COMMISSIONER OF WEALTH TAX Vs. GIRDHARI LAL SARAF

JUDGEMENT

(1.) THIS reference application under Section 27(3) of the Wealth-tax Act, 1957, has been filed by the Commissioner of Wealth-tax, Jaipur.

(2.) IT is submitted by Shri V. K. Singhal, learned counsel, that the respondent-assessee is holding some shares of Messrs. Premnath Motors (Rajas-than) Pvt. Ltd. and Messrs. Saraf Textile Mills Pvt. Ltd., which are not quoted. The value of the share in the case of Messrs. Saraf Textile Mills Pvt. Ltd. was taken on the basis of the balance-sheet and in the case of Messrs. Premnath Motors (Rajasthan) Pvt. Ltd., the face value was taken as the break-up value. The assessee preferred an appeal to the Appellate Assistant Commissioner of Wealth-tax who has held that the profit earning method will be the appropriate method in the case of Messrs. Premnath Motors (Rajasthan) Pvt. Ltd. and accepted the appeal. The petitioner submitted an appeal before the Income-tax Appellate Tribunal and the Tribunal has held that where the valuation dates of the company and the assessees do not coincide, the rule is only directory and the proper method would be to value the shares on the yield method and rejected the appeal of the petitioner. IT is further submitted that, therefore, a question of law arises whether the Tribunal was right in holding that the value of the shares held by the assessee in M/s. Premnath Motors (Rajasthan) Pvt. Ltd. should be taken on the basis of the yield method. IT is pointed out that Rule 1D and the proviso thereto are mandatory and not directory. Learned counsel placed reliance on Mrs. Grace Collis v. CWT [1988] 172 ITR 597 (Ker) and CWT v. Sripat Singhania [1978] 112 ITR 363 (All). IT was held that Rule 1D was mandatory. However, learned counsel frankly pointed out that some other High Courts have taken a different view and have held this rule to be only directory in nature. In this context, Sharbati Devi Jhalani v. CWT [1986] 159 ITR 549 (Delhi) was referred to.