AJAY KUMAR SAHARIA Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THE following questions have been referred by the Appellate Tribunal under Section 27(1) of the Wealth-tax Act, 1957 (for short, "the Act"), at the instance of the Revenue :

(2.) THE reference relates to the assessment for the wealth-tax assessment year 1977-78 under the Wealth-tax Act, 1957 (for short, "the Act"), and the Wealth-tax Rules, 1957 (for short, "the Rules"). THE relevant valuation date is December 31, 1976. THE assessee is an individual owning wealth including equity and preference shares in three public limited companies, namely, Messrs. Moheema Ltd., Messrs. Sonai River Tea Company Ltd., and Messrs. Numburnadi Tea Company Ltd. THE assessee claimed that shares of these companies are quoted on the Calcutta Stock Exchange and he showed in the return the market value of the shares at what, according to him, are the prevailing rates quoted on the stock exchange. THE Wealth-tax Officer found that Messrs. Moheema Ltd. is a subsidiary of another private limited company by name Messrs. Sookerating Tea Co. Ltd., which is holding 96 per cent. of the equity shares of Messrs. Moheema Ltd., and the majority of the remaining four per cent. shares were held by the members of the Saharia family group and that the holding company is controlled and managed by the Saharia family. He found that 80 per cent. of shares of Messrs. Sonai River Tea Co. Ltd. and Messrs. Numburnadi Tea Company Ltd. were held by the members of the Saharia family in their own names or in the name of the bank as security. He found that there had been no transactions in the stock exchange within two years prior to the valuation date in the shares of Messrs. Moheema Ltd., within one year prior to the valuation date in the shares of Messrs. Sonai River Tea Company Ltd, and the shares of Messrs. Numburnadi Tea Company Ltd. He also found that, in the present distribution of shares, the shares of the three companies are not eligible for listing on any stock exchange and the companies have not complied with the listing conditions and the provisions of the Securities Contracts (Regulation) Rules, 1957, and thereby rendered themselves liable for delisting. He, therefore, held the shares as "unquoted shares" within the meaning of Rule 1A(1) of the Wealth-tax Rules, 1957 (for short, "the Rules"), and valued the shares under Rule 1D of the Rules on the break-up value.

(3.) THE three companies are public limited companies. According to the assessee, the shares of these companies are listed in the Calcutta Stock Exchange and the value of the shares is regularly quoted in the stock exchange. THE valuation date is December 31, 1976. THE last transaction in the shares of Messrs. Moheema Ltd. was on April 24, 1974. THE last transaction in the shares of Messrs. Sonai River Tea Co. Ltd. before the valuation date was on April 30, 1976, and the first transaction in the shares after the valuation date was on March 12, 1978. THE two dates in the case of shares of Messrs, Numburnadi Tea Co. Ltd. are December 3, 1976, and January 22, 1977, respectively. It is admitted by the assessee that there were no other transactions at the stock exchange in regard to these shares. It was by considering these circumstances that the Tribunal held that the shares of the three companies cannot be said to be "regularly quoted" in the absence of regular transactions. According to learned counsel for the assessee, even if there are no regular transactions, prices of shares will be regularly quoted at the stock exchange with reference to the price fetched at the last transaction and, therefore, for shares of a company to be regarded as regularly quoted there need not be regular transactions and even if there was only a solitary transaction or there were only isolated transactions, the shares of the company must be regarded as regularly quoted.