COMMISSIONER OF WEALTH-TAX vs. GAUTAMBHAI VIMALBHAI SHAH

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WTR/35/1995HC GujaratGJHC24022717199502 February 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court answered the referred question in the negative, in favour of the Revenue and against the Assessee. The Court relied on the Supreme Court's decision in Bharat Hari Singhania v/s C.W.T. (207 ITR Pg. 1). In that judgment, the Supreme Court had negated the contention that the yield method should be followed for valuing unquoted shares. The Supreme Court held that Rule 1D was mandatory and required to be applied in every case where unquoted equity shares of a company (other than an investment company or a managing agency company) had to be valued, and that Rule 1D was exhaustive on the subject. Consequently, the Tribunal's direction to value the shares on the basis of the yield method was found to be incorrect. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

The assessee, Gautamibhai Vimalbhai Shah, claimed that the value of his unquoted shares in M/s. Metro Wood and Engineering Works Pvt. Ltd. should be determined using the yield method for wealth tax assessment. The Wealth Tax Officer rejected this claim and valued the shares according to Rule 1D of the Wealth Tax Rules, 1957. The Deputy Commissioner of Income Tax (Appeals) upheld this decision. The Income Tax Appellate Tribunal, however, relying on its previous rulings, accepted the assessee's contention and directed the valuation based on the yield method. The Commissioner of Wealth-Tax then sought a reference to the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the wealth-tax officer to value the unquoted shares owned by the assessee in M/s. Metro Wood and Engineering Works Pvt. Ltd. on the basis of the yield method? (Question of law and fact, concerning the valuation of unquoted shares under the Wealth Tax Act, 1957). Assessee's Contention: The assessee argued that the yield method should be applied for valuing the unquoted shares. The Tribunal accepted this contention, relying on its earlier decisions. Revenue's Contention: The revenue contended that Rule 1D of the Wealth Tax Rules, 1957, was the prescribed method for valuing such shares and that the yield method was not applicable. The Wealth Tax Officer and the Deputy Commissioner (Appeals) had followed Rule 1D.

Which sections of the Income-tax Act were involved?

Section 27(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 35 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question 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?

-------------------------------------------------------------- COMMISSIONER OF WEALTH-TAX Versus GAUTAMBHAI VIMALBHAI SHAH -------------------------------------------------------------- Appearance: Mr.Pranav Desai for MR MANISH R BHATT for Petitioner Respondent served by RPAD.

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CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 02/02/98

ORAL JUDGEMENT (Per R.K.Abichandani, J)

The Income Tax Appellate Tribunal, Ahmedabad has referred the following question for the opinion of this court under Section 27(1) of the Wealth Tax Act, 1957. "Whether, the Appellate Tribunal is right in law

and on facts in directing the wealth-tax officer to value the unquoted shares owned by the assessee in M/s. Metro Wood and Engineering Wroks Pvt.Ltd. on the basis of yield method?"

2.

In the course of assessment proceedings, the assessee had claimed that the value of unquoted shares owned by the assessee in M/s.Metro Wood and Engineering Works P.Ltd. be valued on the basis of yield method. The Wealth Tax Officer negativing this contention valued the shares as per Rule 1D of the Wealth Tax Rules. The Dy.Commissioner of Income Tax (Appeals) confirmed that order. The Appellate Tribunal relying on its earlier decision accepting the contention of the assessee held that such shares were to be valued on the basis of yield method.

3.

Rule 1D of the Wealth Tax Rules, 1957 came to be considered by the Supreme Court in Bharat Hari Singhania v/s C.W.T reported in 207 ITR Pg.1 of the Supreme Court negativing the contention that yield method should be followed for valuing such shares, held that Rule 1D was required to be applied in every case where unquoted equity shares of a company (other than an investment company or a Managing Agency Company) have to be valued. It was held that Rule 1D was exhaustive on the subject.

4.

In view of this decision of the Supreme Court, the question referred to us is 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.

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