COMMISSIONER OF WEALTH TAX VS T. M. JOSEPH
1999 P T D 2209
[235 I T R 321]
[Madras High Court (India)]
Before Janarthanam and K. P. Sivasubramaniam, JJ
COMMISSIONER OF WEALTH TAX
Versus
T. M. JOSEPH
T. C. Ps. Nos.624 and 625 of 1997, decided on 17/11/1997.
(a) Wealth tax---
---Reference---Valuation of assets---Valuation of unquoted equity shares-- Supreme Court decision that R.1D is mandatory---Tribunal whether justified in holding that R. ID is directory---Question of law---Indian Wealth Tax Act. 1957---Indian Wealth Tax Rules, 1957, R.ID.
(b) Precedent---
---- Effect of decision of Supreme Court in Bharat Hari Singhania v. CWT (1994) 207 ITR 1.
The Supreme Court held in Bharat Hari Singhania v. CWT (1994) 207 ITR 1 that the valuation of unquoted shares should be made on the basis of break-up method under rule 1 D of' the Wealth Tax Rules, 1957 mandatorily and no option was available to the Assessing Officer to value such shares in any other method:
Held accordingly, that the question whether the Appellate Tribunal was right in law in holding that while valuing unquoted equity shares, the valuation should have been made on yield basis only and whether the Appellate Tribunal was right in law in holding that for purposes of valuation of unquoted equity shares, rule 1 D of the Wealth Tax Act, 1957, is only directory and not mandatory had to be referred to the High Court.
Bharat Hari Singhania v. CWT (1994) 207 ITR 1 (SC); CGT v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38 (SC); CWT v. Sabita Chandran (Smt.) (1985) 151 ITR 210 (Mad.); CWT v. Sharbati Devi Jhalani (1990) 182 ITR 487 (Delhi) and Mammen (K.M.) v. WTO (1983) 139 ITR 357 (Mad.) (Appex) ref.
Mrs. Chitra Venkataraman for C.V. Rajan for Petitioner.
Philip George for Respondent.
JUDGMENT
JANARTHANAM, J. ---Both these tax case petitions are filed by the Commissioner of Wealth Tax, Tamil Nadu-III, Madras, under section 27(3) of the Wealth Tax Act, 1957, for issuance of a direction to the Tribunal to state a case and refer the common questions of law, as below, for the opinion of this Court: '
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that while valuing the unquoted equity shares, the valuation should have been on yield basis only?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that for purposes of valuation of unquoted equity shares, rule 1D of the Wealth Tax Rules, 1957, is only directory and not mandatory?"
The assessee---Mr. T. M. Joseph, Madras, an individual, it appears, was holding 1,800 unquoted equity shares in Bengal Marines (P.) Ltd. He valued the shares on yield basis in the wealth tax proceedings.
The Assessing Officer, while framing the assessment valued the shares on the break-up value method basis under rule 1D of the Wealth Tax Rules.
On appeal, the Commissioner of Wealth Tax (Appeals), Tamil Nadu-III, Madras, accepted the claim of the assessee, following the decision of the Supreme Court in CGT v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38 and the decision of this Court in CWT v. Sabita Chandran (Smt.) (1985) 151 ITR 210 and CWT v. Sharbati Devi Jhalani (1990) 182 ITR, 487 (Delhi).
The Revenue appealed to the Tribunal. The Tribunai, in turn, following the decision of this Court in K. M. Mammen v. WTO (1983) 139 ITR 357 and also the decision of the Supreme Court in CGT v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38 held that the shares should be valued on the yield method.
The Revenue, aggrieved by the decision of the Tribunal, filed a reference application to the Tribunal under section 27(1) of the Wealth TaxAct requesting it to state a case and refer the common questions of law, arising out of the order of the Tribunal, as stated above.
The Tribunal, by its order, dated September 29, 1993, rejected the reference application and refused to state a case, as in its view, there is no referable question of law arising out of the order, giving rise to the present actions---Tax Case Petitions Nos. 624 and 625 of 1997.
The arguments of Mrs. Chittra Venkataraman, learned counsel representing Mr. C. V. Rajan, learned junior standing counsel for income tax cases representing the Revenue, and Mr. Philip George, learned counsel appearing for the respondent, were heard.
The said learned counsel representing the Revenue drew our attention to a recent decision of the apex Court of this country m the case of Bharat Hari Singhania v. CWT (1994) 207 ITR 1, wherein their Lordships of the Supreme Court, referring to a catena of decisions emerging from the Supreme Court, inclusive of the decision in CGT v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38, ultimately held that the valuation of the unquoted shares should be made on the basis of the break-up method under rule 1D of the Wealth Tax Rules mandatorily and no option is inhering in favour of the Assessing Officer to value such shares in any other method.
On the face of the ratio or rule laid down in Bharat Hari Singhania v, CWT (1994) 207 ITR 1 (SC), it goes without saying that there arise referable common questions of law and, therefore, it is, we direct the Tribunal to state a case and refer the common questions of law, as stated above, for the opinion of this Court.
Both these tax case petitions are thus disposed of.
M.B.A./3001/FC Order accordingly