COMMISSIONER OF WEALTH TAX Vs. VIKRAM SWARUP

JUDGEMENT

(1.) In these references made at the instance of the Revenue, the following question of law has been referred to this court by the Income-tax Appellate Tribunal under Section 27(1) of the Wealth-tax Act, 1957 :

(2.) Before going to the merits of the controversy, we reframe the aforesaid question as follows :

(3.) The facts, inter alia, relating to these references are as under : These references relate to the assessment years 1979-80 and 1980-81, for which the relevant valuation dates were March 31, 1979, and March 31, 1980, respectively. The assessee held certain shares of Paharpur Cooling Towers (Pvt.) Ltd., which are unquoted. The assessee disclosed the market value of the shares held by him for the purpose of charge to wealth-tax based on the average maintainable profits and its earnings. The Wealth-tax Officer, however, held that, for the purpose of valuation of unquoted equity shares under the Wealth-tax Act, 1957, Rule 1D of the Wealth-tax Rules, 1957, was mandatory and, accordingly, he valued the aforesaid shares on the break-up value method as envisaged under Rule 1D of the said Rules. While arriving at the value of the shares of Paharpur Cooling Towers (Pvt.) Ltd., based on its balance-sheets drawn up as at October 31, 1978, and October 31, 1980, corresponding to the assessment years 1979-80 and 1981-82, the Wealth-tax Officer followed the computation made by him in the case of Mahendra Kumar and Sons (Hindu undivided family) and did not allow deduction in respect of full liabilities towards provision for income-tax, proposed dividend and gratuity as appearing in the balance-sheets of the said company drawn up in accordance with Schedule VI of the Companies Act, 1956.