Commissioner of Wealth Tax vs K.K. Birla

Ajit K. Sengupta, J.—In this reference u/s 27(1) of the Wealth-tax Act, 1957 (''the Act'') for the assessment year 1981-82 the following questions of law have been referred to this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that rule 1D of the Wealth-tax Rules, 1957 is directory and in directing the WTO to accept the value of the unquoted shares disclosed by the assessee on the basis of the report of the registered valuer?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the WTO to accept the valuation of the unquoted shares of Jayant Investment Corporation (P.) Ltd. as disclosed by the assessee on the basis of the report of the registered valuer?

Shortly stated, the facts are that the wealth-tax assessment of the assessee for the assessment year 1981-82 was first completed u/s 16(3) of the Act on 22-1-1985 by the WTO. Subsequently, the assessment order was revised u/s 35 of the Act on 7-1-1956.

In course of the assessment proceedings, the WTO noticed that the assessee along with other co-sharers had held coffee land and other assets at Billigiri Rangan Estate. He also held certain shares in the Hyderabad Agencies (P.) Ltd., Birla Brothers (P.) Ltd. and Jayant Investment Corporation (P.) Ltd. The shares of all these companies were not quoted in any recognised stock exchange.

The assessee declared the value of his shares in Billigiri Rangan Estate at Rs. 3,59,693 on the basis of a report of a recognised registered valuer. The WTO adopted the valuation of the shares of the assessee in Billigiri Rangan Estate on the basis of Central Board of Direct Taxes Circular No. 357, dated 26-3-1983 [ See Taxmann''s Direct Taxes Circulars, Vol. 1, 1985 edn., p. 1457] at Rs. 4,43,350.

The assessee had also declared the value of the shares of the Hyderabad Agencies (P.) Ltd. at Rs. 12.81 per share, that of the Birla Brothers (P.) Ltd. at Rs. 910 per share and of the Jayant Investment Corpn. (P.) Ltd. at Rs. 26.84 per share on the basis of the report of a registered valuer. The WTO. however, made valuation under rule 1D of the Wealth-tax Rules, 1957 of the shares of the Hyderabad Agencies (P.) Ltd. at Rs. 16.57 per share and those of the Birla Brothers (P.) Ltd. at Rs. 1260.06 per share (as per revised order u/s 35). The WTO adopted the valuation of the shares of the Jayant Investment Corporation Ltd., as per Board''s Circular No. 332A, dated 31-3-1982 [ See Taxmann''s Direct Taxes Circulars, Vol. 1, 1985 edn., p. 1459] at Rs. 102.04 per share.

In view of the judgment in CWT v. India Exchange Traders Association [Matter No. 149 of 1987, dated 21-3-1991] the first question is answered in the negative and in favour of the revenue. We make it quite clear that the valuation will be in respect of the shares of Hyderabad Agencies (P.) Ltd. and Birla Bros. (P.) Ltd. which are the subject-matter of this reference for the assessment year in question.

So far as the second question is concerned, it appears that the Tribunal followed its earlier order in the case of this assessee being WT Appeal Nos. 1, 2 and 3 (Cal.) of 1985 relating to the assessment years 1979-80 and 1980-81. In the said order the Tribunal considered the case of Jayant Investment Corpn. (P.) Ltd. By consent of the parties, the said order of the Tribunal in the case of the assessee for the assessment years 1979-80 and 1980-81 has been filed before this Court, which is treated as part of the records. From the discussions made in the said order it appears that the Tribunal proceeded to consider the valuation of the shares of Jayant Investment Corpn. (P.) Ltd. which is admittedly an investment company on the basis of rule 1D. The Tribunal really did not go into the question of valuation of Jayant Investment Corpn. (P.) Ltd. We, therefore, decline to answer the second question and direct the Tribunal to consider afresh the valuation of the shares of Jayant Investment Corpn. (P.) Ltd. after giving the parties reasonable opportunity of being heard. There will be no order as to costs.

Sen, J.

I agree.