TaxTMI 
TaxTMI 
TaxTMI 
1981 (8) TMI 84
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Co. (P.) Ltd. on the valuation dates, relevant to assessment years 1976-77 and 1977-78. The said shares were valued by the assessees at Re. 1 per share as according to the assessees the liabilities of the company were more than the assets as per the balance sheet of the said company. The WTO accepted such valuation. 3. The learned Commissioner after going through the records found that the WTO while working out the break-up value of the shares considered the provision of taxation for calculation without deducting the advance tax already paid before the relevant valuation dates. Thus, according to the learned Commissioner, the WTO did not strictly adhere to rule 1D of the Wealth-tax Rules, 1957, while determining the value of the shares of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n respect of the assessment years 1965-66 to 1971-72, but he was of the view that the department has not accepted the said finding of the Tribunal and the matter is pending before the Hon'ble Gujarat High Court. 7. According to the learned Commissioner, it was common ground that the shares of Mehta Parikh & Co. (P.) Ltd. were not quoted in the stock exchange and as such these shares are to be valued as per rule 1D. According to him, rule 1D prescribes certain methods for valuation of unquoted shares. As per Explanation II(ii)(e) to rule 1D, as amended by the Wealth-tax (Amendment) Rules, 1967, with effect from 6-10-1967, any amount paid as advance tax shall not be treated as liabilities. Before amendment to rule 1D, it did not contemplate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Commissioner the assessees are in appeal before the Tribunal. The assessees have taken additional grounds but at the time of argument they were not pressed. 9. According to the learned counsel for the assessees the orders passed by the learned Commissioner are bad in law. The learned Commissioner was not correct in not following the Tribunal's order referred to above passed in the case of Shri Ashok K. Parikh in respect of the assessment years 1965-66 to 1971-72. According to the learned counsel for the assessees, the assessees correctly valued the shares at Re. 1 per share as according to them the liabilities of the company were more than the assets as per the balance sheet of the said company. While working out the break-up value of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provides as follows: "The market value of an unquoted equity share of any company, other than an investment company, or a managing agency company, shall be determined as follows:--- The value of all the liabilities as shown in the balance-sheet of the company shall be deducted from the value of all its assets shown in that balance-sheet. The net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet. The resultant amount multiplied by the paid-up value of each equity share shall be the break-up value of each unquoted equity share. The market value of each such share shall be 85 per cent of the break-up value so determined..." Explanation to rule 1D provides: "For the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ined. Explanation II to rule 1D lays down certain rules of interpretation and though, ordinarily, an amount paid as advance tax under section 210 of the Income-tax Act, 1961 will be shown on the assets side of the balance sheet, for the purpose of arriving at the break-up value, by the artificial rule laid down in Explanation II, clause (i)(a), the amount paid as advance tax in this manner under the law relating to income-tax is not to be treated as an asset. 13. From the aforesaid discussion it would be clear that when a particular amount which is shown on the assets side is not to be treated as an asset, the net worth of the company will, to that extent, be reduced because to that extent the assets will be shown less. On the other hand, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its as already ascertained by him. If there is any excess in the provision for tax liabilities, then that excess is not to be treated as part of the liabilities of the company while computing the break-up value of the shares of the company. It is equally clear that so far as provision for advance tax is concerned, that provision has to be disregarded while applying the provisions of sub-clause (e) of clause (ii) of Explanation II. Thus, it is clear that to the extent to which the liabilities are reduced, the net wealth would go up. 15. In our opinion, sub-clause (a) of clause (i) of Explanation II is intended to give a benefit to the holders of shares of those companies, who have been prompt in making payment of their advance tax under the....