COMMISSIONER OF WEALTH TAX Vs. SHEELA BHARAT RAM

JUDGEMENT

(1.) The Income Tax Appellate Tribunal (Delhi Bench 'B ) (hereinafter referred to as the Tribunal) has referred the following two questions to this Court under section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as the Act) :-

(2.) The facts relevant to the first question may be briefly stated: Smt. Sheela Bharat Ram (hereinafter referred to as the assessee) held 400 shares of M/s. Bharat Ram Charat Ram & Co. Pvt. Ltd. (hereinafter referred to as the company). The value of these shares had to be determined for the purpose of the wealth-tax assessment of the assessee for the year 1957-58, the relevant valuation date being 31st December, 1956. These shares were not quoted in the stock. exchange and, therefore, the Wealth-tax Officer had to value these shares on the basis of their break-up value, i.e., in other words, on the basis of the assets and liabilities of the company appearing in the balance-sheet of the company on or about the valuation date. In the balance-sheet of the company, provision was made for tax liability of Rs. 6,34,169.00. The assessee claimed that in computing the value of the shares, the amount provided for tax liability should be deducted from the value of the total assets of the company. The Wealth-tax Officer did not accept the claim of the assessee and included this amount in the value of the assets of the company and determined the value of the shares held by the assessee in the said company at 424.20 paise per share.

(3.) The assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax and the latter accepted the assessee's claim and directed the Wealth-tax Officer to re-compute the value of the shares after allowing a reduction of the actual taxes payable by the company on its book profits as per the balance-sheet of the company for the year. The assessee was, however, not satisfied with this direction of the Appellate Assistant Commissioner, as by that time, the assessment of the company has also been completed and it was found that the provision for taxation made by the company in its balance-sheet was short by Rs. 95,851.00 to its actual tax liability for the accounting year. Therefore, the assessee preferred a second appeal before the Tribunal and contended that this amount of Rs. 95,851.00 also may be deducted from the value of the assets of the company in addition to the amount of Rs. 6,34,169.00 which was provided in the balance-sheet or the company for meeting its tax liability The Tribunal accepted this additional claim of the assessee and directed that the said amount of Rs. 95,851.00 also should be deducted from the value of the assets of the company for the purpose of computing the value of the shares of the company held by the assessee. The Tribunal based its finding on the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v, Commisioner of Wealth-Tax, (1966) 6 I.T.R. 767, But at the instance of the Commissioner of Wealth-tax, the Tribunal has referred the question to this Court under section 27(1) of the Act.