Unquoted share valuation and compulsory deposit exemption under wealth tax produced a mixed outcome for the assessee.

For valuation of unquoted shares under the prescribed wealth-tax rule, a provision for taxation could not be deducted in computing break-up value because only authorised deductions were permissible; the Revenue succeeded on this point. By contrast, an amount deposited under the compulsory deposit scheme was statutorily treated as a deposit with a banking company, so it fell within the wealth-tax exemption for such deposits and was excluded from taxable wealth; the assessee succeeded on this point. The reference was therefore answered with a mixed outcome, rejecting the share-valuation deduction claim while excluding the compulsory deposit from net wealth.

---

---

Issues: (i) Whether, while valuing unquoted shares under the prescribed wealth-tax valuation method, a provision for tax liability was deductible in arriving at the break-up value; (ii) Whether the amount deposited under the compulsory deposit scheme formed part of the assessee's taxable wealth.

Issue (i): Whether, while valuing unquoted shares under the prescribed wealth-tax valuation method, a provision for tax liability was deductible in arriving at the break-up value.

Analysis: The valuation of unquoted shares under the prescribed rule did not permit deduction of items such as provision for taxation while computing the break-up value. The controlling principle was that the net assets for such valuation had to be taken without allowing deductions beyond those authorised by the rule.

Conclusion: The deduction was not admissible. The answer was against the assessee and in favour of the Revenue.

Issue (ii): Whether the amount deposited under the compulsory deposit scheme formed part of the assessee's taxable wealth.

Analysis: The special statutory provision treated compulsory deposits as deposits with a banking company for the purpose of wealth-tax exemption. Since deposits with a banking company were exempt under the relevant exemption clause, the compulsory deposit could not be brought into the net wealth of the assessee.

Conclusion: The compulsory deposit was exempt and could not be included in the assessee's wealth. The answer was in favour of the assessee and against the Revenue.

Final Conclusion: The reference was answered by rejecting the deduction claim in relation to share valuation while excluding the compulsory deposit scheme amount from taxable wealth, resulting in a mixed outcome.

Ratio Decidendi: For valuation of unquoted shares under the prescribed wealth-tax rule, deductions not expressly permitted cannot be made from net assets, but a compulsory deposit deemed by statute to be a bank deposit is excluded from taxable wealth under the exemption provision.

---