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Issues: (i) Whether advance tax payable under section 210 of the Income-tax Act, 1961, was deductible from the provision for taxation while valuing unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957; (ii) Whether the amount standing to the credit of the assessee under the compulsory deposit scheme was includible in the taxable wealth of the assessee.
Issue (i): Whether advance tax payable under section 210 of the Income-tax Act, 1961, was deductible from the provision for taxation while valuing unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957.
Analysis: The valuation of unquoted equity shares had to be made by applying the break-up method prescribed by rule 1D. The binding principle was that the prescribed method was mandatory and had to be followed in valuing unquoted equity shares. On that basis, the provision for taxation could not be reduced by the amount of advance tax payable.
Conclusion: The issue was decided against the assessee and in favour of the Revenue.
Issue (ii): Whether the amount standing to the credit of the assessee under the compulsory deposit scheme was includible in the taxable wealth of the assessee.
Analysis: The amount in the compulsory deposit account was repayable with interest after the prescribed period and therefore answered the description of property of every description. It fell within the definition of 'asset' under section 2(e) of the Wealth-tax Act, 1957, and was includible in taxable wealth.
Conclusion: The issue was decided against the assessee and in favour of the Revenue.
Final Conclusion: Both referred questions were answered in favour of the Revenue, and the assessee's contentions were rejected.
Ratio Decidendi: Where a valuation rule prescribes a compulsory method for valuing unquoted equity shares, that method must be applied as such; and a repayable compulsory deposit constitutes an asset includible in net wealth.
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