Wealth tax---

----Valuation of assets ---Unquoted equity shares of company other than investment company or managing agency Valuation to be in accordance with R. I. D. Indian Tax Act 1957 Indian Wealth Tax Rules 1957 R. 1. D.

Where there is a rule prescribing the manner in which a particular property has to be valid the authorities under the Act have to follow it and cannot device their own ways and means for a valuing the assets.

The value of enquiry shares of a company other than an investment company or managing agency is required to be determined in accordance with rule 1-D of the Wealth Tax Rules, 1957, for the purpose of valuation under the
Wealth Tax Act where the shares are unquoted.

Bharat Hari Singhania v. CWT (1994) 207 ITR 1 (SC) fol.

CWT v. Smt. Sabita Chandran (1985) 151 ITR 210 (Mad). Held no longer good law.

C.V.Rajan for the Commissioner.

Philip Geroge for the Assessee

JUDGMENT

R. JAYASIMHA BABU J,--- At the instance of the Revenue the question that has been referred to us is as to whether on the facts and in the circumstances of the case and having regard to rule 1D of the Wealth Tax Rules, 1957, the Appellate Tribunal was right in holding that the value of the shares held by the assessee in Premier Cotton Spinning Mills Limited, should be adopted at Rs.140 per share for the assessment year 1976-77.

The order of the Tribunal discloses that these shares were unquoted during the relevant assessment year and that the Wealth Tax Officer had applied rule 1D to estimate the value of the shares. The Tribunal has allowed the assessee's appeal against the order of the Wealth Tax Officer and has held that the shares are to be valued at the figure of Rs.140 per share as there had been some transactions during that assessment year. The Tribunal also relied on its earlier order in the case of Sabitha Chandran---W.T. As. Nos. 659 and 660 of 1977-78. That order of the Tribunal in the case of Sabitha Chandran was considered by this Court in the case of CWT v. Smt. Sabita Chandran (1985) 151 ITR 210. This Court dismissed the petition filed by the Commissioner for directing the Tribunal no make a reference, by holding that even though the shares of the company were not quoted on the stock exchange prior to March, 1977, there had been transactions in the shares as registered in the books of the company at values which were considerably less than the market value.

Counsel for the Revenue submitted that the value of the shares was required to be determined in accordance with rule 1D for the purpose of valuation under the Wealth Tax Act as the shares were unquoted.

The decision of this Court in CWT v. Smt. Sabita Chandran (1985) 151 ITR 210, can no longer be regarded as good law, in the light of the subsequent decision of the Supreme Court in the case of Bharat Hari Singhania v. CWT (1994) 207 ITR 1, wherein the Court upheld the validity of rule 1D and held that rule 1D has to be followed in each and every case of unquoted equity shares of a company (other than an investment company or a managing agency), and that it is not a matter of choice or option. The Court further held that where there is a rule prescribing the manner in which a particular property has to be valued, the authorities under the Act have to follow it, and cannot devise their own ways and means for valuing the assets.

The Tribunal, therefore, was clearly in error in holding that rule 1D was not required to be applied, even though the shares of the company were not quoted on the stock exchange in the previous year relevant to the assessment year 1976-77.

The question referred to us is, therefore, answered in the negative, in favour of the Revenue and against the assessee,

M.B.A./4248/FCReference answered.