Heera D. Vatcha vs Commissioner of Wealth Tax

M.P. Chandrakantaraj Urs J.

This is an application u/s 27(3) of the Wealth-tax Act, 1957, made by the assessee, Mrs. Heera D. Vatcha, asking this court to call for a reference from the Income Tax Appellate Tribunal, Bangalore Bench, to answer the following question.

"Whether it is mandatory for the Wealth-tax Officer to adopt the procedure prescribed under rule 1D of the Wealth-tax Rules framed in exercise of the powers conferred on the Central Government by section 46 of the Wealth-tax Act?"

Rule-1D is as follows :

"The market value of an unquoted equity share of any company, other than an investment company or a managing agency company, shall be determined as follows :-

The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet. The net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet. The resultant amount multiplied by the paid-up value of each equity share shall be the break-up value of each unquoted equity share. The market value of each such share be 80 per cent. of the break-up value so determined."

The undisputed facts are : The assessee had declared the value of certain shares held by her in Hutti Gold Mines for the assessment years 1981-82and 1982-83 in the sum of Rs. 1,08,195. But, subsequently, in the year 1985, she had sold the shares for Rs. 21,428. In that context, she wanted the value of the shares in Hutti Gold Mines changed to the value realised in the year 1985 as the market value of those shares. The assessing authority declined solely on the ground that the sale price in 1985 would not represent the market value in the earlier years 1981-82 and 1982-83. On appeal, the order of the assessing authority was confirmed. On further appeal to the Tribunal, the appeal came to be rejected, inter alia, on the ground that the assessee had never taken such a ground at an earlier point of time which it was submitted from the Bar was not factually correct. But, it does not make any difference in the light of the question which is sought to be raised for an answer by this court.

In the scheme of the Rules for valuation of shares, a broad classification is made for shares as quoted share and unquoted shares. Quoted shares are those which are daily quoted with the opening prices and closing prices at each stock exchange. The rule provides to go by the rate prevalent on the average of the relevant assessment year having regard to the prices quoted in the stock exchange. In regard to the other shares, i.e., unquoted shares, a particular method is evolved u/s 1D extracted as above in the course of this order. In the absence of any material produced before the assessing authority, the assessing authority had no choice but to follow the method given s a device of law. In that manner, it is but mandatory inasmuch as the authority is left with no other choice but to compute in accordance with the rule. Therefore, no such question arises on the facts of this case to be answered by us when the shares in question were not quoted shares. The rule is imperative and the assessing authority is bound to obey the statutory rule. No merit in the petition.

Petition is dismissed.