TaxTMI 
TaxTMI 
2012 (10) TMI 69
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....hares owned by the assessee could not be valued as per the rate quoted in the stock exchange as the assessee was bound by a lock in period, and could not sell those shares at that time? (ii) Whether on the facts and circumstances of the case the Tribunal was right in holding that the shares which are bound by the restriction of a lock in period have no value at all and cannot even be valued as per Rule 11 of Schedule III of the Wealth Tax Act? (iii) Whether on the facts and circumstances of the case the Tribunal was right in not applying the specific provisions of Rule 21 to Schedule III of the Wealth Tax Act, which provides that the restrictive covenant price shall be ignored for the purpose of ascertaining the market val....
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.... price of such asset as on the valuation date, valuation of property acquired or transferred under the terms of a deed of trust or through or under a restrictive covenant, the price at which they were acquired shall be ignored and that the price which the said property would fetch, if sold in the market on the valuation date, should be adopted. Thus the value of the property on the valuation date will prevail over the purchase price and any restrictive covenant thereon on the dealing of the property would have to be ignored. The Commissioner pointed out that when a share is quoted in the stock exchange, the quoted price would be normally taken in valuing the share (Refer Rule 9). Rule 9A provides for exception to Rule 9. However, where the ....
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....urushottam N. Amarsay v. CWT [1973] 88 ITR 417 (SC), the Tribunal directed the Assessing Officer to calculate the value, following the decision laid down by the Tribunal in WTO v. Trustees of HEH the Nizam's Jewellery Trust [1990] 35 ITD 402 (Hyd.), which was based on the decision of the Apex Court in Purushottam N. Amarsay (supra) and Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471. In other words, the Tribunal held that the shares not having marketability, the question of considering the open market price did not arise, nor could it be valued on the basis of the price quoted in the stock exchange. Aggrieved by this, the present appeal has been preferred by the Revenue. 6. Learned Standing Counsel appearing for the Revenue pointed out that th....
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....cision in S. Venu Srinivasan's case (supra), which, in turn, followed the decision in R. Rathinasabapathy Chettiar's case (supra), this Court had an occasion to consider the case of a Private Limited Company and there were restrictions incorporated in the Articles of Association regarding the transfer of shares. On the question as to whether such restriction would result in the reduction of the value of the shares, this Court pointed out that the fact that the company is a Private Limited Company and there was no freedom to deal with the shares held in the company, would not affect the question as to the possible value that the shares would fetch, had they been sold in the open market. It was pointed out that even in such cases, it should b....
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....n into account. (iii) After having so fixed the market value, the next question would be the adjustment towards the depreciation. 10. As far as the present case is concerned, it is no doubt true that the share was given to the assessees on promoters' quota, there being family members of the promoter; the shares were held at the value of Rs.10/- per share. It is an admitted fact that the shares of the company are quoted shares. 11. When we look at the Rules concerning valuation of shares, Part C of the III Schedule to the Wealth Tax Act, as it then stood, deals with shares or debentures of companies. Rule 9 is a specific Rule providing for the valuation of quoted shares and debentures of the company. Rule 10 deals with valuati....
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....reciation that may be granted to the shares, remains without any guidelines provided for in Part C of the III Schedule. It is an open secret that in the absence of any such guideline, the depreciation may range from 0 to 100 and it is always a question of debate. Apparently, on account of all these, we feel that the Commissioner of Wealth Tax justifiably adopted Rule 11 of Part C of the III Schedule, which is with reference to unquoted equity shares. By adopting the principle as given under Rule 11, we are neither treating the shares as unquoted shares, nor are we ignoring the fact that the company's shares are quoted shares. All that one does by applying the principle in Rule 11 is to arrive at the valuation of a shares which are quoted sh....