COMMISSIONER OF WEALTH TAX Vs. RAMAMURTHY

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following common question for the asst. yrs. 1972-73 and 1973-74 under s. 27(1) of the WT Act, 1957, for the opinion of this Court :

(2.) THE point for consideration is, in the valuation of unquoted equity shares for the purpose of determining the break-up value, whether provision for taxation should be reduced by the advance tax paid. A similar question came up for consideration before the Supreme Court in the case of Bharat Hari Singhania vs. CWT wherein the Supreme Court held that while valuing the unquoted equity shares of a company under r. 1D, no deduction on account of capital gains tax which would have been payable in case the shares were sold on the valuation date can be made. THEre is no sale of the asset and there is no question of capital gains tax being attracted or being paid. Sec. 7(1) speaks of the market value of the asset and not the net income or the net price received by the assessee. This is not a case where a fiction is created by Parliament. It is only a case of prescribing the basis of determination of market value. On the same reasoning, no other amounts like provision for taxation, provident fund and gratuity, etc., can be deducted. Rule 1D is exhaustive on the subject. In view of the abovesaid judgment of the Supreme Court, we answer the question referred to us in the negative and in favour of the Department. No costs.