COMMISSIONER OF WEALTH-TAX vs. GIRA R. PATEL

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WTR/82/1995HC GujaratGJHC24022764199508 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Supreme Court decision in Bharat Hari Singhania vs. CWT (207 ITR 1) impliedly disapproved the principles laid down by the Gujarat High Court in CWT vs. Ashok K. Parikh (129 ITR 46). The Supreme Court's ruling clarified that if advance tax paid is shown as an asset and also as a liability (provision towards taxation) in the balance sheet, it should be deducted from liabilities. Clause (ii)(e) of Rule 1D complements clause (i)(a) by stating that only the amount of tax still remaining to be paid is to be treated as a liability. Therefore, the Tribunal was not right in relying on the interpretation in Ashok K. Parikh. The question was answered in the negative, in favour of the revenue and against the assessee. The reference was disposed of with no order as to costs.

What were the facts?

The Income-tax Appellate Tribunal (ITAT), Ahmedabad, referred a question of law to the Gujarat High Court concerning the valuation of unquoted equity shares of Cadila group of companies for the assessment year 1986-87. The reference was made at the instance of the revenue. The ITAT had directed that the valuation should be as per Rule 1D, as interpreted by the Gujarat High Court in the case of CWT vs. Ashok K. Parikh (129 ITR 46). The revenue was represented by counsel, while the assessee did not appear despite being served notice.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing that the valuation of the unquoted equity shares of Cadila group of companies be taken as per Rule 1D as interpreted by the Gujarat High Court in the case of Ashok K. Parikh (129 ITR 46)? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. The Tribunal had relied on the Gujarat High Court's interpretation in Ashok K. Parikh (129 ITR 46). Revenue's Contention: The revenue's counsel invited the attention of the High Court to the Supreme Court decision in Bharat Hari Singhania vs. CWT (207 ITR 1), which, according to the revenue, impliedly disapproved the principles laid down by the Gujarat High Court in Ashok K. Parikh.

Which sections of the Income-tax Act were involved?

Rule 1D

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 82 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF WEALTH-TAX Versus GIRA R. PATEL -------------------------------------------------------------- Appearance: 1. WEALTH TAX REFERENCE No. 82 of 1995 MR BB NAIK WITH MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 08/11/2001

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

In this reference at the instance of the revenue, the Income-tax Appellate Tribunal, Ahmedabad has referred the following question for our opinion in respect of assessment year 1986-87 :-

"Whether, the Appellate Tribunal is right in law and on facts in directing that valuation of the unquoted equity shares of Cadila group of companies be taken as per Rule 1D as interpreted by the Gujarat High Court in the case of Ashok K. Parikh, 129 ITR 46 ?"

2.

We have heard Mr BB Naik, learned counsel for the revenue. Though served, none appears for the respondent-assessee.

3.

Our attention is invited to the decision of the the following principles :-

"If in the case of the balance-sheet of the company the amount of tax paid, which is shown as an asset and has to be deducted from the value of the assets as required by clause (1)(a) of Explanation II to rule 1D, is also shown as a liability i.e. if that amount is included in the amount set apart as provision towards taxation, it would obviously have to be deleted from the column of liabilities - and this is also what clause (ii)(e) says. Clause (ii)(e) is in a sense complementary to clause (i)(a). The advance tax paid is not really an asset but the proforma of balance-sheet in Schedule VI to the Companies Act requires it to be shown as such. What clause (i)(a) does is to remove the said amount from the list of assets for the purpose of rule 1D. It is then that clause (ii)(e), which speaks of liabilities, says that only that amount which is still remaining to be paid shall be treated as a liability on the valuation date. If in the provision for taxation made in the column of liabilities in the balance-sheet, the amount of advance tax already paid is again shown as a liability, it will not be treated as a liability. This is the true function of both the sub-clauses." sundar/-

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