judgement:
N: Criminal Appeal No. 718 of 1979 From the Judgment and Order dated 11 10 1979 of the Gujarat High Court in Criminal Appeal No. 110/77.
A.K. Trivedi and S.S. Khanduja for the Appellant.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal is preferred by the three accused in Sessions Case No. 46 of 1976 against their conviction and sentence 354 imposed upon them by the High Court under the .
The three appellants were tried by the Sessions Judge for commit ting offences punishable under section 302/120 B/323/324 read with section 34 and 109 of the Indian Penal Code for committing the murder of one Karsan Kala on 19 1 1976.
The learned Sessions Judge acquitted all the three appellants of the charges levelled against them.
The State of Gujarat filed an appeal against the order of Sessions Judge acquitting them, to the High Court of Gujarat.
A division Bench of the High Court in Criminal Appeal No. 110/77 allowed the appeal of the State and reversed the order of acquittal by the Learned Sessions Judge and convicted them for offences under section 302/120 B and sentenced them to imprisonment for life.
They were also convicted tor lesser offences and sentenced to varying terms of imprisonment The prosecution strongly relied on the evidence of three eye witnesses Rata Mala, Ganesh and Ruda.
Rata Mala was an injured eye witness having receives several incised injuries.
The evidence of Ruda not accepted.
The complainant Savai Kala, the brother of the deceased saw the latter part of the occurrence when the deceased was being carried away by the accused.
When Savai Kala questioned, the accused attacked him and he was also injured The High Court in an elaborate judgment after thoroughly scrutinising the evidence of the eye witnesses accepted their testimony.
It observed that the evidence of the eye witnesses Rata Mala is most reliable and trustworthy and so also the evidence of Ganesh.
The High Court has referred to the circumstance under which the order of acquittal could be interfered 1, with in the light of the various decisions of this Court.
The High Court taking into consideration the reasons given by the Sessions Judge for not accepting the testimony of the eye witnesses found them to be totally unacceptable.
We have been taken through the evidence of the material witnesses.
We have no hesitation in agreeing with the conclusion arrived at by the High Court that the reasons given by the l rial Court for acquitting the accused are totally unacceptable.
After hearing the learned counsel and examining the petition of appeal and after going through the relevant parts of the judgment of the High Court and the Sessions Court.
we find that there are no sufficient grounds of interference.
The appeal is summarily dismissed under S 384 of the Code of Criminal Procedure.
After we pronounced our judgment dismissing the appeal summarily under section 384 of the Code of Criminal Procedure, but before signing 355 the judgment, a decision of this Court Sita Ram & Ors.
vs State of U.P. was brought to our notice wherein the scope of the power of the Courts to dismiss an appeal summarily under section 384 of the Code of Criminal Procedure has been referred.
In that case an appeal was preferred to this Court under section 379 of the Code of Criminal Procedure, 1973 read with section 2(a) of the .
The appeal was listed for preliminary hearing under Rule 15(1) (c) of O.XXI of the Supreme Court Rules 1966.
The Appellants filed an application for adducing additional grounds, namely, (1) the provisions under cl.
(c) of sub rule (1) of Rule 15 of Order XXI of the Supreme Court Rules empowering the Court to dismiss the appeal summarily is ultra vires being inconsistent with the provisions of the ; (2) the power of the Supreme Court to frame rules under article 145 of the Constitution cannot be extended to annul the rights conferred under an Act of Parliament and (3) an appeal under the cannot be dismissed summarily without calling for the records ordering notice to the State and without giving reasons.
When the petition fr leave to adduce additional grounds came up before the Court, this Court ordered : "The appellants have challenged the constitutional validity of cl.
(c) of sub rule (1) of rule 15 of O.XXI of the Supreme Court Rules, which enables an appeal of the kind with which we are concerned, to be placed for hearing ex parte before the Court for admission.
In that view of the matter, we think that unless the question of the constitutional validity of the rule is decided, we cannot have a preliminary hearing.
Of this appeal for admission.
Let the records, therefore, be placed before the Hon 'ble the Chief Justice for giving such direction as he may deem fit and proper.
" The matter was placed before a Bench of five Judges by the Hon 'ble the Chief Justice as the constitutional validity of cl.
(c) of rule 15(1) of O.XXI of Supreme Court Rules, was challenged.
Alongwith the question of constitutional validity, two other grounds referred to earlier were also raised.
The contention of the Learned Counsel that a right of appeal cast an obligation on the Court to 356 send for records of the case, to hear both the parties and to make reasoned judgment, was not accepted by the judgment of the Court.
Reasons given by the Court are as follows: "Counsel for the appellant insisted that an absolute right of appeal as he described it, casts an inflexible obligation on the court to send for the record of the case, to hear both parties, and to make a reasoned Judgment.
Therefore, to scuttle the appeal by a summary hearing on a preliminary posting absent record, ex parte and absolved from giving reasons is to be absolutist a position absonent with the mandate of the Enlargement Act Act, indeed, of the Constitution in Article 134(1).
Counsel 's ipsi dixit did not convince us but we have pondered over the issue in depth, being disinclined summarily to dismiss.
" Regarding the power of the Court to summarily dismiss the appeal under section 384 of the Code of Criminal Procedure, the submission of the Learned Counsel was that the provisions of the Code of Criminal Procedure are not applicable to the Supreme Court which contention was not accepted by the Court.
Neither in the application for adducing additional grounds or in the order of the Court directing the matter to be placed before the Constitution Bench, there was any reference to The validity of section 384 of the Code of Criminal Procedure.
Neither was it pleaded during the arguments that section 384 of the Code of Criminal Procedure is ultra vires of the Constitution.
As the question of validity of section 384 the Code of Criminal Procedure was neither raised nor argued, a discussion by the Court after "pondering over the issue in depth ' would not be a precedent binding on the Courts.
The decision is an authority for the proposition that Rule ]5(1)(c) of O.XXI of the Supreme Court Rules should be read down as indicated in the decision.
We are satisfied for the reasons stated above that the decision is no authority regarding the scope of section 384 of the Code of Criminal Procedure.
The order cf dismissal of the appeal summarily will stand, P.B.R. Appeal dismissed.

summary/full:
The appellants who were charged with the offence of committing murder were acquitted by the Sessions Judge.
But on appeal by the State, the High Court convicted and sentenced them.
In their appeal under section 2(a) of the , this court, after a detailed analysis of the High Court 's judgment and the evidence led in the case summarily dismissed the appeal under section 384 of the Code of Criminal Procedure, 1973.
After the pronouncement of the judgment but before it was signed, the attention of the court was drawn to the judgment in Sita Ram vs State of U.P. ; which, according to them, held that the Supreme Court had no power to summarily dismiss an appeal under section 384, Cr.
P.C. in an appeal under section 2(a) of the 1970 Act.
Dismissing the appeal.
^ HELD: The decision in Sita Ram vs State of U.P. is no authority regarding the power of the court to summarily dismiss an appeal under section 384 of the Criminal Procedure Code.
In that case neither in the application for adducing additional grounds nor in the order of the Court directing the matter to be placed before the constitution bench was there any reference to the validity of section 384 nor was it pleaded that the section was ultra vires the Constitution.
[356 E] Therefore the observation of the Court that it has "pondered over the issue in depth" would not be a precedent binding on the court.
The decision is an authority for the proposition that rule 15(1)(c) of order XXI of the Supreme Court Rules should be read down as indicated in that decision.
[356F]


judgement:
ivil Appeal Nos. 129 and 512 of 1 97.
Appeals by Special Leave from the Judgment and order dated 19 6 1975 of the Bombay High Court in Gift Tax Application Nos. 1 and 2 of 1975.
AND CIVIL APPEAL Nos 755 756 OF 1976 Appeals by Special Leave from the Judgment and order dated 8 12 1975 of the Bombay High Court in W.T.A. No. 15/75.
AND 359 CIVlL APPEAL No. 1787 OF 1977 Appeal by Special Leave from the Judgment and order dated 18 12 1976 of the Bombay High Court in W.T.A. No. 24/76.
AND CIVIL APPEALS NOS.
1639 1645 OF 1977 Appeals by Special Leave from the Judgment and order dated 3 1976 of the Bombay High Court in Writ Petition Nos. 16, 1 and 21/76 and Judgment and order dated 4 11 1976 in W.T.A. Nos. 20 and 23/76.
S.T. Desai, section P. Nayar and Miss A. Subhashini for the Appellants.
N. A. Palkhiwala, section P. Mehta, H. P. Raina, Ravinder Narain, Mrs. A. K. Verma, Talat Ansari and A. N. Haksar for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
These appeals by special leave raise a short question as to whether a reference should have been called for by the High Court in each of these cases.
Some of these cases are under the Gift Tax Act while others under the Wealth Tax Act.
They all relate to the valuation of the ordinary shares of a private limited company called Mafatlal Gagalbhai Pvt. Ltd. which is admittedly an investment company.
The assessee in these cases claimed in the course of assessment to gift tax or wealth tax, as the case may be, that the value of the shares should be taken to be the figure arrived at by M/s. C. C. Chokay & Co., Chartered Accountants, by applying the profit earning method of valuation of shares without making any adjustment in the profits of the company.
It is not necessary for the purpose of these appeals to set out the different figures of valuation given in the report of M/s. C. C. Chokay & Co. and claimed by the assessees as representing the correct value of the shares on the material dates, because the question with which we are concerned is one of principle and the actual figures of valuation are not relevant.
The Gift Tax and the Wealth Tax officers did not accept the figures of valuation given by the assessees 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 assessees in higher tax liability and hence they preferred appeals to the Appellate Assistant Commissioner.
The Appellate Assistant Commissioner applied what has been described in 360 the record as 'rule of three and reduced the valuation of the shares but the figure determined by the Appellate Assistant Commissioner were still higher than those claimed by the assessees.
Since the valuation of the shares made by the Gift Tax and the Wealth Tax officers was reduced by the Appellate Assistant Commissioner, the Revenue was dissatisfied and it, therefore, preferred appeals against the orders of the Appellate Assistant Commissioner, to the Tribunal.
The assessees were also unhappy with the valuation made by the Appellate Assistant Commissioner since he did not accept the valuation put forward on their behalf and hence they too preferred cross objections in the appeals filed by the Revenue.
The appeals and the cross objections in the cases forming the subject matter of Civil Appeal No. 129/76 ere heard together by the Tribunal.
The only controversy before the Tribunal was as to which method should be followed for valuing the shares of the company.
The Revenue contended that in the case of an investment company like Mafatlal Gagalbhai Pvt Ltd., the proper method of valuation would be to take the mean of two values, one arrived at by applying the profit earning method and the other by applying the break up method, while the assessees pleaded for adopting only the profit earning method, since in their submission that was the only method which could be applied for valuation of shares of a going concern The Tribunal by a common judgment accepted the contention of the assessees and adopted the valuation of the shares made by M/s. C. C. Chokay and Co. by applying the profit earning method and in the result rejected the appeals of the Revenue and allowed the cross objections of the assessees.
We shall discuss in some detail the reasons which weighed with the Tribunal in coming to this decision when we deal with the arguments of the parties, but suffice it to state for the present that in taking this view, the Tribunal followed the recent decision of this Court in Commissioner of Wealth Tax vs Mahadeo Jalan & Ors.
Similar orders were passed by the Tribunal in the appeals and cross objections relating to the other assessees.
The Revenue was obviously aggrieved by the orders of the Tribunal and, therefore, it made applications to the Tribunal for referring to the High Court the following question of law, namely, "Whether the Tribunal is right in holding, that the shares of an investment company has to be valued only on the basis of the yield without taking into account the assets owned and reflected in the balance sheet 361 could be said to arise out of the orders of the Tribunal.
The applications for reference were rejected by the 'Tribunal on the ground that no referable question of law arose out of the orders of the Tribunal.
the Revenue thereupon made applications to the High Court for calling for a reference but those applications also met With the same fate.
Hence the Revenue preferred petitions for special leave to appeal in the case of all the assessees and special leave having been granted in some of the petitions, the present appeals have come up for hearing before us.
The sole question that arises for determination in these appeals is whether any question of law arises out of the orders of the Tribunal which needs to be referred to the High Court.
It is true that there must be a question of law arising out of the order of the Tribunal before a reference can be made, but it is not every question of law that is required to be referred by the Tribunal to the High Court.
Where the answer to the question of law is self evident or is concluded by a decision of this Court, it would be futile to make a reference and in such a case the Tribunal would be justified in refusing to refer the question to the High Court vide C.I.T. vs Chander Bhan; Mathura Prasad vs C.I.T. and C.I.T. vs Indian Mica Supply Co. Ltd. Now there can be no doubt that in the present case the question as to which method should bf ed for valuation of the shares of Mafatlal Gagalbhai Private Ltd., a private limited company which was an investment company and at all material times a going concern whether it should be the profit earning method or a combination of the break up method and the profit earning method is clearly a question of law.
But the argument of the assessees was that the determination of this question was completely covered by a recent decision of this Court in Commissioner of Wealth Tax vs Mahadeo Jalan & others in favour or the assessees and no useful purpose would be served by calling for a reference.
The Revenue conceded that the decision in Mahadeo Jalan 's case did lay down certain principles for valuation of shares in a limited company, but its contention was that these principles were no more than broad guidelines and they did not eliminate the necessity of finding out the appropriate method of valuation in each case which came before the taxing authority and hence it was necessary to ' make a reference so that the proper method for valuation of the shares of Mafatlal Gagalbhai Pvt. Co. Ltd. could be determined 362 by the High Court.
The controversy between the parties thus centered round the question is to what was decided by this Court in Mahadeo jalan 's case and whether it laid down what method should be applied for valuation of shares of a private limited company which is an t investment company carrying on business as a going concern.
If the method to be applied in such case could be found to have been judicially laid down by this Court in Mahadeo jalan 's case, all that would be necessary to be done for arriving at the valuation of the shares in Mafatlal Gagalbhai Company Private Limited would be to apply that method and it would be wholly unnecessary to call for a reference.
Let us, therefore, examine the decision in Madhadeo jalan 's case and see whether any principle of valuation of shares is laid down in it which would be applicable in case of a company like Mafatlal Gagalbhli Private Limited.
The decision in Mahadeo jalan 's case was rendered under.
the Wealth tax Act and the question was as to what was the appropriate method for valuation of shares of a private limited company for the purpose of wealth tax.
The Tribunal adopted the break up method and arrived at the valuation of the shares on that basis? but on a reference, the High Court took the view that in case of a company which is a going concern the only proper method of valuation of shares is the yield value method and n(lt the break up method.
The Revenue carried the matter in appeal to this Court and in a judgment delivered by Jaganmohan Reddy, J. this Court examined the question of valuation of shares in depth and after referring to various decisions of the English, Irish and Australian Courts, laid clown the following principles for valuation of shares in a limited company: "(1) Where the shares in a public limited company quoted on the stock exchange and there are dealings in them, the price prevailing on the valuation date is the value of the shares.
(2) Where the shares arc of a public limited company which are not quoted on a stock exchange or of a private limited company the value is determined by reference to the dividends if any, reflecting the profit earning capacity on a reasonable commercial basis.
But, where they do not, then the amount of yield on that basis will determine the value of the shares.
Tn other words, the profits which the company has 11 been making and should be making will ordinarily determine the value.
The dividend and earning method or yield method are not mutually exclusive; 363 both should help in ascertaining the profit earning capacity as indicated above.
If the results of the two methods differ, an intermediate figure may have to be computed by adjustment of unreasonable expenses and adopting a reasonable proportion 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 of quoted shares of companies which have suffered similar reverses.
(5) Where the company is ripe for winding up then the break up value method determines what would be realised by that process.
(6) As in Attorney General of Ceylon vs Mackie a valuation by reference to the assets would be justified where as in that case the fluctuations of profits and uncertainty of the conditions at the date of the valuation prevented any reasonable estimation of prospective profits and dividends." Since the company involved in this case was a private limited company which was a going concern, the Court following the above principles, negatived the applicability of the break up method for valuation of the shares and upheld the view taken by the High Court that the yield method was the proper method for arriving at the valuation of the shares.
It is clear from this decision that where the shares in a public limited company are quoted on the stock exchange and there are dealings in them, the price prevailing on the valuation date would represent the value of the shares.
But where the shares in a public 364 limited company are not quoted on the stock exchange or the shares are in a private limited company the proper method of valuation to be adopted would be the profit earning method.
This method may be applied by taking the dividends as reflecting the profit earning capacity of the company on reasonable commercial basis but if it is found that the dividends do not correctly reflect the profit earning capacity because only a small proportion of the profits is distributed by way of dividends and a large amount of profits is systematically accumulated in the form of reserves, the dividend method of valuation may be rejected and the valuation may be made by reference to the profits.
The profit earning method takes into account the profits which the company has been making and should be capable of making and the valuation, according to this method is based on the average maintainable profits.
Of course, for the purpose of such valuation, the taxing authority is not bound by the figure of profits shown in the profit and loss account because it is possible that the amount of profits may have suffered diminution on account of unreasonable expenditure or the directors having chosen to take away a part of the profits in the form of remuneration rather than dividends.
The figure of profits in such a case would have to be adjusted in order to arrive at the real profit earning capacity of the company.
It would, thus, be seen that in the case of a company which is a going concern and whose shares are not quoted on the stock exchange, the profits which the company has been making and should be capable of making or in other words, the profit earning capacity of the company would ordinarily determine the value of the shares.
That is why in Mahadeo Jalan 's case the Court quoted with approval the following observations of Williams, J. in McCathie vs Federal Commissioner of Taxation. ". the real value of shares which a deceased person holds in a company on the date of his death will depend more on the profits which the company has been making and should be capable of making,.
having regard to the nature of its business, than upon the amounts which the shares would be likely to realise upon a liquidation," and stated.
in no uncertain terms that "The general principle of valuation in a going concern is the yield on the basis of average maintainable profits subject t adjustment etc.
which the circumstances of any particular case may fall for".
The break up method would not be appropriate for valuation of shares of a company is a going concern, because as pointed out by the Court in Mahadeo Jalan 's case, "among the factors which govern the consideration of the buyer and the seller where the one desires to purchase and the other 365 wishes to sell, the factor or break up value of a share as on liquidation hardly enters into consideration where the shares are of a going concern".
It is only where a company is ripe for winding up or the situation is such that the fluctuations of profits and uncertainty of conditions at the date of valuation prevent any reasonable estimation of the profit earning capacity of the company, that the valuation by the break up method would be justified.
The Revenue leaned heavily on the observation in Mahadeo Jalan 's case that the factors likely to determine the valuation of a share include "in special cases such as investment companies, the asset backing" and urged on the strength of this observation that in the case of an investment company, the asset backing was a relevant consideration and the break up method could not, therefore, be considered as totally irrelevant.
This contention, we are afraid, is based on a wrong reading of the observation of the Court.
When the Court said that in case of an investment company, the asset backing is a relevant factor in determination of the value of he shares, what the Court meant was in order to determine the capacity of the company to maintain its profits the asset backing would be a relevant consideration.
The profit earning capacity of the company which would determine the valuation of the shares would naturally have to take.
into account not only the profits which the company is actually making but also the profits which the company should be capable of making and in order to arrive at a proper estimation of the latter, the asset backing would be a relevant factor in case of an investment company.
It would not be right to read the observation of the Court as suggesting that valuation of the assets would be a relevant factor in determining the valuation of shares.
The Revenue, of course, did not plead for exclusive adoption of the break up method and wanted the mean of the values arrived at by applying the break up method and the profit earning method to be taken as representing the valuation of the shares, but we do not see on what principle can a combination of the two methods be justified.
There is no authority either in any judicial decision or in any standard text book on valuation of shares which recognises the validity of a combination of the two methods, though it may sound acceptable as a compromise formula.
In fact, Adamson has criticised this combination of the two methods as unscientific in his book on "The Valuation of Company Shares and Businesses", (Fourth Edition) at page 55, where he has said: "The mere averaging of two results obtained by quite different basis of approach can hardly be said to represent any logical approach, whatever its merit as a compromise.
366 Despite its evident popularity in many quarters, it has not been given judicial recognition in decisions involving the fixation of a value by the Court.
" The combination of the two methods advocated on behalf of the Revenue has, thus, no sanction of any judicial or other authority and cannot be accepted as a valid principle of valuation of shares.
The Revenue than pointed out that the principles of valuation set out by the Court in Mahadeo Jalan 's case were merely broad guidelines and they did not obviate the necessity of considering each case on its own facts and circumstances and in support of this contention the Revenue relied on the observation made by the Court that in setting out these principles, the Court had not "tried to L., down any hard and fast rule because ultimately the facts and circumstances of each case, the nature of the business, the prospects of profitability and such other considerations will have to be taken into account as will be applicable to the facts of each case.
" Now it is true, as observed by the Court, that there cannot be any hard and fast rule in the matter of valuation of shares in a limited company and ultimately the valuation must depend upon the facts and circumstances of each case, but that does not mean that there are no well settled principles of valuation applicable in specific fact situations and whenever a question of valuation of shares arises, the taxing authority is in an uncharted sea and it has to innovate new methods of valuation according to the facts and circumstances of each case.
The principles of valuation as formulated by the Court are clear and well defined and it is only in deciding which particular principle must be applied in a given situation that the facts and circumstances of the case become material.
It is significant to note that immediately after making the above observation the Court hastened to make it clear, as if in answer to a possible argument which might be advanced on behalf of the Revenue on the basis of that observation that the yield method is the generally applicable cable method while the break up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation.
Here in the present case Mafatlal Gagalbhai & Co. Pvt. Ltd. was a private limited company which was a going concern and it was neither ripe for liquidation nor were there any exceptional circumstances which should attract the applicability of the break up method.
The profit earning method was, therefore, the only method which 367 could properly be applied for arriving at the valuation of the shares ill the company and the tribunal was right in accepting the figures of valuation in the Report of M/s. C. C. Choksy Co., based on the application of the profit earning method.
The answer to the question of law relating to the method to be adopted for valuation of shares in the company was clearly concluded by the decision in Mahadeo Jalan 's case and the High Court was, therefore, justified in refusing to call for a reference on this question.
It is true that in the present appeals, the question of valuation arises not only under the Wealth Tax Act but also under the Gift Tax Act, but since the provision for determining the value of an asset is the same in section 6 sub section (1) of the Gift Tax Act as it is in section 7 sub section (1) of the Wealth Tax Act, the principles of valuation laid down ill Mahadeo Jalan 's case must apply equally i relation to valuation of shares to be made for the purpose of the Gift Tax Act.
It was, however, contended on behalf OF the Revenue that there is a vital difference between section sub section (t) of the Gift Tax Act and section 7 sub section (1) of the Wealth Tax Act in aS much aS section S sub section ( 1 ) of the Gift Tax Act is subject inter alia to the provision of sub section (3) of that section and this latter sub section provides that where the value of any property cannot be estimated under sub section ( 1 ) because it is not saleable in the open market, the value shall be determined in the prescribe manner and Rule 10 sub rule (2) of the Gift Tax Rules prescribes the manner of valuation of shares in a private limited company where the Articles of Association contain restrictive provision as to the alienation of shares, by providing that in such a case, the value of the shares "if not ascertainable by reference to the value of the total assets of the company, shall be estimated to be what they would fetch if on the date of gift they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the articles, but the fact that a special buyer would for his own special reasons give a higher price that the price in the open market shall be disregarded".
The argument of the Revenue was that Mafatlal Gagalbhai Pvt Ltd, was a private limited company and its Articles of Association admittedly contained restrictive provision as to the alienation of shares and, therefore, Rule 10 sub rule (2) was applicable and according to that sub rule, the value of the shares was required to be 1 ascertained by reference to the value of the total assets of the company and it was only if the value was not so ascertainable that 368 it could be determined in any other manner.
The break UP method was thus, according to this sub rule, the primary method to be applied for arriving at the valuation of the shares and in the circumstances the Tribunal was wrong ill determining the value of the shares by applying the profit earning method, atleast so far as the valuation under the Gift Ta Act was concerned.
Now it is difficult to see how the question whether the valuation of the shares should have been made on the basis of the break up method by reason of Rule 10 sub rule (2) of the Gift Tax Rules can be required to be referred by the Tribunal to the High Court.
It is well settled that no question can be referred to the High Court unless it arises out of the order of the Tribunal and, as pointed out by this Court in Commissioner of Income tax vs Scindia Steam Navigation Co. Ltd. a question of law can be said to arise out of the order of the Tribunal only if it is dealt with by the Tribunal or is raised before though not decided by the Tribunal and a question of law not raised before the tribunal and not dealt with by it in its order cannot be said to arise out of its order, even if on the facts of the case stated in the order the question fairly arises.
It is obvious that this question sought to be raised on behalf of the Revenue was neither raised before the Tribunal nor decided by it and the only argument advanced before the Tribunal was that the mean of the values arrived at on an application of the profit earning method and the break up method should be taken to be the value of the shares.
There was no argument addressed to the Tribunal that the breakup method should be adopted because that was the primary method prescribed by Rule 10 sub rule (2) and the Tribunal had, therefore, no occasion to deal with such argument.
This question obviously, therefore, does not arise out of the orders of the Tribunal and it cannot be required to be referred to the High Court.
These were the only contentions urged on behalf of the Revenue and since there is no substance in them, the appeals fail and are dismissed with costs, N.K.A. Appeals dismissed.

dataset_name: IN-Abs

summary/full:
The Chartered Accountants of the assessee company, which was an investment company.
VL ed its shares by applying the profit earning method of valuation of shares without making any adjustment in the profits of the company.
The Gift Tax and Wealth Tax officers did not accept this method and valued The shares by applying the break up method.
The Appellate Assistant Commissioner applied a different method called "the rule of three" and reduced the valuation of the shares; but the figures determined by him were still higher than those claimed by the assessee.
The Revenue preferred an appeal against the order of the Appellate Assistant Commissioner because the valuation of the shares made by the Gift Tax and Wealth Tax officers was reduced by him: the assessee preferred an appeal against the order of the Appellate Assistant Commissioner because he did not accept the valuation put forward d by the assessee.
The Tribunal accepted the valuation made by the Chartered Accountants and rejected the Revenue s appeal.
The Department 's request for making reference to the High Court was rejected on the ground that no referable question of law arose out of the order of the Tribunal.
The High Court refused to call for a reference.
It was contended on behalf of the assessee before this Court that the determination of this question was completely covered by the decision of this Court in Commissioner of Wealth Tax vs Mahadeo Jalan and no useful purpose would be served by calling for reference.
On the other hand the Revenue contended that (1) the decision in Mahadeo Jalan 's case laid down no more than broad guidelines which did rot eliminate the necessity of finding out the appropriate method of valuation in each case and therefore it was necessary to make a reference so that the proper method of valuation of shares could be determined by the High Court.
(2) The break up method according to rule 10(2) of the Gift Tax Rules is the primary method to be applied for arriving at the valuation of the shares and since in this case the articles of association contained a restrictive provision as to the alienation of the shares, the Tribunal was wrong in determining the value of I i the shares by applying the profit earning method so far as the valuation under the Gift Tax Act was concerned.
358 Dismissing the appeals, ^ HELD: 1.
It is not every question of law that is require to referred by the Tribunal to he High Court.
Where the answer to the question of law is self evident or is concluded by a decision of this Court no reference would be justified [361 C D] The answer to the question of law relating to the method adopted for valuation of shares in the company was clearly concluded by the decision in Mahadeo Jalan 's case and the High Court was justified in refusing to call for a reference on this question.
[367A B] In the instant case the assessee was a private limited company which was a going concern.
lt was neither ripe for liquidation nor were there any exceptional circumstances which should attract the applicability or the break J up method.
The profit earning method was, therefore, the only method which could properly be applied for arriving at the valuation of the shares in the company and the Tribunal was right in accepting the figures of valuation in the report of the Chartered Accountants based on the application of the profit earning method.
[366G H, 367A] 2.
It is well settled that no question can be referred to the High Court unless it arises out of the order of the Tribunal.
A question of law can be said to arise out of the order of the Tribunal only if it is dealt with by the Tribunal or is raised before it, though not decided by the Tribunal.
A question of law not raise before the Tribunal and not dealt with by it in is order cannot be said to arise out of its order, even if on the facts of the case stated in the order, the question fairly arises.
[368C D] In the instant case the question sought to be raised by the Revenue was l ' neither raised before the Tribunal nor decided by it and the only argument t advanced before the Tribunal was that the mean of the values arrived at on an application of the profit earning method and the break up method should be taken to be the value of the shares.
No argument was addressed to the Tribunal that the break up method should be adopted because that was the primary method prescribed by rule 10(2) and the Tribunal had no occasion to deal with such argument.
The question did not arise out of the order of the Tribunal and it could not be required to be referred to the High Court.
3(i F]


judgement:
Civil Appeal No. 1113 of 1976.
Appeal by Special Leave from the Judgment and Order dated 16 4 1976 of the Allahabad High Court in execution Second Appeal No. 2162 of 1974.
J. P. Goyal and section K. Jain for the Appellants.
P. G. Gokhale and B. R. Agarwala for the Respondents.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
Rattan Lal sold certain land to Sri Ram for Rs. 10,000/ under a registered sale deed dated 31 March, 1960.
On April 4, 1960 Sri Ram executed an agreement to reconvey the 471 property for a sum of Rs. 15,000/ if paid within a period of two years.
Rattan Lal filed suit No. 18 of 1961 in the Court of First Additional Civil Judge, Meerut for specific performance of the agreement to reconvey and obtained a decree on April 17, 1962.
The decree was confirmed in appeal by the High Court of Allahabad on September 5, 1963.
On April 25, 1963 Rattan Lal assigned the rights which he had under the decree in favour of the present appellants, Dhani Ram Gupta and another.
The appellants filed an application for execution of the decree under Order XXI, Rule 16 of the Code of Civil Procedure on December 10, 1963.
Notice of application was issued to Sri Ram, the judgment debtor as well as the original decree holder Rattan Lal.
Rattan Lal kept quiet but on March 7, 1964, the judgment debtor Sri Ram filed objections contending that the execution application was not maintainable.
The application was adjourned from time to time.
Meanwhile, on May 26, 1964, Rattan Lal the original decree holder and Sri Ram, the judgment debtor moved the Executing Court to record full satisfaction of the decree.
It was stated that the parties had entered into a compromise and that the decree was proposed to be satisfied by payment of a sum of Rs. 7,000/ in cash by the judgment debtor to the original decree holder.
The amount was paid in open Court and satisfaction of the decree was duly recorded on May 27, 1964 by the Executing Court, who, however, observed that the compromise would not have any effect whatsoever ' on the rights, if any, of Dhani Ram, who had already filed an execution application pursuant to the deed of assignment dated April 25, 1963.
Thereafter, the execution application filed by the appellants was taken up and was dismissed on October 9, 1964, on the ground that the assignee had no right to execute the decree after the judgment debtor had satisfied the original decree holder by entering into a compromise with him.
On appeal the learned Additional District Judge, Meerut held that the appellant assignees had the right to execute the decree and that their right could not be defeated by the collusive compromise entered into between the judgment debtor and the original decree holder subsequent to the date of assignment and with notice of assignment.
One of the contentions raised before the learned Additional District Judge was that the so called deed of assigned did not in fact have the effect of assigning the decree to the appellants.
That contention was also negatived by the learned District Judge.
On further appeal to the High Court by the Judgment debtor, it was held that the assignee of the decree had no right to execute the decree until the assignment was recognised by the Court.
Until that was done, it was held, it was open to the original decree holder to put the decree in execution; it was also open to the judgment debtor to satisfy the 472 decree fully by payment to the decree holder or by other adjustment.
The High Court however, did not express any opinion on the question whether the deed of assignment did assign the right of the decree holder to the appellants.
The assignees of the decree have preferred this appeal after obtaining special leave under Article 136 of the Constitution.
Even the bare statement of the facts is sufficient to show how the original decree holder and the judgment debtor have colluded to deprive the appellants of their rights under the deed of assignment and how the Executing Court tacitly gave its seal of approval by permitting satisfaction of the decree to be entered despite the fact that the decree had already been assigned to the knowledge of the judgment debtor.
The process of the Court cannot be reduced to a mockery and we do not think that the procedure prescribed by the Code of Civil Procedure permits this to be done notwithstanding the argument of Shri D. V. Patel and Shri Govind Dass, learned Counsel for the judgment debtor to the contrary, in support of the judgment under appeal.
Their submission was that the assignee of a decree had no rights until the assignment was recognised by the Court.
In substance, the submission of the learned Counsel was that the recognition by the Court it was that completed the assignment and gave the right to the assignee to execute the decree.
Let us examine if the provisions of the Code of Civil Procedure justify the submission of the learned counsel.
Section 2(3) defines "decree holder" as meaning "any person in whose favour a decree has been passed or an order capable of execution has been made".
Section 51 provides that the Court may, on the application of the decree holder order execution of the decree by various methods.
Section 146 provides that where any proceeding may be taken or application made by or against any person, then the proceeding may be taken or the application may be made by or against any person claiming under him.
Order XXI of the Code of Civil Procedure deals with execution of decrees and orders and Orders XXI r. 2 in particular provides for payment or adjustment out of Court and for the recording of satisfaction of the decree by the Court in whole or in part as the case may be.
Order XXI r. 16 with which we are primarily concerned is as follows: "16.
Where a decree or, if a decree has been passed jointly in favour of two or more persons, the interest of any decree holder in the decree is transferred by assignment in writing or by operation of law, the transferee may apply for 473 execution of the decree to the Court which passed it and the decree may be executed in the same manner and subject to the same conditions as if the application were made by such decree holder: Provided that, where the decree, or such interest as aforesaid, has been transferred by assignment, notice of such application shall be given to the transferred and the judgment debtor, and the decree shall not be executed until the Court has heard their objections (if any) to its execution: Provided also that, where a decree for the payment of money against two or more persons has been transferred to one of them, it shall not be executed against the others." "(Explanation omitted)".
We are unable to read Order XXI r. 16 as furnishing any foundation for the basic assumption of the learned counsel for the respondent that property in a decree does not pass to the transferee under the assignment until the transfer is recognised by the Court.
Property in a decree must pass to the transferee under a deed of assignment when the parties to the deed of assignment intend such property to pass.
It does not depend on the Court 's recognition of the transfer.
Order XXI r. 16 neither expressly nor by implication provided that assignment of a decree does not take effect until recognised by the Court.
It is true that while Order XXI r. 16 enables a transferee to apply for execution of the decree, the first proviso to Order XXI r. 16 enjoins that notice of such application shall be given to the transferor and the judgment debtor and that the decree shall not be executed until the Court has heard their objections, if any, to its execution.
It is one thing to say that the decree may not be executed by the transferor until the objections of the transferor and the judgment debtor are heard, it is an altogether different thing to say that the assignment is of no consequence until the objections are heard and decided.
The transfer as between the original decree holder and the transferee is effected by the deed of assignment.
If the judgment debtor has notice of the transfer, he cannot be permitted to defeat the rights of the transferee by entering into an adjustment with the transferor.
If the judgment debtor has no notice of the transfer and enters into an adjustment with the transferor before the transferee serves him with notice under Order XXI r. 16, the judgment debtor is protected.
This in our view is no more than plain good sense.
In Dwar Buksh Sirkar vs Fatik Jali, the decree holder represented to the Court that the 474 judgment debtor had satisfied the decree by payment and wanted his execution application to be disposed of accordingly.
Before satisfaction could be recorded a transferee of the decree from the original decree holder intervened and claimed that satisfaction could not be recorded as there was a valid transfer of the decree in his favour prior to the alleged payment by the judgment debtor to the original decree holder.
The argument before the High Court was that the assignee could not prevent the recording of the satisfaction of the decree as he had not filed an execution application and got the assignment in his favour recognised.
The High Court of Calcutta observed: "The only provision in the Code referring expressly to the assignment of a decree is contained in section 232, and that no doubt contemplates a case in which the assignee applies for execution.
In such a case the Court may, if it thinks fit, after notice to the decree holder and the judgment debtor, allow the decree to be executed by the assignee.
If, how ever, there is an assignment pending proceedings in execution taken by the decree holder, I see nothing in the Code which debars the Code from recognising the transferee as the person to go on with the execution.
The recognition of the Court is no doubt necessary before he can execute the decree, but it is the written assignment and not the recognition which makes him the transferee in law.
The omission of the transferee, if it was an omission, to make a formal application for execution, was merely an error of procedure and does not affect the merits of the. . . . . . . .
It is argued for the respondent that the transferee 's title was not complete as express notice of the transfer had not been given to the judgment debtor.
As already observed, the transfer, as between transferor and the transferee, is effected by the written assignment.
If the judgment debtor had no notice of the transfer and being otherwise unaware of it paid the money to the decree holder, the payment was, of course, a good payment, and he cannot again be held liable to the transferee".
We express our agreement with the observations made by the Calcutta High Court.
In one of the cases cited by the learned counsel for the respondent, namely Arvapalli Ramrao vs Kanumarlapudi Ranganayakulu and others, a Full Bench of the Andhra Pradesh High Court disagreeing with the observations made in Puthiandi Mammed vs Avalil 475 Moidin, and agreeing with the observations made in Sadagopa Chariar vs Raghunatha Chariar held that when a decree was transferred by an assignment in writing the property in the decree passed to the transferee at the time of assignment and that recognition of the Court was not necessary to complete the transaction of assignment but was required to enable the assignee decree holder to proceed with the execution.
We agree.
The learned counsel for the respondent relied upon Kadir Mira Sahib vs Peer Mohd., Ch.
Mohd. Ishrat Ali & Ors.
vs Molvi Sayed Raza and Duvvuru Balasubramanya Reddy vs Duvvruru Munuswami Reddy & Ors.
We do not think that it is necessary for us to refer in any detail to these cases.
The basic assumption in Ch.
Mohd. Ishrat Ali & Ors.
vs Molvi Sayed Raza and Duvvuru Balasubramanya Reddy vs Duvvuru Muniswami and Ors.
(supra) and was that the transfer was complete only on recognition by the Court.
We have pointed out that it is not so.
In Ch.
Mohd. Ishrat Ali & Ors.
vs Molvi Sayed Raza (supra) there are some observations which are helpful to the respondent but the question presently under consideration did not arise and we need say no more than that.
We are of the view that the High Court was wrong in holding that the adjustment of the decree between the judgment debtor and the transferor decree holder even after notice of the application under Order XXI, r. 16 had been served on the transferor and the judgment debtor barred execution of the decree by the transferee.
The question whether there was any transfer of the decree under the deed of assignment was not decided by the High Court and we, therefore, allow the appeal and remit the matter to the High Court for decision upon this question only.
The appeal is allowed with costs as indicated.
N.V.K. Appeal allowed.

summary/full:
The appellants who were the assignees of a decree for specific performance of an agreement to reconvey property, filed an application for execution of the decree under Order XXI, rule 16 of the Code of Civil Procedure.
Notice of the application was issued to the respondent judgment debtor as well as the original decree holder.
The judgment debtor filed objections contending that the execution application was not maintainable.
The application was adjourned from time to time.
In the meanwhile the original decree holder and the judgement debtor moved the executing court to record full satisfaction of the decree, stating that they had entered into a compromise and that the decree was proposed to be satisfied by payment of a fixed sum of money in cash.
The money was paid in cash by the judgment debtor to the original decree holder in open court and satisfaction of the decree was recorded by the Executing Court which also observed that the compromise would not have any effect whatsoever on the rights, if any, of the transferee decree holder who had already filed the execution application pursuant to the deed of assignment.
The execution application filed by the appellants was thereafter taken up and dismissed on the ground that the assignees had no right to execute the decree after the judgment debtor had satisfied the original decree holder by entering into a compromise with him.
In the appeal, the District Court held that the appellants had the right to execute the decree and that their right could not be defeated by the collusive compromise entered into between the judgment debtor and the original decree holder subsequent to the date of assignment and with notice of assignment.
In the further appeal to the High Court by the judgment debtor, it was held that the assignee of the decree had no right to execute the decree until the assignment was recognised by the Court and until that was done, it was open to the original decree holder to put the decree in execution and it was also open to the judgment debtor to satisfy the decree fully by payment to the decree holder or by other adjustment.
In the appeal to this Court by the assignees of the decree on the question whether the adjustment of the decree between the judgment debtor and the transferor decree holder barred execution of the decree by the transferee: ^ HELD: 1.
The High Court was wrong in holding that the adjustment between the judgment debtor and the transferor decree holder even after notice 470 of the application under Order XXI, rule 16 had been served on the transferor and the judgment debtor barred execution of the decree by the transferee.
[475 D] 2.
Property in a decree must pass to the transferee under a deed of assignment when the parties to the deed of assignment intend such property to pass.
It does not depend on the Court 's recognition of the transfer.
Order XXI rule 16 neither expressly nor by implication provides that assignment of a decree does not take effect until rcognized by the Court.
[473 D] 3.
While Order XXI rule 16 enables the transferee to apply for execution of the decree, the first proviso to Order XXI rule 16 enjoins that notice of such application shall be given to the transferor and the judgment debtor and that the decree shall not be executed until the court has heard their objections, if any, to its execution.
[473 E] 4.
The transfer as between the original decree holder and the transferee is effected by the deed of assignment.
If the judgment debtor has notice of the transfer, he cannot be permitted to defeat the rights of the transferee by entering into an adjustment with the transferor.
If the judgment debtor has no notice of the transfer and enters into an adjustment with the transferor before the transferee serves him with notice under Order XXI Rule 16 the judgment debtor is protected.
[473 G] In the instant case, the original decree holder and the judgment debtor had colluded to deprive the appellants of their rights under the deed of assignment and the Executing Court tacitly gave its seal of approval by permitting satisfaction of the decree to be entered despite the fact that the decree had already been assigned to the knowledge of the judgment debtor.
The process of the Court cannot be reduced to a mockery and the procedure prescribed by the Code of Civil Procedure does not permit this to be done.
[472 C] Dwar Buksh Sirkar vs Fatik Jali I.L.R. 26 Calcutta 250 @ 253, 254; Avrapalli Ramrao vs Kanumarlapudi Ranganayakulu and others AIR 1964 A.P. 1; Sadagopa Chariar vs Raghunatha Chariar ILR , approved.
Puthiandi Mammed vs Avalil Moidin ILR , disapproved.