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(3) That further sale price of shares also included the price of the negative covenants given in the agreement of sale of shares and the same is claimed @ Rs. 100 per share by the appellant ought to have been treated as capital receipt not liable to capital gains tax. In other words, the sale price of the shares for purposes of capital gains tax ought to have been taken at Rs. 258.89 per share as purposes of capital gains tax ought to have been taken at Rs. 258.89 per share as against Rs. 400 adopted by the authorities below.

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto :

8. In the present appeal the dispute is with regard to the computation of the consideration received on sale of shares. As can be seen from the computation of capital gains given in para 3 of this order, the assessee had declared only Rs. 358.89 as sale consideration received on transfer of shares as against Rs. 400 per share as mentioned in the share transfer agreement. Secondly, the assessee sought to deduct Rs. 100 per share as capital receipts for observing various negative covenants under the agreement for sale of shares and that such capital receipts were not chargeable to tax. The first plea of the assessee was that there were various restrictive covenants under the share transfer agreement dt. 21st Jan., 1993. According to the assessee, out of the total sale value of Rs. 400 per share, Rs. 100 per share will have to be allocated as consideration received by the assessee towards accepting negative covenants under the agreement of transfer of shares. In this regard, the assessee had filed the report of a chartered accountant M/s Vaish & Associates wherein they have valued the shares only at a sum of Rs. 93.12 as per the break-up value of shares as on 31st March, 1993. According to the assessee though in law he was entitled to claim the entire difference between the sale consideration and the break-up value as given by the valuation report of the chartered accountant towards compensation received for accepting various negative covenants mentioned in the share purchase agreement, yet it had apportioned only Rs. 100 as consideration received for accepting various negative covenants under the share transfer agreement. It was further submitted by the assessee that the consideration received by the assessee on transfer of shares which is allocated as consideration for accepting negative covenants would be a capital receipt not chargeable to tax.

13. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. In this appeal two issues arise for consideration.

(i) Whether sum of Rs. 100 out of the sale consideration of Rs. 400 per share as mentioned in the share transfer agreement can be said to be consideration paid by the purchasers towards the obligation to adhere to the various negative covenants set out in the aforesaid share purchase agreement ? The incidental question that will arise while deciding this question is as to whether in the absence of specific bifurcation in the agreement for transfer of shares whether the assessee can make such bifurcation ? In other words, whether consideration mentioned in the share transfer agreement was a composite consideration for transfer of shares as well as for performance of the various negative covenants set out in the said agreement ?

16. In the light of the aforesaid restrictive covenants, it cannot be said that the consideration of Rs. 400 per share as fixed in the agreement is only towards the value of the shares. This fact is also further confirmed by the report of the valuers M/s Vaish & Associates, chartered accountants 'according to whom the break-up value of one share of GBS Ltd. as on' 31st March, 1993 was only Rs. 93.12. As per the audited financial accounts of GBS Ltd. as on 31st March, 1992, the value of one equity share as per Rule 1D of the WT Rules was also at Rs. 60.24 only. From the aforesaid facts it is clear that the fair value of one share of GBS Ltd., as on date of transfer was much lower than the consideration of Rs. 400 per share. In fact the fair value of one share was not even Rs. 100 per share. In those circumstances we are of the view that the assessee has on a very conservative estimate apportioned 25 per cent of the value of shares towards consideration payable for the obligations to be performed by it in the form of negative covenants under the share transfer agreement.