COMMISSIONER OF INCOME TAX Vs. LAKSHMAIAH M

JUDGEMENT

(1.) THIS reference arises under the WT Act, 1957, At the instance of the CWT, the following question is referred for the consideration of this Court under S. 27(1) :

(2.) THE reference relates to two separate assessees. Maddi Lakshmaiah is the assessee in connection with the asst. year 1976 77 and the corresponding valuation date in his case was 31st Dec., 1975. Maddi Seetha Devi is the assessee for the asst. year 1980 81 and the corresponding valuation date in her case was 31st March, 1980. In both these cases, a question arose in connection with the valuation of shares held by the two assessees in a company known as "Maddi Lakshmaiah (P) Ltd.." It is common ground that the company being a private limited company, its shares are not quoted on the stock exchange, and, therefore, their value has to be determined in accordance with r. 1D of the WT Rules, 1957. In connection with the asst. year 1976 77, the WTO found that the assessee was holding 4,000 shares in the company. The market value of each share was reckoned at Rs. 383.08 and applying the provisions of r. 1D, the value was determined at Rs. 274.36 per share. For the asst. year 1980 81, the assessee was likewise holding 2,500 shares in the company ; the value in accordance with r. 1D was worked out by the WTO at Rs. 483.31 per share. The assessees objected to the value of the shares computed by applying the provisions contained in r. 1D. The contention urged in particular was that the WTO committed an error in disallowing the provision for taxation made by the company. The assessees' claim was that the entire provision should be regarded as a liability and deducted in ascertaining the net value of the assets of the company for the purpose of determining the break up value of the shares.

(3.) WE have heard Sri M. Suryanarayana Murthy, learned counsel for the Revenue, and Sri M. J. Swamy, for the assessees. At the time of hearing of the reference, we were considerably handicapped as the relevant particulars relating to the computation of the value of each share as held by the WTO were not available. We called upon learned standing counsel to secure the records from the WTO so that we can find out the manner in which the share value was computed and whether, in computing the value, the WTO committed any error. The records have since been placed before us. We find the records equally unhelpful as we will presently indicate.