Judgment:
AJIT K. SENGUPTA, J. :
In this reference under s. 27(3) of the WT Act, 1957 for the asst. yr. 1983-84 the following question of law has been referred to this Court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the proper method of valuation of unquoted equity shares in M/s. Aminchand Payarelal (P) Ltd. should be yield method though the company had not profit earning capacity but held valuable assets through its subsidiary and subsequent subsidiaries ?'
The facts which have been incorporated in the statement of case are as under :
2. The assessee M/s. Surrendra Paul & Ors. is an HUF and the assessment year involved is 1983-84 for which the valuation date was 31st March 1983. The wealth-tax assessment of the assessee for the year, under reference was completed under s. 16(3) of the WT Act, 1957 on 21st March, 1988. The assessee, inter alia, held 4,500 equity shares of M/s. Aminchand Payarelal (P) Ltd. and disclosed the value of the shares at nil on the basis of yield method. The Assessing Officer found that the shares of the said company were not quoted in any stock exchange and the said company had no business activities for the several years. The main items of assets held by the company were investments. Besides, M/s. Aminchand Payarelal (P) Ltd. was the holding company of M/s. Park Hotels (P) Ltd., M/s. Park Hotels (P) Ltd. was again the holding company of M/s. Flurys Swiss Confectionery (P) Ltd. and again M/s. Flurys Swiss Confectionery (P) Ltd. was the holding company of M/s. Aruna Estate (P) Ltd. The company M/s. Aminchand Payarelal (P) Ltd. had no profit earning capacity and did not declare any dividend for the past several years although it held valuable assets through its subsidiary and subsequent subsidiaries. The Assessing Officer, therefore, held that the yield method adopted for valuation of the shares in question was not correct. He applied r. 11 of the WT Rules, 1957, and applied the break-up method of valuation and also a method of valuation of unquoted equity shares of investment companies. The Assessing Officer, therefore, considered that the proper method of valuation of the shares of the above company would be the averaging of the value under yield method and under the break up value method. The Assessing Officer accordingly worked out the value of equity shares in question at Rs. 7,721 per share.
3. Being aggrieved the assessee preferred an appeal before the CWT(A) who held that the valuation of shares of the above company by either applying r. 1D or even by net maintainable profit method would become nil. At the same time we also held that in view of M/s. Aminchand Payarelal (P) Ltd. holding shares of other companies having solid financial position, it could not be said that value of the shares of the said company would really be worth nil. He, accordingly, estimated the value of one share at Rs. 10 only.
4. Being aggrieved, the Department came up in appeal before the Tribunal. The assessee also preferred an appeal against the decision of the CWT(A) and also filed cross-objection to the Departmental appeal. The Tribunal disposed them of vide its consolidated order dt. 21st November, 1989. The Tribunal having considered the facts and circumstances of the case and relying on the decisions of the Honble Supreme Court in the case of CWT vs . Mahadeo Jalan & Ors. : [1972]86ITR621(SC) and in the case of CGT vs . Smt. Kusum Ben D. Mahadevia : [1980]122ITR38(SC) held that the proper method of valuation of the shares of M/s. Aminchand Payarelal (P) Ltd. was on the basis of yield method. The Tribunal also reversed the order of the CWT(A) to the effect that some valuation was to be placed on the shares only for the reason that the company was holding valuable shares in some other companies.
It appears to us that the Tribunal has not adverted to the question whether M/s. Aminchand Payarelal (P) Ltd. is an investment company or not. The answer to the question will depend on determination of this issue. If it is an investment company then the shares of this company have to be valued in accordance with the provisions of WT Rules or the Schedule III to the WT Act, 1957 as the case may be. If, however, it is a non-investment company, in that event the valuation has to be made in terms of r. 1D or corresponding provision of Schedule III to the WT Act, 1957. This Court has held in CWT vs. India Exchange Traders Association reported in (1991) 197 ITR 356 that r. 1D will be applicable in case of valuation of the shares of a non-investment company.
For the reasons aforesaid, we decline to answer the question in this reference. We remand the matter to the Tribunal for fresh disposal in accordance with the observations made in the said judgment. The Tribunal must first ascertain whether M/s. Aminchand Payarelal (P) Ltd. is a investment company or not and, thereafter, shall proceed to decide the question of valuation of the shares in accordance with law.
There will be no order as to costs.
SHYAMAL KUMAR SEN, J. :
I agree.