Commissioner of Wealth-tax Vs. Surrendra Paul and ors. - Court Judgment

Excerpt:
- ajit k. sengupta, j.1. in this reference under section 27(3) of the wealth-tax act, 1957, for the assessment year 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 messrs. aminchand payarelal (p.) ltd. should be yield method though the company had no profit-earning capacity but held valuable assets through its subsidiary and subsequent subsidiaries ?'2. the facts which have been incorporated in the statement of the case are as under :the assessee, surrendra paul and others, is a hindu undivided family and the assessment year involved is 1983-84 for which the valuation date was march 31, 1983. the wealth-tax assessment of the assessee for the year under reference was completed under section 16(3) of the wealth-tax act, 1957, on march 21, 1988. the assessee, inter alia, held 4,500 equity shares of aminchand payarelal (p.) ltd. and disclosed the value of the shares at nil on the basis of the yield method. the assessing officer found that the shares of the said company were not quoted on any stock exchange and the said company had no business activities for the past several years. the main items of assets held by the company were investments. besides, aminchand payarelal (p.) ltd. was the holding company of park hotels (p.) ltd., park hotels (p.) ltd. was again the holding company of flury's swiss confectionery (p.) ltd. and again flury's swiss confectionery (p.) ltd. was the holding company of aruna estate (p.) ltd, the company, 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 rule 11 of the wealth-tax 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 the 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 commissioner of wealth-tax (appeals) who held that the valuation of shares of the above company by either applying rule 1d or even by net maintainable profit method would become nil. at the same time, he also held that in view of aminchand payarelal (p.) ltd. holding shares of the other companies having solid financial position, it could not be said that the 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 commissioner of wealth-tax (appeals) and also filed cross-objection to the departmental appeal. the tribunal disposed of vide its consolidated order dated november 21, 1989. the tribunal having considered the facts and circumstances of the case and relying on the decisions of the supreme court in the case of cwt v. mahadeo jalan : [1972]86itr621(sc) and in the case of cgt v. smt. kusumben d. mahadevia : [1980]122itr38(sc) held that the proper method of valuation of the shares of aminchand payarelal (p.) ltd. was on the basis of yield method. the tribunal also reversed the order of the commissioner of wealth-tax (appeals) to the effect that some valuation was to be placed on the shares for the reason that the company was holding valuable shares in some other companies.5. it appears to us that the tribunal has not adverted to the question whether aminchand payarelal (p.) ltd. is an investment company or not. the answer to the question will depend on the 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 the wealth-tax rules or the schedule iii to the wealth-tax 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 rule 1d or the corresponding provision of schedule iii to the wealth-tax act, 1957. this court has held in cwt v. india exchange traders' association : [1992]197itr356(cal) , that rule 1d will be applicable in the case of valuation of the shares of a non-investment company.6. 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 aminchand payarelal (p.) ltd. is an investment company or not and thereafter shall proceed to decide the question of valuation of the shares in accordance with law.7. there will be no order as to costs.shyamal kumar sen, j.8. i agree.