the learned counsel has laid unnecessary stress on the knowledge of the ex‑shareholders or the public which has no relevancy so far as the application of section 39 is concerned ascertainment of assets on the company or for that the value of the shares with reference to them is not dependent on the knowledge of the ex‑shareholders. It may be pertinent to note that the value of the shares is to be ascertained by reference to tire value of the total assets of the company. It could not be said that there were no assets of the company or that the assets of the company had Nil value. It also cannot be proved that the value of the assets could not be ascertained. The value of the shares is ascertainable with reference to the value of the assets. What the Dy. Controller had to do was to first ascertain the value of the total assets of the company and then the value of the shares of the deceased had to be ascertained with reference to the value of the assets so arrived at. I entirely agree with the learned J. M. that it was absolutely unarguable case so far as ascertainment of the value of the shares was concerned. Since the value of the shares could be ascertained and has in fact been ascertained it was absolutely unnecessary to come to second mode of valuation i. e. the market value. It may also be noted that no alternative bad been prescribed by law nor any mode has been suggested for ascertainment of value of assets or value of shares with reference to them. This gives wide discretion to the deceased to take into consideration whatever facts could be made available to him or whatever material which could be relevant for valuation of assets. Therefore the question of published or unpublished information or one balance‑sheet or the other is irrelevant consideration. The fact remains that certain documents including balance‑sheet were available to the deceased at the time of assessment which he could certainly make use of for ascertainment of value of the shares with reference to the assets of the com pany. I would go even so far that any material or facts discovered subsequent to the death of the deceased which could throw some light for the ascertain ment of the value of the assets of the company as on the date of death of the deceased can also not be said as irrelevant consideration. Mere fact that certain material, carne to light after the death of the deceased, cannot be a ground Ipso facto for rejecting, it. As I have stated above the valuation has to be made by the deceased and it is his information which matters. Unless it could be shown that the accountable persons have been prejudiced because of the use of some material or that the valuation made by the deceased was perverse, the valuation cannot be brushed aside merely because certain balance‑sheet bad not been published or certain material which was not available at the time of death of the deceased had been made use of. In this case the balance sheet as on 30‑6‑1975 was available which could give a reasonable basis for the ascertainment of the value of the assets of the com pany. Similarly when shares had been acquired by the Federal Government on 31‑7‑1976 i. e. about two months after the death of the deceased, and the compensation was paid to the accountable persons which was determined as on 31‑7‑1976. This was certainly a relevant fact or for the ascertainment of the value of the shares of the deceased with reference to the assets of the company on the date of his death. The compensation paid by the Federal Government, was on the value as on 31‑7‑1976 which date coincides approxi mately with the death of the deceased. In these circumstances I entirely agree with the learned J. M. that the value of the shares in this case should be made with reference to the value of total assets of the company and in other words the break‑up value. The answer to question No. 1 is therefore in the negative. Since my answer to Question No. 1 is in the negative the answer to Question No. 2 really does not arise. However since both the learned Members have given their opinion on this issue as well I also give my opinion on this issue. At the outset 1 have no hesitation in saying that the view of the learned J. M. is correct and I entirely agree with him. My reasons for arriving at this conclusion are given below. The appellant's whole case is again based on the same point namely that while determining the market value it is the published document or informa tion which can be taken into account arid no other document which had not been published could be made the basis for determining the market value. This argument is based on the case‑law which has been cited by the learned A. R. The leading case on this subject which was relied upon by the A. R, is the case of Lynall v. Inland Revenue Commissioner already, quoted above. The facts of that case were that one Airs. Lynall held 67886 shares Lincll, a Private limited company and Article of Association of which restricted right of shareholders to transfer their shares. There were in all five shareholders and the deseased had 28 % of the share capital. The other four shareholders were her husband and her two sons beside the Manager who held 200 shares. All the shareholders were Directors. Since Airs Lynall and her husband were quite old, they are apprehensive of death and in order to forestall the death duty as to be paid after their death, some steps went taken. They proposed that the company should be made a public company. They took certain steps in that direction secretly and a survey was got conducted and survey reports were obtained as to the best method of floatation. However before any decision could be taken by the Company Mrs. Lynall died on 21‑5‑1962. Originally the value per share was fixed of the Court at 3/10s but the Court of appeal increased the value to by 10s. The house of Lords on appeal restored the original order and fixed the value at 3

109. The precise question in that case was as to whether the secret information contain ed in various reports as to the proposal for making the company a public company, which were called Category, B documents was relevant consideration for determining the market value of the shares. All the three Courts agreed that the market value was to be determined by assuming the facts (i) That there was no restriction of any kind of the disposition of shares ; (ii) that the sale was not real but hypothetical ; (iii) that the sale was in the open market arid imaginary and took place at the time of death of the deceased ; (iv) the Directors or the vendors of the shares would be deemed to have done what all reasonable Directors would do for the sale and they would disclose all the information available to them provided its disclo sure Would not possibly prejudice the interest of the company. It is to be assumed that the shareholder who is to sell the shares is an honest man and would give as much information as he could ; (v) the hypothetical seller as a willing seller and a hypothetical purchaser a willing purchaser. However the difference of opinion arose only on one point as to what was the information which could possibly be available to a hypothetical purchaser. It was on that issue that the Court of appeal held that Category B information referred to above which was in fact a secret information, was relevant factor to be considered in arriving‑at the market value of the shares and it was on that issue that the House of Lords reversed the view of the Court of appeal and held that such information could not reasonably be said to be trade available to a hypothetical purchaser by the Directors of the company. It was in that context and referring to this Category B. information that the House of Lords at page 574 of the report held as under "As such information was not published information and as it would not in fact have been elicited on enquiry it ought not to enter into the calculation of price and value." On the same rage the House of Lords further observed: "if however the Category B documents and the information contained in them were confidential to the board, as they were, the information could not be made generally available so that it became open market knowledge. On this some what limited issue I, therefore, prefer the figure of 3, 10s and I would restore the decision of the learned Judge." It is therefore clear that this case does not support the contention of the appellant. The non‑consideration of published information was in the circular context referable to certain confidential information : The House of Lords nowhere stated that in order to arrive at market value of shares only published material is relevant consideration. On the contrary at page 572 the House of Lords observed as under "In argument before your Lordships counsel agreed that if the decision in the Cross-man case stood, the figure to be decided upon should be either 3, 10s or 4, 10s and that it should be the latter figure only on the basis that a hypothetical purchaser would be in possession of the information contained in the Category B documents as well as of information concerning the current financial position of the company." This observation was made on the argument advanced by the Revenue that since of the last balance‑sheet was drawn up on 31‑7‑1961 the trading had taken place and the profits had been earned by the company till the death of the deceased on 7‑6‑1962. In fixing the price to be paid by a hypothetical purchaser in the open market as on the date of death the hypothetical purchaser should be deemed to have information of the current financial position of the company and the profits earned by it. In this context Lord Reid observed that the value of the share could be greatly increased if infor mation regarding the prospects of the company becoming a public company would be available to a hypothetical purchaser, particularly the timings of the change, would lave considerable effect upon the prices of the shares. It was therefore concluded in that judgment that such information contained in Category B document could not have been made available to prospective purchaser as it was the confidential information and therefore it could not be regard as open market knowledge. Excluding this information it was held: "On this some what limited issue I therefore prefer the figure of 3 10s and I would restore the decision of the learned Judge." The order of the Court of appeal was reversed only on the limited issue that Category 13 document could be taken into consideration while determining the market value of the shares. It is pertinent to note that certain other informa tion which were not published information were taken into account even by the House of Lords in this case for determining the market value of the shares. At page 574 it was observed by Lord Reid: "A purchaser in the open market would probably not be context merely with what would be published information in the sense of information which had been in print in some documents sent out by a company to its shareholders. He would form his own idea as to the company's respects having regard to trends and developments which are matters of public knowledge. Furthermore on known facts in regard to a private company and its directors and its management he would form his own reasonable deductions." Lord Viscount Dilhorne in the same case had gone a little farmer god wag more specific. As stated above, the balance‑sheet in that case had been prepared as on 31‑7‑1961 and was passed on 7‑6‑1962 after the death of the deceased and therefore, as the learned A. R. puts it, was not a published document. Lord Viscount Dilhorne however held it not confidential docu ment at page 577 of the report which has already been reproduced above. From the above discussion it is therefore obvious that Lynell's case is of no help to the assessee. The other case relied upon is that of Indian Jurisdiction‑Controller of Estate Duty, Mysore v. H. Krishna Murthy. In that case the Mysore High Court upheld the order of the Appellate Tribunal with the direction that the value of the shares could have been determined only on the basis of published information and the information with the Directors of the Company which would have been given in answer to reasonable questions likely to be asked by any shareholder or intending purchaser. This case unfortunately also does not support the case of the assessee. The point involved in that case was entirely different. In that case one Mr. William Whitley died on September 11, 1967 and the last balance‑sheet which was prepared and published was that of 31‑12‑1966. The C. E. D. had made calculation on the basis of balance sheet prepared as on 31‑12‑1967 i.e. after the death of the deceased. It was in that context that the High Court had held that the relevant balance‑sheet that of 31st December, 1966 namely the one which was prepared before the death of the deceased and the one prepared after the death of the deceased could not be taken into account. Another question involved in that case was regarding goodwill which also had been included in the total assets of the Company while calculating the values of the shares. The High Court further held that valuation should be made in accordance with the Wealth Tax Rules and since under those rules goodwill was not to be included the value of the goodwill should not have been included in the total assets of the Company to work out the value of the shares of the deceased. This case therefore has no relevancy whatsoever and there is no ratio decidendi for application in the facts and circumstances of this case. In the present case the balance sheet had been prepared for a number of years latest of which was as it stood on 30‑6‑1975. Mere fact that it was approved subsequent to the death of the deceased has no bearing as has already been held by the House of Lords in Lynell's case discussed above. Another case relied upon by the learned A. M. is that of Dewan Labh Chand v. C. E. D. (83 I T R 538). In that case dealing with the verified claim of a displaced person under the Displaced Persons (Claims) Act, 1950 it was held that right to compensation was not property within the meaning of Estate Duty Act. In this case the facts are entirely different. As the learned J. M. has rightly pointed cut since the shares had been acquired by the Federal Government after the death of the deceased what had been passed on to the Accountable Persons was the shares itself and not the right to receive compensation. The learned D. E. C. D. had also determined the value of the shares on this basis. However in ascertaining the value of the assets of the Company, the quantum of compensation as was determined almost immediately after the death of the deceased, had been taken account. This case therefore has no relevancy to the facts and circumstances of the present case. Still another case relied upon b5 the A. R. was C. E. D. Patiala v. S. M. T. Motia Rani Malhotra (98 I T R 42). In that case the question was as to whether the compensation received by the heirs of the deceased on account of the death of the deceased was property passing the death of the deceased. It was held in the negative and obviously so. The compensation received by the heirs was not property of the deceased which could pass on the heirs though it was on account of the death of the deceased. The next case cited by the A. R. at the Bar was Commissioner of Gift Tax, West Bengal v. Sardar Ajaib Singh (83 I T R 221) I do not know why this case has been cited which has no relevancy. In the first instance this was a case of gift tax and secondly the question in that case was the direction for the estimated tax liability not provided for the balance‑sheet and the answer to this question was in the negative upholding the order of the Tribunal. The next case cited was C. L.‑T. West Bengal v. Swadeshi Mining & Mfg. Co. Limited (116 I T R 259). That case was of capital gains and it was held that while valuing the shares the break‑up method should be resorted to exceptionally. I do not known this case is relevant when it has not been shown that provision of capital gains are pari materia with section 39 of the Estate Duty Act. In section 59, of the Estate Duty Act, as discussed above, it has been made incumbent on the estate duty authorities to first ascertain the value of the shares with reference to the value of the assets of the Company if it cannot be done only then the other method of market value can be adopted. This case therefore has also no relevancy. The last case cited at the Bar was that of Estate of Late G. Ramswami Naidu v. C. E. D., Madras (76 I T R 553). In that case it was held that the contents of the wealth tax return and the order of the wealth tax authorities which had become final are relevant material on which reliance could be placed by the Tribunal to decide the issue under the Estate Duty Act. This case was cited by the learned A. R. in support of his contention that in this case the assessee's wealth tax assessments had been finalised for the years 1973‑74 to 1975‑76 on 27‑5‑1978 in which the W. T. O. (incidentally he was the same person who made the assessment under the Estate Duty Act) adopted the value of the shares for purposes of wealth tax at face value. In other words the alternate argument of the A. R. was that at best valuation which would be made by the D. C. E. D. was at the face value of the shares and not the value relevant to the assets of the Company. There are more than one reason for not accepting this argument of A. R. Firstly section 39 of the Estate Duty Act casts a duty on the D. C. E. D. to ascertain the value of the shares by reference to the value of total assets. Therefore be has to make independent ascertainment irrespective of the value adopted which has been considered and finalised under some other law may be relevant a consideration. No doubt the assessments under the Wealth Tax Act should have been and might have been taken into the consideration by the D. C. E. D. but it cannot be said to, the D. C. E. D. was bount to adopt the same value of the shares as has been adopted under the Wealth Tax Act. This view is supported by a recent decision of the Lahore High Court in Tax Ref. No. 30/1979 dated 11‑5‑1980. Secondly in this case the latest assessment under the Wealth Tax Act was made for the year 1975‑76 which may not be true on the date of death. Thirdly under rule 8 of the Wealth Tax Rules, 1963 under clause (c) value of the shares of Joint Stock Companies which are not quoted on recognised stock exchange had to be taken at the face value or break up value as determined under the Wealth Tax Rules which ever is higher. When the W. T. O. has adopted the face value of the shares be is obviously wrong as the rules require the higher value to be adopted. Mere fact that the D. C. E. D. had fallen into an error in adopting the face value of the shares could not operate a bar to entirely a different authority i.e. the D. C. E. D. to come to a different conclusion as required by section 39 of the Estate Duty Act. The market value has to be determined and the matter had to be referred to the D. C. E. D. for further enquiry. Therefore my answer to the second issue is that the market value of the shares could not be taken as NIL. On this issue as well, I agree with the learned J. M. The last question on which the learned Members have differed in their views is in regard to adjustment of liabilities of the deceased in respect of affairs of U. I. L. against payment on account of minimum guaranteed return made by G. C. of P. The accountable persons were held entitled to payment of Rs. 4,07,788 on account of minimum guaranteed return under the HVOI Act which provided minimum guaranteed return at 2 % above the bank rate. This amount related to the period from 2‑9‑1973 to 31‑7‑1976 which was included by the D. C. E. D. in the total asses of the deceased. Both the' learned Members have agreed that this amount should be curtailed and be calculated for the period from 2‑9‑1973 to 4‑5‑1976 i.e. the date of death of the deceased and not up to 31‑7‑1976. Both the learned Members have also agreed that the adjustment already made to the tune of Its 11,957 should be given credit. Both the learned Members have set aside the order of the D. C. E. D. on this point. However the learned Members have differed on one point. The G. C. of P. while making payment for the minimum guaranteed return adjusted liabilities of the deceased to the tune of Rs. 3,73,001 and this amount was deducted out of the total entitlements of the accountable persons. According to the learned a. m. this amount should have been straight away accepted by the D. C. E. D. and he directed to D. C. E. D. to do so and to predetermine the amount of minimum guaranteed return which could be included in the estate of the deceased. The learned J. M. on the other hand has held that the 'D. C. E. D. should know the exact amount of alleged liabilities and should not accept them without first satisfying himself as to whether these liabilities are genuine liabilities and could be adjusted. On this issue as well I agree with the learned J. M. (?) requires the estate duty authorities satisfy themselves in regard to the number of circumstances enumerated in that section. One of these factors is as to‑ whether encumbrance or debts were incurred or created bona fide for full consideration of moneys worth. The G. C. of Pakistan was not concerned in regard to factors mentioned by section 45 of the Estate Duty Act. They would normally accept what the books of accounts have shown. The estate duty authorities on the other hand have to see and satisfy themselves as to whether the conditions under which allowance could be allowed had been fulfilled or not. Therefore it is necessary that the D. C. E. D. should apply his independent mind and find out whether the liabilities which have been adjusted by the G. C. of Pakistan are the kind of liabilities which are allowable and adjustable under the Estate Duty Act and the conditions required for this allowance have been satisfied. On the third issue therefore my answer is in the negative.

3. In view of the majority decision the conclusion would be as follows: (1) The value of the shares of the U. I. L. L. could be ascertained and has rightly been ascertained by the D. C. E. D. under section 39 of the Estate Duty Act. His order on this issue is upheld. (2) Addition in cash is knocked off. (3) Addition in jewellery is maintained. (4) The order of the D C. E. D. in respect of share in F. . . T. . . M. . .is set aside for fresh decision. (5) The order of the D. C. E. D. is also set aside on the following issues‑ (i) In regard to the claim of liability in respect of Income‑tax Rs. 3,915 and wealth tax Rs. 34,063. (ii) In regard to the minimum guaranteed return it is directed to‑ (i) restrict the Minimum Guaranteed Return only up to the date of the death of the deceased. (ii) reduce the amount so arrived at by Rs. 11,957 in respect of the liability already allowed re per admission of the learned counsel for the appellant, and (iii) In regard to the liabilities of Rs. 3,73,001 adjusted by the G. C. of Pakistan the D. C. E. D. is directed to make fresh enquiry so as to satisfy himself as to whether or not these liabilities warranted allowance in terms of section 45 and to allow the accountable persons sufficient opportunity to adduce evidence in respect of the alleged debts of the deceased for which the G. C. of Pakistan has made adjustments out of the Minimum Guaranteed Return and also to call for the necessary details and requisite evidence, if any, from the G. C. P. by invoking, if the circumstances so demand, the powers vested in him under section 54 of the Estate Duty Act for proper dispensation of justice. Order accordingly.