BRIJ MOHAN THAPAR Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) IN this reference under S. 27(1) of the WT Act, 1957 ('the Act') the following questions of law have been referred by the Tribunal for the asst. yr. 1980-81.

(2.) IN appeal before the CWT (A), the assessee challenged such disallowance of the deduction, the CWT (A) however, upheld the WTO's action. Being aggrieved, the assessee came in appeal before the Tribunal. The Tribunal found that on identical facts the order of the CWT (A) in the assessee's case for the asst. yr. 1979-80 stood approved by the Tribunal ruling out any scope for interfering with the order under appeal. Thus, the appellate order of the CWT (A) was upheld by the Tribunal. Another point raised by the assessee before the Tribunal was that deposit under (CDS) should not have been included in the total wealth of the assessee. The Tribunal held that this point did not arise out of order of the CWT (A). The Tribunal further observed that in view of the order of the Tribunal for the asst. yr. 1979-80 and that of Special Bench in the case of Smt. Sushilaben A. Mafatlal vs. WTO (1986) 18 ITD 189 (Bom) CDS deposit has to be included in the total wealth of the assessee. The Tribunal accordingly, dismissed both the assessee's and Revenue's appeals.

(3.) WITH regard to the first question, the learned counsel, Dr. Pal, appearing for the assessee contended that there being consensus between the parties that the yield method, as prescribed by the Board in its Circular No. 332A dt. 31st March, 1982 (supra) should apply, there cannot be any manner of doubt as to the deductibility of the reserve for bad and doubtful debts in arriving at the maintainable profits of the company, whose shares are begin valued. According to him, the said circular holds that in the case of a company, which is a going concern and whose shares are not quoted in the Stock Exchange, the profit which the company has been making and should be capable of making or, in other words, the profit-earning capacity of the company, would ordinarily determine the value of its shares. He, further, pointed out that the circular requires that in determining the profit-earning capacity of the company the book profits of the company for the five years immediately preceding the valuation date have to be ascertained and certain adjustments are to be made in respect of such book profits, as laid down in para 4 of the said circular.