COMMISSIONER OF WEALTH TAX vs. SAVITABEN I PATEL

The Appellate Tribunal dismissed the appeal of the Revenue holding that the gratuity liability was required to be deducted for the purpose of working out the break-up value of shares under Rule 1-D of the Wealth Tax Rules, 1957. 3. We have now the benefit of the decision of the Apex Court in BHARAT HARI SINGHANIA v. C.W.T. reported in 207 ITR 1 in which the Supreme Court while construing the provisions of Rule 1-D of the Wealth Tax Rules, 1957, held that the said Rule was required to be followed in every case where unquoted equity shares of a company (other than an investment company or a managing agency company) have to be valued and that all the authorities under the Act including the Valuation Officer were bound by the said Rule. It was further held that while valuing the unquoted equity shares under Rule 1-D, no deductions on account of capital gains tax which would have been payable in case the shares were sold on the valuation date can be made. Similarly, no other deductions including provision for taxation, provident fund and gratuity are admissible. It was held that Rule 1-D was exhaustive on the subject.

In view of the decision of the Supreme Court in BHARAT HARI SINGHANIA v. C.W.T. (supra), we hold that the Tribunal was in error in holding that the gratuity liability not provided in books was required to be deducted for the purpose of working out the break-up value of shares under Rule 1-D of the Wealth Tax Rules, 1957. The question referred to us is, accordingly, answered in the negative in favour of the Revenue and against the assessee. The Reference stands disposed of accordingly with no order as to costs. [KMG Thilake]