Per Shri F. C. Rustagi, Judicial Member - The appeal by the revenue and the cross-objection by the assessee under the Gift-tax Act, 1958 (the Act), since are in respect of one and the same assessment year 1974-75, both the matters were heard together and are disposed of by this consolidated order for the sake of convenience.
2. The revenue in its appeal has contested the action of the AAC setting aside the assessment for valuation to be made as per the Supreme Court decision in the case of CGT v. Smt. Kusumben D. Mahadevia  122 ITR 38 in order to determine the value of shares sold by the assessee-trust in respect of which deemed gift was subjected to tax by the GTO whereas the assessee in its cross-objection originally supported the order of the AAC but at the time of hearing before us, came forward with a newly raised legal plea that the assessee being a recognised charitable trust under the Income-tax Act, 1961 (the 1961 Act), enjoys exemption under the 1961 Act as the same is not applicable to it as per section 45(e) of the Act and the assessment, therefore, should be annulled. The new contention raised before the tribunal was purely legal and the same as such was permitted to be forwarded.
3. The facts and the background pertaining to the issue are that the assessment year involved is 1974-75. The assessee, Mohan Devi Oswal Public Charitable Trust, owned 2,400 equity shares of Oswal Woollen Mills Ltd. and it sold 1,400 shares at the paid-up value of Rs. 12.50 per share. The GTO referred the matter to the Valuation Officer under section 55A of the 1961 Act. The Valuation Officer by applying the method of valuation provided under rule 1D of the Wealth-tax Rules, 1957, valued the shares at Rs. 55.45 per share. The difference between the fair market value determined by the official valuer (sic) and the same price was assessed to income-tax under section 52 of the 1961 Act as capital gains. Further, the same difference has been treated as deemed gift under section 4(1) of the Act and was assessed to gift-tax.
While framing the gift-tax assessment, the GTO, after issuing necessary notice and the return having been filed for nil was enhanced to an amount of Rs 74,130 as deemed gift (sic) and the same was subjected to tax.
4. When this action of the GTO came to be disputed by the assessee-trust before the AAC, the first objection raised by the assessee was that the revenue had nothing with it to constitute a reasonable belief that the shares sold at Rs. 12.50 per share actually had higher value and the method of valuation adopted by the GTO as well came under challenge, wherein the assessee contended that the valuation should have been done in accordance with the principles of valuation laid down by the Supreme Court in the cases of CWT v. Mahadeo Jalan  86 ITR 621 and Smt. Kusumben D. Mahadevia (supra). The AAC after considering the contentions from paras 3 to 6 of his order, came to a finding that rule 1D was not mandatory but directory in nature and restored the matter back to the file of the GTO with a direction to make a first assessment by valuing the shares according to the principles of valuation laid down by the Supreme Court in the above referred two judgments.
5. It is this action of the AAC which left the revenue and the assessee aggrieved. The revenue, as above said, challenges the action of setting aside where was the assessee in its cross-objection has asked for annulment of the gift-tax assessment. The learned departmental representative, Mr. M. P. Singh, while arguing the revenues appeal submitted that the matter is covered against the revenue as in a very large number of such cases of Oswal group, action restoring the issue pertaining to valuation back to the GTO has been confirmed by the Tribunal and his attempt is only to keep it alive. But the learned counsel for the assessee-trust, Mr. Dinesh Gogna, on the other hand, came forward with a legal plea which was absolutely new and submitted that there being difference in the present assessee and other assessees of Oswal group, he vehemently argued that the assessee-trust should not be subjected to gift-tax in respect of the deemed gift because it was trust which enjoyed exemption under section 80G of the 1961 Act and to that effect he made available to us the certificate granted by the Commissioner pertaining to exemption under section 80G. He submitted that as per section 45(e), the assessee cannot be subjected to gift-tax. The only argument advanced by the learned departmental representative in this regard was that though the assessee is a trust but the fact that it has not been subjected to tax is not burned out from record, though he did not controvert the fact that the assessee enjoyed exemption under section 80G granted by the Commissioner.
6. After taking into consideration the rival submissions and going through section 45(e) which clearly says that the Act is not to apply to "any institution or fund the income whereof is exempt from income-tax under section 11 or section 12 of the Income-tax Act". With this when we read the relevant sections 11 and 80G of the 1961 Act and go through the exemption certificate granted by the Commissioner, we are of the view that the gift-tax assessment deserves to be annulled and we, therefore, annul the same. Undoubtedly, there is difference in the instant case and other cases of Oswal Group because the present assessee so a trust which enjoys exemption under section 80G and there being a specific provision in the form of section 45(e), the assessee could not be subjected to gift-tax even in respect of deemed gift and other questions, therefore, pertaining to valuation, etc., shall only be academic.
7. We observe, before we part with the matter, that contention raised by the assessee in respect of section 45(e) was neither raised before the lower authorities nor was available as per grounds raised in the assessees cross-objection but the same being purely a question of law and the same as such having been admitted by us, the assessee on that score alone succeeds. The order of the GTO, therefore, in this case is annulled.
8. The appeal of the revenue, therefore, in the result, stands dismissed and the cross-objection of the assessee stands allowed.