'Commercial Establishments or Complexes' under the Wealth Tax Act, 1957 - ITAT held that the properties of Assessee at Connaught Circus, New Delhi and Sardar Mohan Singh Building, Connaught Lane, New Delhi were 'Commercial Establishments or Complexes' and therefore outside the purview of 'assets' under Section 2 (ea) (i) (5) of the Wealth Tax Act, 1957 (WTA)? - as urged by Revenue, that the expression 'commercial establishments or complexes' should be understood only in the plural and not in the singular High Court [2017 (7) TMI 1474 - DELHI HIGH COURT] as held to unable to agree with the above submission. It is obvious from a reading of the entire Section 2 (ea) WTA that the legislative intent was not to restrict the benefit of exemption any particular type of commercial establishments or complexes. By reading such a restrictions into the said clause, the Court would be writing into Section 2 (ea) WTA something which is not there. Impugned order of the ITAT does not suffer from any legal infirmity. HELD THAT:- The appeals are not pressed on the ground of low tax effect. The appeals are dismissed as not pressed. Pending applications, if any, also stand disposed of.

Valuation of unquoted shares - valuation of quoted shares - mandatory application of Rule 11, Part C, Schedule III of the W.T. Act for unquoted equity shares - prohibition on hybrid valuation or ad hoc depreciation from quoted price under the rules - scope and effect of Rule 21, Part H, Schedule III of the W.T. Act (restrictive covenants to be ignored) - interaction of Schedule II of the G.T. Act with Schedule III of the W.T. Act - role of stock-exchange certificate under Explanation to sub-rule (9) of Rule 2, Part A, Schedule III of the W.T. ActValuation of unquoted shares - quoted shares - lock-in period and marketability - Equity shares under statutory lock-in period are not "quoted shares" and must be treated as "unquoted shares" for valuation purposes. - HELD THAT: - The Court held that shares subject to a lock-in period are not quoted with regularity on a recognised stock exchange and there are no current transactions in the ordinary course of business in respect of such shares. The lock-in imposes a bar on transferability (including inscription of "not transferable"), and the possibility of restricted private transfers inter se promoters does not convert such shares into "quoted shares" under the definition in sub-rule (9) of Rule 2, Part A of Schedule III of the W.T. Act. Accordingly, the shares in lock-in must be categorised as unquoted for the purpose of valuation under the applicable rules. [Paras 5, 6]Shares under lock-in are unquoted and must be valued as unquoted shares.Mandatory application of Rule 11, Part C, Schedule III of the W.T. Act for unquoted equity shares - Valuation of unquoted equity shares (other than investment companies) must be determined strictly by the formula in Rule 11, Part C, Schedule III of the W.T. Act; no alternative method is permissible. - HELD THAT: - Rule 11 prescribes a statutory, mandatory formula for valuing unquoted equity shares (break-up value and application of eighty per cent rule). The Court emphasised that Schedule II of the G.T. Act makes Schedule III of the W.T. Act applicable and that the machinery provision is mandatory; hence unquoted shares must be valued pursuant to Rule 11 alone. Deviating from or applying any other method is not permitted under the statutory scheme. [Paras 7, 9]Unquoted shares must be valued by applying Rule 11; alternative or hybrid valuation methods are not allowed.Prohibition on hybrid valuation or ad hoc depreciation from quoted price under the rules - valuation of quoted shares - Ad hoc depreciation from the market (quoted) price or adoption of a hybrid valuation (mixing quoted valuation with downward adjustment to account for restrictions) is not permissible under Rule 9 or Rule 11. - HELD THAT: - The Court explained that Rule 9 governs quoted shares (value taken as market quotation) and Rule 11 governs unquoted shares (formulaic break-up approach). The rules do not permit a hybrid approach where a quoted market price is taken and then an ad hoc reduction applied to account for transfer restrictions. Where shares are unquoted because of restrictions, they must be valued under Rule 11 as a standalone method; ad hoc downward adjustments to quoted prices are inconsistent with the statutory scheme. [Paras 8, 9]Neither Rule 9 nor Rule 11 permits application of a hybrid valuation or ad hoc depreciation from quoted market price.Scope and effect of Rule 21, Part H, Schedule III of the W.T. Act (restrictive covenants to be ignored) - Rule 21 permits assuming an open market for valuation despite restrictive covenants but does not authorize ignoring the restrictions; valuation must account for rights and limitations attached to the property. - HELD THAT: - Rule 21 was construed as a clarificatory provision allowing valuation even when transfer is forbidden, restricted or contingent by assuming a hypothetical sale in an open market. However, the Court held that Rule 21 does not mandate ignoring the limitations; instead the market value must be ascertained while taking into account the restrictions, because rights and limitations form ingredients of value. The provision therefore permits valuation but not by enhancing rights or disregarding restrictions. [Paras 10, 11, 13, 14]Rule 21 enables valuation despite restrictive covenants but requires the valuation to reflect the restrictions; it does not permit ignoring them.Role of stock-exchange certificate under Explanation to sub-rule (9) of Rule 2, Part A, Schedule III of the W.T. Act - A stock-exchange certificate on whether a share is quoted is a relevant conclusive statement under the Explanation, but the authority, tribunal or court retains the power to examine and decide the quoted/unquoted character when challenged. - HELD THAT: - While the Explanation provides that a certificate from the concerned stock exchange furnished in the prescribed form shall be accepted as conclusive on whether a share is "quoted", the Court clarified that this does not oust the power of the statutory authorities or judicial forums to examine the question. The Explanation does not delegate exclusive adjudicatory power to the stock exchange; decisions by the authority are reviewable on appeal. [Paras 4, 15]The stock-exchange certificate is to be accepted as conclusive in form, but authorities and courts can examine the question and their decisions are subject to appeal.Final Conclusion: Revenue's appeal is dismissed. The shares under lock-in are unquoted and must be valued under Rule 11, Part C, Schedule III of the W.T. Act; Rule 21 does not permit ignoring restrictions when valuing property. The assessee's separate ground was not pressed. No order as to costs.

Stay of operation of High Court observation - interim relief pending further consideration - authority to proceed with substantive assessmentStay of operation of High Court observation - authority to proceed with substantive assessment - interim relief pending further consideration - Effect and operation of the High Court's observation in paragraph 78 permitting the Assessing Authority to proceed with substantive assessments shall remain stayed pending further consideration. - HELD THAT: - The Supreme Court, after granting leave, has stayed the operative effect of the High Court's observation in paragraph 78 which had stated that the Assessing Authority would be free to proceed to make substantive assessments in the hands of the respondent assessees. The stay is interlocutory and preserves the status quo until the Court gives further consideration to the matter. No determination was made on the merits of the underlying assessments or the correctness of the High Court's observation; the order is limited to restraining its implementation pending final adjudication.Operation of paragraph 78 of the High Court judgment is stayed; the Assessing Authority is restrained from proceeding pursuant to that observation until further orders.Final Conclusion: Leave granted; an interim stay has been placed on the High Court's paragraph 78 observation that allowed the Assessing Authority to proceed with substantive assessments, and that observation shall not operate pending further consideration by this Court.

Association of persons - indeterminate or unknown individual shares - purpose test (business or profit motive) for association of persons in tax statutes - Section 21AA of the Wealth Tax Act - anti evasion provision - determinacy of members' shares on relevant valuation/liquidation dateAssociation of persons - purpose test (business or profit motive) for association of persons in tax statutes - Section 21AA of the Wealth Tax Act - anti evasion provision - Whether Section 21AA of the Wealth Tax Act applies to the Bangalore Club - HELD THAT: - The Court interpreted Section 21AA in light of its object and earlier authorities holding that, in taxation statutes, an "association of persons" denotes persons banding together for a common business or commercial purpose to produce income or profit. Section 21AA was enacted to plug tax evasion by associations that do not define members' shares so as to avoid addition to individual members' wealth. Consequently, merely being an unincorporated body or a members' club does not satisfy the purpose test; a social club whose members join to enjoy facilities and not to carry on business or earn profits does not fall within the scope of Section 21AA. The Court relied on the established presumption that Parliament, when using an expression with settled judicial meaning, is taken to have adopted that meaning absent a contrary indication, and it applied the relevant authorities construing "association of persons" in tax law. On the facts, Bangalore Club is a social members' club and not an association formed for business or profit; therefore Section 21AA is not attracted. [Paras 13, 14, 26, 28, 31]Section 21AA does not apply to the Bangalore Club because it is a social club and not an association formed with a business or profit making object.Indeterminate or unknown individual shares - determinacy of members' shares on relevant valuation/liquidation date - Whether the members' shares in the Bangalore Club's assets are indeterminate or unknown so as to attract Section 21AA - HELD THAT: - Section 21AA applies only where individual shares of members in the association's income or assets are indeterminate or unknown. The Court examined Rule 35 which provides that on winding up any surplus after discharge of liabilities shall be divided equally among members. Applying the principle that determinacy is to be judged with reference to the relevant date (here, the date of liquidation), the Rule yields a fixed list of members and an ascertainable equal share per member on that date. Further, subsection (2) of Section 21AA refers to "any business or profession carried on" by an association, underscoring that the provision targets commercial associations; a social club carrying no business cannot be brought within subsection (2). Thus, even if the Bangalore Club were treated as an association, the existence of an express rule for distribution on liquidation makes members' shares determinate and Section 21AA inapplicable. [Paras 31, 32, 34, 35]Members' shares are determinate (ascertainable on liquidation as per Rule 35), so Section 21AA is not attracted.Section 21AA of the Wealth Tax Act - anti evasion provision - judicial construction of taxing expressions - Whether the High Court's reliance on CWT v. Chikmagalur Club and its conclusion taxing such clubs under Section 21AA was correct - HELD THAT: - The Court held that the Chikmagalur Club decision overlooked and omitted crucial paragraphs of Ellis Bridge Gymkhana and failed to engage with the earlier line of authorities (beginning with Indira Balkrishna) construing "association of persons" in tax statutes as implying a business or profit purpose. Section 21AA was not intended to expand the class of taxable persons generally but to prevent evasion by certain associations with indeterminate member shares. Chikmagalur Club's approach was therefore incorrect and is overruled; the High Court judgment resting solely on that decision was unsustainable. [Paras 29, 30]Chikmagalur Club was wrongly decided and is overruled; the High Court's reliance on it is set aside.Final Conclusion: The High Court's judgment and its review were set aside. The appeals were allowed: Section 21AA of the Wealth Tax Act does not apply to the Bangalore Club because it is a social club (not formed for business/profit) and, in any event, members' shares are determinate on liquidation under Rule 35; accordingly, the club is not liable to assessment under Section 21AA for the assessment years in question.

Summary order. Special Leave Petition dismissed; delay condoned; question of law left open.

Summary order. The Special Leave Petition is dismissed; delay condoned.

Summary order. The special leave petition is dismissed; delay condoned; pending applications, if any, stand disposed of.

Summary order. Special Leave Petition dismissed; delay condoned.

Non obstante clause in Section 7(2) - income capitalisation method for valuation of a running business - land and building (open market) method of valuation - discretionary/enabling power of the Wealth Tax Officer to adopt valuation methods - reference to Valuation Officer under Section 16A for open market valuationNon obstante clause in Section 7(2) - discretionary/enabling power of the Wealth Tax Officer to adopt valuation methods - Whether Section 7(2)(a) mandates application of income capitalisation method in all cases of a running business or is an enabling/discretionary provision. - HELD THAT: - The Court examined the scheme of Section 7 and held that the normal rule is valuation by the price the asset would fetch in the open market. Sub-section (2) begins with a non obstante clause but, on its language and in light of precedent, it is an enabling provision conferring discretion on the Wealth Tax Officer to determine the net value of the business as a whole having regard to the balance-sheet. Resort to Section 7(2)(a) is optional and not mandatory; the provision does not fetter the Assessing Officer's discretion to adopt an alternative appropriate method of valuation.Section 7(2)(a) is discretionary/enabling and does not mandate income capitalisation in every case of a running business.Reference to Valuation Officer under Section 16A for open market valuation - land and building (open market) method of valuation - income capitalisation method for valuation of a running business - Whether the Assessing Officer was justified in referring Alpana Cinema to the Departmental Valuer under Section 16A and adopting the land-and-building/open-market valuation instead of the income-capitalisation method applied by the Tribunal. - HELD THAT: - The Assessing Officer made a conscious decision to refer valuation to the Departmental Valuer under the statutory power to refer under Section 16A, and the Valuation Officer's report valued the property on the land-and-building/open-market basis. The High Court upheld that choice, observing that the property was owned and in possession without encumbrances and could command an open-market price; further, factual circumstances (including reported early-year losses) expose a risk that strict income-capitalisation could yield unrealistic or negative values. The Court found no error in the Assessing Officer's reference or in the Appellate Authority's rejection of the assessee's objections to the land-and-building method. The Tribunal's view favouring income-capitalisation did not bind the High Court where the Assessing Officer had validly exercised discretion and obtained the Departmental valuation.Assessing Officer was justified in referring the property for departmental valuation and in adopting the land-and-building/open-market method; the High Court correctly reversed the Tribunal on this point.Final Conclusion: All appeals dismissed; the High Court rightly held that Section 7(2)(a) is an enabling discretion and that the Assessing Officer was justified in referring the Alpana Cinema for departmental valuation and adopting the land-and-building/open-market valuation over the income-capitalisation approach.

Substantial question of law - appeal to High Court under Section 27-A of the Wealth Tax Act - interpretation of Section 27-A by reference to Section 100 of the Code of Civil Procedure - legislation by incorporation - jurisdiction limited to formulated questionInterpretation of Section 27-A by reference to Section 100 of the Code of Civil Procedure - legislation by incorporation - Applicability of the law laid down in Santosh Hazari (concerning Section 100 of the Code) to appeals under Section 27-A of the Wealth Tax Act. - HELD THAT: - The Court held that Section 27-A is in pari materia with Section 100 of the Code and was enacted by following the principle of legislation by incorporation; the language being identical, the interpretative principles and requirements applicable to second appeals under Section 100 of the Code apply equally to appeals under Section 27-A of the Act. Consequently, the existence of a "substantial question of law" is a sine qua non for the exercise of the High Court's appellate jurisdiction under Section 27-A, and the guidance in Santosh Hazari is binding for such appeals. [Paras 7, 8, 10]Section 27-A must be construed like Section 100 of the Code; Santosh Hazari applies to appeals under Section 27-A.Substantial question of law - jurisdiction limited to formulated question - Whether the High Court was justified in deciding the appeals without formulating the substantial question(s) of law as required by Section 27-A. - HELD THAT: - The Court found that the High Court did not ascertain or formulate the substantial question(s) of law and proceeded to decide the appeals beyond the limited jurisdiction conferred by Section 27-A. In doing so the High Court failed to confine its adjudication to the question(s) so formulated, contrary to the statutory mandate and the principles laid down in Santosh Hazari; therefore its exercise of jurisdiction was legally unsustainable. [Paras 11, 12]The High Court's decision without formulating substantial question(s) of law was erroneous and legally unsustainable; the impugned orders must be set aside on that ground.Appeal to High Court under Section 27-A of the Wealth Tax Act - substantial question of law - Relief to be granted in consequence of the High Court's failure to follow the statutory procedure under Section 27-A. - HELD THAT: - In view of the High Court's failure to formulate the substantial question(s) of law and the consequent illegality of its orders, the Supreme Court allowed the appeals, set aside the impugned High Court judgments and remanded the matters to the High Court for fresh decision. The High Court is directed to consider the appeals afresh, formulate the substantial question(s) of law where required, and decide the appeals in accordance with the statutory scheme and the principles explained in Santosh Hazari. [Paras 5, 13]Appeals allowed; impugned High Court orders set aside and matters remanded for fresh decision after formulation of substantial question(s) of law.Final Conclusion: The appeals are allowed; the High Court's orders are set aside because it proceeded without formulating the substantial question(s) of law under Section 27-A. The matters are remanded to the High Court to decide afresh in accordance with the requirement that appeals under Section 27-A be entertained only where a substantial question of law is formulated and in accordance with Santosh Hazari.

Value of asset for wealth tax - hypothetical open market valuation - valuation date - effect of Urban Land Ceiling Act on valuation - maximum compensation under Urban Land Ceiling ActValue of asset for wealth tax - hypothetical open market valuation - valuation date - Whether the value of vacant land for wealth tax purposes must be taken as the maximum compensation payable under the Urban Land Ceiling Act - HELD THAT: - The Court applied Section 7 of the Wealth Tax Act which requires valuation as the price the asset would fetch if sold in the open market on the valuation date, i.e., a hypothetical market with an assumed willing purchaser. The Court accepted that restrictions and prohibitions under the Ceiling Act depress market value and therefore the Wealth Tax Officer must take those restrictions into account when forming his opinion. However, the Court held that the statutory assumption of an open market remains central and does not mandate adoption of the Ceiling Act compensation figure as the entire market value of the land. While speculative purchases by risk-taking buyers must be disregarded, a reasonable purchaser aware of the Ceiling Act's effect would not offer more than the compensation fixed by the Competent Authority for the excess land covered by the Ceiling Act. Consequently, the valuation must reflect the hypothetical market price subject to the statutory restrictions prevailing on the valuation date rather than mechanically equating market value to the maximum statutory compensation in all respects. [Paras 23, 24, 25, 30, 31]The market value for wealth tax is to be estimated on the hypothetical open market basis as on the valuation date taking into account depressing effects of the Ceiling Act, but it is not automatically identical to the maximum statutory compensation under the Ceiling Act.Effect of Urban Land Ceiling Act on valuation - maximum compensation under Urban Land Ceiling Act - How valuation is to be computed where part of the vacant land is subject to the Urban Land Ceiling Act - HELD THAT: - In the factual matrix before the Court the Competent Authority had determined the maximum compensation for the excess vacant land under the Ceiling Act at the specified figure. The Court held that the part of the land which is the "excess land" covered by Sections 3 and 4 of the Ceiling Act should be valued at the compensation determinable under that Act because a reasonable purchaser, aware that the land would be taken over and that compensation is the only monetary entitlement, would not pay more. However, the total vacant land for wealth-tax purposes is not limited to the excess portion; other parts of the vacant land which would remain with the assessee must be valued according to their market value (subject to restrictions). Thus the correct approach is to value the excess land at the Ceiling Act compensation and add the market value of the remaining land to arrive at the taxable value. [Paras 29, 31]Excess vacant land subject to the Ceiling Act is to be valued at the compensation fixed under that Act; the market value of the remaining vacant land (which is not 'excess') must be added to that amount for wealth-tax valuation.Final Conclusion: Appeals allowed. The Court ruled that wealth-tax valuation must assume a hypothetical open market on the valuation date taking into account depressing legal restrictions; where part of the vacant land is excess land under the Urban Land Ceiling Act that portion is to be valued at the statutory compensation determined under the Ceiling Act and the market value of the remaining land is to be added to arrive at the wealth-tax value.

Definition of 'urban land' - land occupied by any building which has been constructed with the approval of the appropriate authority - exemption from wealth tax - construction completed - literal interpretation of taxing statute - strict interpretation of exemption provisions - purposive construction limited by unambiguous textLand occupied by any building which has been constructed with the approval of the appropriate authority - construction completed - definition of 'urban land' - Whether the exclusion of 'urban land' in Explanation 1(b)(ii) applies to land on which building construction has merely commenced or only to land on which a building has been fully constructed with approval of the appropriate authority. - HELD THAT: - On a plain reading Explanation 1(b)(ii) excludes from 'urban land' only "the land occupied by any building which has been constructed with the approval of the appropriate authority." The Court held that the phrase "has been constructed" cannot be read to include buildings that are not fully constructed or are merely in the process of construction. The opening words "the land occupied by any building" reinforce that the land must in fact be occupied by a completed building; mere commencement of construction does not render the land "occupied by any building." In the context of a taxing statute and an exemption provision the language, when unambiguous, must be given its literal meaning and exemptions are to be construed strictly with the onus on the assessee to bring itself within the exception. Purposive construction was rejected because there is no ambiguity in the text and adopting the assessee's construction would produce anomalous results (for example, permitting exemption where construction is later abandoned), which the Legislature could not have intended. The Court also rejected the submission that completed buildings are already covered elsewhere in the definition in a manner that would render Explanation 1(b)(ii) otiose, observing that the provisions address different situations and Explanation 1(b) specifically carves out categories of land from the definition of 'urban land.' The Karnataka High Court view that the exclusion applies only to fully constructed buildings was affirmed and contrary decisions of other High Courts were set aside. [Paras 15, 16, 17, 18, 20]The exclusion in Explanation 1(b)(ii) applies only where a building has been fully constructed with the approval of the appropriate authority; land where construction is merely in progress is not excluded from the definition of 'urban land'.Final Conclusion: Appeals of the assessee dismissed; appeals preferred by the Department against the Kerala and Madras High Court judgments allowed; SLPs disposed of; parties to bear their own costs.

Substantial question of law under Section 27A(3) and (4) of the Wealth Tax Act, 1957 - duty of the High Court to frame the question of law - remittal for framing of substantial question and rehearingSubstantial question of law under Section 27A(3) and (4) of the Wealth Tax Act, 1957 - duty of the High Court to frame the question of law - remittal for framing of substantial question and rehearing - High Court erred in deciding the appeal without framing the substantial question of law as required by Section 27A(3) and (4) of the Wealth Tax Act, 1957, and the matter required remand for framing and rehearing. - HELD THAT: - The Supreme Court examined the impugned judgment and found that the High Court had not formulated the substantial question of law mandated by sub section (4) and had proceeded to decide the appeal without framing such question. Because admission of an appeal under Section 27A is conditional upon the existence of a substantial question of law and the High Court is required to formulate that question, the failure to do so vitiated the appellate process. In the circumstances and having regard to the facts, the appropriate course was to set aside the impugned order and remit the matter to the High Court so that it may frame any substantial question of law, if ariseable, and hear the appeal afresh.Impugned order set aside; matter remitted to the High Court to frame the substantial question of law, if any, and to rehear the appeal.Final Conclusion: Appeal allowed; impugned High Court order set aside and the matter remitted to the High Court for framing of the substantial question of law and fresh hearing; no order as to costs.

Liability of net wealth of closely-held companies to wealth tax - exclusion of buildings used by the assessee as office for the purposes of its business - exclusion of buildings used as hospital mainly for the welfare of employees - limited meaning of 'office' as administrative wing in clause (vi) - construction of exclusionary clause in wealth tax statuteConstruction of exclusionary clause in wealth tax statute - limited meaning of 'office' as administrative wing in clause (vi) - Meaning and scope of clause (vi) of sub-section (3) of Section 40 - whether the words 'office for the purposes of its business' exclude all buildings used by a closely held company for conducting its business or only a limited category. - HELD THAT: - The Court agreed with the High Court's analysis that clause (vi) cannot be read to exclude every building used by a closely held company merely because it is used 'for the purposes of its business'. The drafting of clause (vi), which separately lists specific categories such as factory, hotel and cinema theatre, demonstrates that the legislature intended to exclude only the particular types of buildings enumerated, and that 'office for the purposes of its business' must be read narrowly. The phrase is to be understood in a limited sense - principally as covering the administrative wing of a closely held company - and not as a catch-all exemption for all productive assets used in a company's business. Internal aids and the specific inclusion of non-administrative business premises (for example, hotels and cinemas) support this restricted construction. The exclusion of a 'hospital' in clause (vi) is likewise confined to those hospitals maintained mainly for the welfare of a company's employees (i.e., as an employee welfare facility), rather than hospitals run as business undertakings serving outsiders. [Paras 17, 18]Clause (vi) is to be construed narrowly; 'office for the purposes of its business' denotes the administrative wing and the enumerated exclusions apply only to the specified kinds of buildings used in the limited senses described.Exclusion of buildings used as hospital mainly for the welfare of employees - liability of net wealth of closely-held companies to wealth tax - Application of clause (vi) to the appellant's hospital building - whether the hospital run by the appellant (serving outsiders as a business) falls within the excluded category. - HELD THAT: - Applying the above construction to the facts, the Court accepted the High Court's finding that the appellant's hospital is run as a business to serve the public and cannot, by any stretch, be treated as an 'office' or as a hospital maintained mainly for the welfare of the company's employees. The exclusion in clause (vi) for a hospital applies only where the facility is held for employee welfare by an industrial unit. Because the appellant's hospital operates as a business undertaking serving outsiders, it does not qualify for the exclusion and therefore falls within the assets to be included in computing the net wealth of a closely held company under Section 40. [Paras 17, 18]The appellant's hospital building is not excluded under clause (vi) and is includible in the net wealth subject to wealth tax under Section 40.Final Conclusion: The appeals are dismissed; the hospital building of the appellant, being used as a business serving outsiders and not as an employee welfare hospital or an administrative 'office', is not excluded by clause (vi) and is includible in the net wealth of the closely held company for the specified assessment years.

Use by the assessee as factory for the purpose of its business - productive asset versus non-productive asset - preservation of corporate personality between related companies - treatment of related party transactions as indicia of separate entities - interpretation of a taxing statute by its plain languageUse by the assessee as factory for the purpose of its business - preservation of corporate personality between related companies - treatment of related party transactions as indicia of separate entities - Whether the portion of the building let to a sister concern was 'used by the assessee as factory for the purpose of its business' within clause (vi) of Section 40(3) of the Finance Act, 1983, and therefore excluded from net wealth. - HELD THAT: - On the facts it was admitted that the portion of the Sahibabad building was occupied and machinery was installed by M/s Dior International Pvt. Ltd., which carried on its own manufacturing activity and billed the assessee for the job work. The assessee charged a licence fee to M/s Dior of Rs. 20,000 per month and treated that receipt as business income. The Court applied the plain language of clause (vi) which requires that the building or part must be used by the assessee himself for the purposes of his business. The Tribunal and High Court findings that the lessee and the assessee maintained separate corporate identities were accepted: mutual charges (licence fee and job work billing) indicated arm's length treatment and preservation of separate personalities. The object of Section 40 to tax non productive assets was noted, but the Court held that only in case of ambiguity could purpose override plain statutory language. On these determinative facts, the portion occupied and used by the sister concern was not use 'by the assessee' for its own business and therefore did not qualify for exclusion from net wealth under clause (vi).Portion of the building used and occupied by the sister concern is not 'used by the assessee as factory for the purpose of its business' and was rightly included in the assessee's net wealth; appeal dismissed.Final Conclusion: Appeal dismissed; the Tribunal and High Court decisions upholding inclusion of the portion of the Sahibabad building in the assessee's net wealth are affirmed because the part was used by a separate corporate entity and not by the assessee for its own business as required by clause (vi) of Section 40(3) of the Finance Act, 1983.

Valuation under Schedule III of the Wealth-tax Act - Applicability of Rule 3 for valuation of immovable property - Exception under Rule 8(a) of Schedule III - Reference to Valuation Officer under Section 16A - Practicability standard for invoking Rule 8(a) - Assessing Officer's judicial discretion to invoke Rule 8(a)Applicability of Rule 3 for valuation of immovable property - Exception under Rule 8(a) of Schedule III - Reference to Valuation Officer under Section 16A - Whether the Assessing Officer was justified in holding that Rule 3 was not practicable and in invoking Rule 8(a) to refer the valuation to the Valuation Officer under Section 16A and determine value under Rule 20. - HELD THAT: - The Court examined Schedule III, Rule 3 and the carve-out in Rule 8(a), and Section 16A and Rule 20. It held that the statutory scheme does not mandate rigid application of Rule 3 in every case; the Assessing Officer has discretion to decide that Rule 3 is not practicable and, with prior approval, to invoke Rule 8(a) and either value under Rule 20 or refer the matter to the Valuation Officer under Section 16A. Where the AO forms the opinion that the valuation disclosed by the assessee is absurd, bears no correlation to fair market value, or application of Rules 3-7 is otherwise impracticable, Rule 8(a) may be invoked and a reference under Section 16A is permissible. Applying these principles to the facts, the AO recorded factors (wide variation from Departmental valuation, low municipal ratable value, use as guest house, prior tenancy and subsequent improvements, and an agreement to sell at a much higher price) which, in the Tribunal's and High Court's view and in this Court's assessment, furnished a reasonable basis to conclude that Rule 3 was not practicable and to obtain a valuation under Section 16A; the AO's action was therefore lawful and the valuation by the Valuation Officer could be the basis of assessment. [Paras 22, 23, 26, 27, 28]The AO was justified in invoking Rule 8(a), referring the matter under Section 16A to the Valuation Officer and assessing wealth-tax on the basis of the Valuation Officer's estimate.Practicability standard for invoking Rule 8(a) - Assessing Officer's judicial discretion to invoke Rule 8(a) - Scope and limits of the term 'practicable' and the standard applicable to the AO's discretion to discard Rule 3 valuation. - HELD THAT: - The Court construed 'practicable' broadly (citing dictionary meanings) to mean feasible or possible with due diligence. It emphasised that the AO's discretion to invoke Rule 8(a) cannot rest on ipse dixit; instead the discretion must be judicially and reasonably exercised, based on subjective satisfaction demonstrated by objective factors and thus open to judicial scrutiny. If the AO's conclusion that application of Rule 3 is impracticable is supported by relevant facts and circumstances, including material indicating absence of correlation with fair market value, the invocation of Rule 8(a) is permissible. On the facts of this case the AO's reasons met this standard. [Paras 24, 25, 26]The word 'practicable' is to be given a wide meaning but the AO must exercise the discretion judicially and reasonably; on the facts the AO met that standard.Final Conclusion: The appeal is dismissed. The Assessing Officer validly invoked Rule 8(a) of Schedule III, referred the property valuation under Section 16A to the Valuation Officer and assessed wealth-tax on the Valuation Officer's estimate; the AO's conclusion that Rule 3 was not practicable was reasonably and judicially exercised and sustainable.

Discretionary trust - specific trust - inclusion of trust income in hands of settlor/beneficiary - characterisation of foreign trusts for income tax and wealth tax - settlor's conduct and declarations as evidence of intentionDiscretionary trust - specific trust - settlor's conduct and declarations as evidence of intention - characterisation of foreign trusts for income tax and wealth tax - Character of the deeds of settlement executed in the United Kingdom was that of a discretionary trust and not a specific trust for the assessment years in issue. - HELD THAT: - The Court considered the terms of clauses 3 and 4 of the U.K. settlement deeds and the factual matrix. Clause 3 vested discretion in the trustees to distribute income among beneficiaries; clause 4 applied in certain contingencies. A discretionary trust gives beneficiaries no vested right to income but vests a power in trustees to pay or apply income as they think fit; failure to disburse in due time does not extinguish the trustees' discretion. The Tribunal's conclusion that clause 4 became operative because the settlor failed to appoint additional trustees was rejected. The High Court's interpretation that the trusts remained discretionary was supported by (a) the legal principles governing discretionary trusts (as explained in Snell and applied by this Court in earlier proceedings) and (b) contemporaneous and later conduct showing that the income was retained by trustees rather than constituting an automatic vesting in beneficiaries. Mere non-exercise by the settlor or his successor of the power to appoint discretion-exercisers does not convert the trusts into specific trusts. Having regard to these legal principles and the facts, the two U.K. trusts continued to be discretionary trusts for the assessment years under consideration. [Paras 16, 17, 18, 19]The U.K. trusts are discretionary trusts for the subject assessment years and not specific trusts.Inclusion of trust income in hands of settlor/beneficiary - characterisation of foreign trusts for income tax and wealth tax - Consequences for income-tax and wealth-tax assessments: the appeals arising from substantive assessments and the protective assessment were without merit and were dismissed. - HELD THAT: - The Court examined the factual record, including returns and balance sheets showing the endorsement 'Net Income for the year retained' and the Settlement Commission's findings that both the settlor and his son had in fact received or treated the income as received in earlier years. The High Court distinguished earlier findings and concluded that for the assessment years before it the assessee had not admitted receipt and had not shown the amount as taxable in those years; on interpretation of the trust clauses the trusts were discretionary. Applying that legal characterisation, the Court held that neither income-tax appeals (for assessment years 1984-85 to 1991-92) nor wealth-tax appeals (including the protective assessment for the listed years) could be sustained. Consequently the substantive appeals lack merit and the protective-assessment appeal falls away. [Paras 12, 14, 21, 22, 23]All 17 civil appeals (16 substantive appeals and one protective-assessment appeal) are dismissed with no order as to costs.Final Conclusion: The Supreme Court upheld the High Court's conclusion that the U.K. settlements are discretionary trusts for the assessment years in dispute; accordingly the Income-tax and Wealth-tax appeals, including the protective assessment, were dismissed as lacking merit, with no order as to costs.

Validity of revocable gift - treatment of bonus shares as benefit derived from original shares - interpretation of Section 4(1)(c) of the Gift Tax Act, 1958 - reassessment and change of opinion - applicability of McDowell & Co. principle - remand for de novo considerationInterpretation of Section 4(1)(c) of the Gift Tax Act, 1958 - treatment of bonus shares as benefit derived from original shares - validity of revocable gift - applicability of McDowell & Co. principle - Whether the reassessment for Assessment Year 1989-90 could be sustained without the High Court having considered Section 4(1)(c) and related authorities on whether the 14,000 bonus shares constituted a gift or benefit. - HELD THAT: - The Supreme Court found that the High Court's impugned order did not consider the meaning and application of Section 4(1)(c) of the Gift Tax Act, 1958, although the determinative question was whether the assessee had made a gift of the bonus shares in the previous year relevant to AY 1989-90. The Court recorded that the fact of a valid revocable gift of 6,000 shares had been conclusively determined in earlier proceedings, and that the timing of revocation (15 June 1988) and the earlier allotment of bonus shares (29 Sept 1982 and 31 May 1986) required an express view on Section 4(1)(c). The Court also noted that the applicability of the McDowell & Co. principle and the relevance of Escorts Farms (on cost allocation when bonus shares are issued) arise only after a finding under the first part of Section 4(1)(c). Because the High Court did not address these statutory and precedential questions, the Supreme Court declined to decide the matter on merits and remanded the controversy for de novo consideration by the High Court, directing that the High Court consider Section 4(1)(c), the earlier assessment for AY 1982-83 and the arguments on McDowell & Co. [Paras 24, 25, 26, 27, 28]Remanded to the High Court for de novo consideration of the interpretation and application of Section 4(1)(c) to the bonus shares, and for reconsideration of the applicability of McDowell & Co. and relevant prior orders.Reassessment and change of opinion - remand for de novo consideration - setting aside of High Court order - Whether the impugned judgment of the High Court upholding the reassessment for AY 1989-90 should be sustained. - HELD THAT: - The Supreme Court held that because the High Court failed to consider the pivotal statutory provision (Section 4(1)(c)) and related authorities, the impugned judgment could not be permitted to stand. The Supreme Court therefore set aside the High Court's order and allowed the appeals, while making clear that the parties may raise all contentions and file additional documents before the High Court on remand. [Paras 28, 29, 30]Civil Appeals allowed; the High Court judgment is set aside and the matter remitted for fresh adjudication without any order as to costs.Final Conclusion: Both Civil Appeals are allowed; the Supreme Court set aside the High Court's judgment and remitted the matter to the High Court for de novo consideration of the applicability and interpretation of Section 4(1)(c) of the Gift Tax Act, 1958 (keeping in view the earlier assessment for AY 1982-83 and relevant authorities), with liberty to the parties to raise all contentions and file further documents.

Summary order. Delay condoned; applications for substitution allowed; permission to file special leave petitions granted; special leave petitions dismissed.