WTR/78/1991 of vs. JASVIDYABEN C MEHTA

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WTR/78/1991 of Vs JASVIDYABEN C MEHTAHC GujaratGJHC24013740199127 January 1998Bench: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Tribunal was not right in law and on facts in holding that Rule 1D was not mandatory. The Court referred to the Supreme Court's decision in Bharat Hari Singhania (reported in 207 ITR page 1), which construed the provisions of Rule 1D of the Wealth Tax Rules. The Supreme Court held that Rule 1D has 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 all authorities under the Act are bound by this Rule. The Supreme Court further held that Rule 1D was exhaustive on the subject. Consequently, the High Court answered the referred question in the negative, in favour of the Revenue and against the assessee. The reference was disposed of accordingly.

What were the facts?

This case involves a reference made by the Income Tax Appellate Tribunal (ITAT), Ahmedabad, to the High Court of Gujarat. The reference concerns the valuation of shares for wealth tax purposes. The assessee is Jasvidyaben C Mehta, and the Revenue is the department responsible for wealth tax collection. The assessment year is not explicitly stated. The core of the dispute revolves around the method of valuing unquoted equity shares of a going concern. The ITAT had previously held that the shares should be valued using the yield method, implying that Rule 1D of the Wealth Tax Rules was not mandatory. The High Court is asked to provide its opinion on this matter.

What were the issues?

1. Whether the Tribunal is right in law and on facts in holding that the provisions of Rule 1D are not mandatory in character and the shares in question are required to be valued as per the yield method? This question concerns the mandatory nature of Rule 1D of the Wealth Tax Rules and its applicability to the valuation of shares of a going concern. Assessee's contention: The assessee, through the ITAT's prior finding, argued that Rule 1D was not mandatory and the yield method was the appropriate valuation method for the shares in question. Revenue's contention: The Revenue implicitly contended that Rule 1D was mandatory and should have been followed for the valuation of the shares. The Revenue relied on the Supreme Court decision in Bharat Hari Singhania.

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 78 of 1991

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.R.DAVE ============================================================ 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?

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Versus JASVIDYABEN C MEHTA -------------------------------------------------------------- Appearance: R.P. Bhatt & Co., Advocates for Petitioner Respondent served

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CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.R.DAVE Date of decision: 27/01/98

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

The Income Tax Appellate Tribunal, Ahmedabad has referred the following question for our opinion under Section 27(1) of the Wealth Tax Act, 1957:-

1.

"Whether, the Tribunal is right in law and on facts in holding that the provisions of Rule 1D are not mandatory in character and the shares in question are required to be valued as per yield method?"

The Tribunal proceeded on the footing that the proper method for valuing the shares of a going concern is the yield basis method.

The Hon'ble Supreme Court in Bharat Hari Singhania, reported in 207 ITR page 1, has while construing the provisions of Rule 1D of the Wealth Tax Rules, held that Rule 1D has 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 all the authorities under the Act are bound by the said Rule. It was held that Rule 1D was exhaustive on the subject.

In view of this decision, the aforesaid 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.

*/Mohandas

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