COMMISSIONER OF WEALTH TAX Vs. MALINI SRINIVASAN

JUDGEMENT

(1.) AFTER seeing the reference, we are inclined before answering the questions, to observe that whatever little determination was necessary to clear any doubt or ambiguity as to rule 1D and Explanations I and II thereto of the Wealth-tax Rules, 1957, is removed by the judgment of the Supreme Court in the case of Bharat Hari Singhania v. CWT [1994] 207 ITR 1. The Supreme Court has held in the said case that rule 1D is perfectly valid and effective and it has to be followed in every case where unquoted equity shares of a company (other than an investment company or a managing agency company) have to be valued. Rule 1D is exhaustive on the subject. Explanation I to rule 1D is a perfectly valid piece of delegated legislation and has to be followed and Explanation II in rule 1D contains two clauses : clause (i) provides that two items shown as assets in the balance-sheet shall not be treated as assets for the purpose of rule 1D and clause (ii) says that six items shown as liabilities in the balance-sheet shall not be treated as the liabilities for the purpose of rule 1D; in other words, the balance-sheet of the company with the aforesaid modifications shall be the basis for working the rule.

(2.) THE instant case, however, is concerned with Explanations I and II(ii)(b) which have been adverted to by the Tribunal in these words :