2004 (7) TMI 34 - HC - Wealth-tax

Court rectifies order to include exception for investment companies under Rule 1D of Wealth-tax Rules, 1957.

Lalit Mohan Thapar Versus Commissioner of Wealth-Tax.

The court allowed the application for rectification, modifying the order to include the exception for investment companies under Rule 1D of the Wealth-tax ... Rule 1D of the Wealth-tax Rules, 1957 - valuation of unquoted shares - the first question is that rule 1D, does not include investment companies and managing agency companies for the purpose of valuing unquoted equity shares in terms of rule - The second question that has been raised is whether such a mistake could be corrected within the scope and ambit of the jurisdiction exercised by the High Court under section 27(1) of the 1957 Act or, in other words, in the absence of any specific provision conferring power of review or rectification on the High Court, whether the High Court in exercise of its power inherent in it, can rectify such mistake. - we are of the view that the learned Division Bench had omitted to note that the assessee-company is an investment company - it would be open to the Department to contend that the assessee is not an investment company subject to such objection that might be taken by the assessee in establishing its case in order to apply the principle of rule 1D which is otherwise accepted and where the valuation made is different to what is provided in rule 1D. Issues Involved:1. Applicability of Rule 1D of the Wealth-tax Rules, 1957, on investment companies.2. Power of the High Court to rectify mistakes in its judgments under section 27(1) of the Wealth-tax Act, 1957.Detailed Analysis:Issue 1: Applicability of Rule 1D of the Wealth-tax Rules, 1957, on Investment CompaniesFacts and Arguments:- The question raised pertains to the valuation of unquoted shares under Rule 1D of the Wealth-tax Rules, 1957. The rule mandates a specific method for valuing unquoted shares, excluding investment companies and managing agency companies.- Mr. Khaitan argued that the assessee was an investment company and thus, Rule 1D should not apply. He pointed out that both the assessment order and the appellate order described the assessee as an investment company, which was not disputed.- Mr. Chowdhury countered that there was no conclusive finding that the assessee was an investment company and argued that Rule 1D could still apply to investment companies.Judgment:- The court examined Rule 1D, which explicitly excludes investment companies and managing agency companies from its application. The language of Rule 1D is clear and unambiguous, leaving no room for interpretation or multiple opinions.- The Division Bench had previously noted the exception in Bharat Hari Singhania [1994] 207 ITR 1 (SC) but omitted it in the operative part of the order dated September 4, 2001.- The court concluded that the omission to note that the assessee was an investment company was a mistake apparent on the face of the record. The Division Bench had not intended to apply Rule 1D to investment companies, and this omission needed rectification.Issue 2: Power of the High Court to Rectify Mistakes in its JudgmentsFacts and Arguments:- Mr. Khaitan acknowledged that the Wealth-tax Act, 1957, does not provide for a review but argued that the High Court has inherent power to rectify mistakes apparent on the face of the record, akin to the powers under sections 154 or 254 of the Income-tax Act.- Mr. Chowdhury admitted the High Court's power to rectify but contended that it could not review or amend judgments without statutory authority.Judgment:- The court examined its jurisdiction under section 27 of the Wealth-tax Act, which is advisory and not appellate or original. While the High Court does not have the power of review unless explicitly conferred, it can rectify errors apparent on the face of the record.- The court cited several precedents, including K. Ahamad v. CIT [1974] 96 ITR 29 (Ker) [FB] and CIT v. Bansi Dhar and Sons [1986] 157 ITR 665 (SC), supporting the inherent power of the High Court to rectify mistakes to prevent injustice.- The court distinguished between 'review' and 'rectification,' asserting that while it cannot review, it can rectify clear errors to do justice.Conclusion:- The court concluded that the Division Bench had omitted to note that the assessee was an investment company, which was a mistake apparent on the face of the record. The order dated September 4, 2001, was rectified to include the exception for investment companies.- The Department can still contest the status of the assessee as an investment company, subject to objections from the assessee.Order:- The application for rectification was allowed. The order dated September 4, 2001, was modified to reflect the exception for investment companies, with no change in the outcome against the assessee.- No order as to costs was made, and urgent certified copies of the judgment were made available to the parties upon request.