BAL KRISHNA BINANI Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) This writ application has been specially assigned before this Bench. This writ application has been filed by the petitioner as the karta of a Hindu undivided family challenging the vires of Rule 1D of the Wealth tax Rules, 1957. The facts are in a narrow compass.

(2.) The Hindu undivided family of which the petitioner is the karta held, amongst others, shares and securities in several companies. The shares are both quoted and unquoted. The unquoted shares are as follows :

(3.) For the assessment year 1981-82, for which the relevant valuation date is November 7, 1980, the petitioner family filed its return declaring a net wealth of the Rs. 7,86,700. The petitioner valued the unquoted shares on the basis of the yield method. In the course of the assessment proceedings for the said assessment year, the petitioner family made statements in regard to the valuation and audited accounts of the companies in which the petitioner held unquoted shares. The contention of the petitioner before the Assessing Officer was that the market value of the said unquoted shares should be determined on the basis of the yield method as accepted by the Central Board of Direct Taxes in its Circular dated March 31, 1992, and the principles laid down by the Supreme Court in the case of CGT v. Smt. Kusumben D. Mahadevia (1980) 122 ITR 38 and another decision of the Supreme Court in the case of CWT v. Mahadeo Jalan [1972] 86 ITR 621. The petitioner-family filed a revised valuation on the basis of the yield method before the Assessing Officer. By an order of assessment dated February 21, 1985, made under Section 16(3) of the said Act, the Wealth-tax Officer computed the value of the unquoted shares on the basis of the break-up method under Rule 1D of the Rules. The Wealth-tax Officer was of the view that the Circular of the Central Board of Direct Taxes applies only to investment companies and not to manufacturing companies and the break-up method as per Rule 1D of the Wealth-tax Rules, 1957, had to be applied in determining the valuation of the unquoted shares.