1985 (12) TMI 109

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....re not quoted on any recognised stock exchange. Originally a return was filed on 9-2-1979 wherein the value of these shares were shown at Rs. 2,74,000, which value was arrived at after working out the shares as per the provisions of rule 1D of the Wealth-tax Rules, 1957 ('the Rules') which valuation gave the value per share at Rs. 274. Later a revised return was filed where the value of these shares were shown at Rs. 85,000, which was arrived at working out these shares on the basis of yield method. The WTO required the assessee as to why these shares should not be valued unquoted equity shares. The assessee stated that even if rule 1D provided for the adoption of a particular method of valuation of shares, which is commonly known as break ....

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....bstantial. The WTO accepted the revised valuation and completed the assessment after making minor changes. The Commissioner, subsequently, came to the view that the assessment made by the WTO was erroneous and that the WTO should have followed the provisions of rule 1D and valued the shares on that basis. The Commissioner after overruling the objections of the assessee directed the WTO to value the shares as per the provisions of rule 1D. The assessee aggrieved filed a writ petition before the High Court challenging the order of the Commissioner submitting that the provisions of rule 1D were only directory and never mandatory. If rule 1D is held to be mandatory then that rule ultra vires the Income-tax Act, 1961 and should be struck down as....

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....ent from the value as arrived at by applying rule 1D. In the former case, where the valuation date is identical, the Wealth-tax Officer will have to compute the value of the unquoted shares by applying the rule 1D. Where, however, like the present the valuation date is not the same even the Wealth-tax Officer may not be bound to take the course to the provisions of rule 1D." By laying down the law, thus, the High Court felt that the value of the shares must be arrived at on the basis of yield method. Dealing with the various other arguments the High Court held : "To summarise, the position, therefore, is that when the question arises as to the value of unquoted shares the Wealth-tax Officer has to act according to the provisions of se....