RATNAM R Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THE question referred to us by the Income-tax Appellate Tribunal under Section 27(1) of the Wealth-tax Act is this :

(2.) THE assessee held 50 shares of the face value of Rs. 100 each in a public limited company called the " Madras Motor and General Insurance Company Ltd. ", which carried on business of motor and general insurance. THE shares of the company are not quoted in the share market. As on the valuation dates, on March 31, 1960, and March 31, 1961, for the assessment years 1960-61 and 1961-62, respectively, the assessee had valued these shares for the purpose of inclusion in his net wealth at their face value of Rs. 100 per share. THE Wealth-tax Officer did not accept the said valuation. He worked out their value on the basis of the balance sheet of the company as on December 31, 1959, for the assessment year 1960-61 as under: <FRM>JUDGEMENT_602_ITR87_1973Html1.htm</FRM>

(3.) WE are, however, of the view that the Code of Conduct for the general insurance business framed by the General Insurance Council is statutory. Section 64-L of the Insurance Act, 1938, enumerates the functions of the executive committee of the General Insurance Council, and Section 64-R empowers the General Insurance Council to frame regulations in respect of any matter which may be necessary for the purpose of enabling it to carry out its duties under the Act, with the previous approval of the Central Government, Therefore, it is not possible to ignore the Code of Conduct issued by the General Insurance Council as non-statutory, having no binding effect either on the insurance or on the taxing authorities. The question, therefore, is whether the separate reserve credited for unexpired risks as required by the Insurance Act and the Code of Conduct can be treated as surplus profits by the authorities under the WEalth-tax Act, for purpose of determining the intrinsic value of shares of the insurance company in question.