COMMISSIONER OF WEALTH TAX Vs. SURRENDRA PAUL

JUDGEMENT

(1.) In this reference under Section 27(3) of the Wealth-tax Act, 1957, for the assessment year 1983-84, the following question of law has been referred to this court :

(2.) The facts which have been incorporated in the statement of the case are as under : The assessee, Surrendra Paul and others, is a Hindu undivided family and the assessment year involved is 1983-84 for which the valuation date was March 31, 1983. The wealth-tax assessment of the assessee for the year under reference was completed under Section 16(3) of the Wealth-tax Act, 1957, on March 21, 1988. The assessee, inter alia, held 4,500 equity shares of Aminchand Payarelal (P.) Ltd. and disclosed the value of the shares at nil on the basis of the yield method. The Assessing Officer found that the shares of the said company were not quoted on any stock exchange and the said company had no business activities for the past several years. The main items of assets held by the company were investments. Besides, Aminchand Payarelal (P.) Ltd. was the holding company of Park Hotels (P.) Ltd., Park Hotels (P.) Ltd. was again the holding company of Flury's Swiss Confectionery (P.) Ltd. and again Flury's Swiss Confectionery (P.) Ltd. was the holding company of Aruna Estate (P.) Ltd, The company, Aminchand Payarelal (P.) Ltd., had no profit-earning capacity and did not declare any dividend for the past several years although it held valuable assets through its subsidiary and subsequent subsidiaries. The Assessing Officer, therefore, held that the yield method adopted for valuation of the shares in question was not correct. He applied Rule 11 of the Wealth-tax Rules, 1957, and applied the break-up method of valuation and also a method of valuation of unquoted equity shares of investment companies. The Assessing Officer, therefore, considered that the proper method of valuation of the shares of the above company would be the averaging of the value under the yield method and under the break-up value method. The Assessing Officer accordingly worked out the value of equity shares in question at Rs. 7,721 per share.

(3.) Being aggrieved, the assessee preferred an appeal before the Commissioner of Wealth-tax (Appeals) who held that the valuation of shares of the above company by either applying Rule 1D or even by net maintainable profit method would become nil. At the same time, he also held that in view of Aminchand Payarelal (P.) Ltd. holding shares of the other companies having solid financial position, it could not be said that the value of the shares of the said company would really be worth nil. He, accordingly, estimated the value of one share at Rs. 10 only.