COMMISSIONER OF WEALTH TAX Vs. V T RAMALINGAM

JUDGEMENT

(1.) THE question referred at the instance of the Revenue in respect of the assessee's assessments for the assessment years 1974-75 and 1975-76 is, as to whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the arrears of dividends on cumulative preference shares should be deducted while working out the value of the shares of Thiru Arooran Sugars Ltd. ?

(2.) THE assessee held 250 shares in the company. He had worked out the market value by applying Rule 1D of the Wealth-tax Rules, 1957, framed under the Wealth-tax Act, 1957, and did not deduct the arrears of dividends on the cumulative preference shares held by him, for the liabilities shown in the balance-sheet. THE Wealth-tax Officer held that the amount could not be deducted as undeclared dividend for which monies had been set apart by the company, as the dividends had not been declared as on the valuation date of a general meeting of the company. THE assessee appealed to the Commissioner of Income-tax (Appeals), who allowed the assessee's claim by referring to Rule 1D, Explanation II(ii)(f) which refers to "any amount representing contingent liabilities other than arrears of dividends payable in respect of the cumulative preference shares". THE Commissioner held that the arrears of dividends on cumulative preference shares were not in the nature of a contingent liability and was not required to be deducted from the total liabilities of the company for the purpose of determining the value of the share under Rule 1D of the Act. THE Tribunal has affirmed the view of the Commissioner.