Wealth tax---

----Reference---Valuation of assets---Valuation of unquoted equity shares-- Decision of Supreme Court that valuation should be made on the basis of break-up method under R.1D of Wealth Tax Rules---Tribunal whether justified in holding that valuation should be done on yield basis---Question of law---Indian Wealth Tax Act, 1957, S.27---Indian Wealth Tax Rules, 1957, R.I D.

Held, that in Bharat Hari Singhania v. CWT (1994) 207 ITR 1 ('SC), the Supreme Court held that the valuation of unquoted shares should be made on the basis of the break-up method under rule 1D of the Wealth Tax Rules, 1957, mandatory. The question whether the Tribunal was right in law in holding that the value of unquoted equity shares should be taken only on yield basis and thus cancelling the orders passed by the Commissioner of Income-tax under section 25(2) of the Wealth Tax Act, 1957, and, whether, the Tribunal was right in law in holding that rule I D is only directory and mandatory had to be referred.

Bharat Hari Singhania v. CWT (1994), 207 ITR 1 (SC); CGT v. Kusumben D. Mahadevia (Sint.) (1980) 122 ITR 38 (SC) and Mammen (K. M.) v. WTO (1983) 139 ITR 357 (Mad.) (Appex.) ref.

Mrs. Chitra Venkataraman for C. V. Rajan for Petitioner.

Nemo for Respondent.

JUDGMENT

JANARTHANAM, J.---These tax cases petitions are filed by the Commissioner under the Wealth Tax Act, 1957 (Act No.27 of 1957---for short "the W. T. Act"), 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 Tribunal was right in law in holding, that the value of unquoted equity shares should be taken only on yield basis and, thus, cancelling the orders passed by the Commissioner of Income-tax under section 25(2) of the Wealth Tax Act?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that rule ID of the Wealth Tax Rules, 1957, is only directory and not mandatory?"

The assessee, Mr. S. S. Mothilal, Madras, it appears, holds some unquoted equity shares in Sholinghure Textiles Limited. In the Wealth Tax assessment proceedings relating to the assessment years 1985-86, 1986-87 and 1987-88, the assessee declared the value of the shares on yield basis and the same was accepted by the Assessing Officer and consequently completed the assessments accordingly under section 16(1) of the Wealth Tax Act for all those assessment years.

Subsequently, the Commissioner of Wealth Tax was of the view that the unquoted shares held by the assessee should have been valued under rule ID of the Wealth Tax Rules, 1957 (for short "the W. T. Rules"), that is to say, the break-up method and not on the yield basis. Therefore, he was of the further view that the assessments made for all the assessment years were erroneous and prejudicial to the interests of the Revenue. He, therefore, in exercise of the powers conferred on him under section 25(2) of the. Wealth Tax Act set aside the assessments, made for all those assessment years and directed the Assessing Officer to value the unquoted equity shares held by the assessee on the break-up method basis under rule ID of the Wealth Tax Rules.

The assessee agitated the matters further by filing appeals for the aforesaid assessment years before the Tribunal and the Tribunal in turn, placing reliance on the decision of this Court in Mammen (K. M.) v. WTO (1983) 139 ITR 357 (Appex.) and also the decision of the Supreme Court in CGT v. Kusumben D. Maliadevia (Smt.) (1980) 122 ITR 38, cancelled the order of the Commissioner of Wealth Tax passed under section 25(2) of the Wealth Tax Act and ordered for the restoration of the assessment orders passed by the Assessing Officer originally thereby allowing all the appeals.

The Revenue, aggrieved by the orders as above, filed reference applications under section 27(1) of the Wealth Tax Act, requiring the Tribunal to state a case and refer the common questions of law as stated above to this Court and the Tribunal, in turn, refused to refer those common, questions of law for the opinion of this Court, culminating in the present actions-Tax Case Petitions Nos. 601 to 603 of 1997.

Despite service of notice on the assessee, in all these actions, he did not choose to engage a counsel of his choice. Nor was he present in Court to oppose these applications. In such a situation, there is no other go for us, except to hear the arguments of Mrs. Chitra Venkataraman, learned counsel representing Mr. C. V. Rajan, learned junior standing counsel for income- tax cases representing the Revenue and dispose of them.

The said learned counsel representing the Revenue drew our attention to a recent decision of the apex Court of this country in 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. Kurnsumben D. Mahadevia (Sint.) (1.980) 122 ITR 38 (SC), ultimately held that the valuation, of the unquoted shares should be made on the basis of the break-up method under rule ID of the Wealth Tax Rules mandatorily end no option is inhering in favour of the Assessing Officer to value such shares in any other method.

In the face of the ratio or rule laid down in the case of Bharat Hari Singhania v. CWT (1994) 2.07 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.

These tax case petitions are thus, disposed of.

M.B.A./125/FCOrder accordingly.