COMMISSIONER OF WEALTH-TAX Vs. DOMINIC JOSEPH

JUDGEMENT

(1.) THE Commissioner of Wealth -tax is before us.

(2.) NOW , coming to the question : The answer thereto depends upon the construction of rule 1D, Explanation II (i) (a) and Explanation II(ii) (e) of the Wealth -tax Rules, 1957. For easy reference, we shall extract these rules (leaving out unnecessary parts) :

(3.) THIS rule prescribes the procedure the assessing authority should follow while determining the market value of an unquoted equity share of any company other than an investment company or a managing agency company. To determine the market value of unquoted equity shares, the assessing authority shall first deduct all the liabilities as shown in the balance -sheet from the value of all its assets, again as shown in the balance -sheet. In view of Explanation II(i) (a) (hereinafter mentioned as clause a), the assessing authority, however, shall not treat the amount paid as advance tax under section 18A of the Indian Income Tax Act, 1922(11 of 1922), or under section 210 of the Income Tax Act, 1961 (43 of 1961), as an asset although the same is shown as an asset in the balance -sheet. Similarly, the amount representing provision for taxation (other than the amount referred to in clause (i)(a)) to the extent of the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto, the assessing authority shall not treat as a liability notwithstanding the fact that the same is shown as a liability in the balance -sheet. The net amount so arrived at shall be divided by the total amount of its paid -up equity share capital as shown in the balance -sheet. Eighty -five per cent of the break -up value so determined is the market value of each unquoted equity share.