2002 (10) TMI 47 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and had valid materials in holding, that the market value of the shares held by the assessee in a company in which the public are substantially interested and the shares of which are also quoted in a recognised stock exchange can be fixed at a rate lower than the rates quoted in the stock exchange ? - The question referred to us is, answered in negative in favour of the Revenue and against the assessee.

Summary

Issues: Valuation of shares for wealth tax assessment

Analysis:
The judgment addressed the issue of determining the market value of shares held by the assessee in a company for wealth tax assessment. The assessee held shares in a company, and the Wealth-tax Officer valued them at the trading rate on the stock exchange. However, the assessee argued that the shares should be valued at a lower book value due to certain restrictions on their disposal. The Tribunal then calculated the valuation by averaging the book value and the stock market quotation, setting it at a rate lower than the stock exchange value.

The court referred to the definition of "quoted share" in the Wealth-tax Act, which includes shares quoted on a recognized stock exchange based on current transactions. The Act specified that the value of such quoted shares should be taken as the value quoted on the valuation date. The Commissioner confirmed that the shares in question were quoted on the stock exchange, and their value was adopted according to the quoted rate, which was not disputed.

The court emphasized that the valuation of quoted shares should be based on the value quoted at the exchange as per Rule 9 of Schedule III of the Wealth-tax Act. The Act does not provide for any deduction from the quoted value, and the Tribunal could not grant a deduction by averaging the book value and the stock exchange quotation. The court clarified that the net wealth as on the valuation date is what is taxed under the Wealth-tax Act, regardless of the transferability of the asset during the year. Therefore, if the statute specifies a valuation method without deductions, no such deductions can be allowed.

In conclusion, the court ruled in favor of the Revenue and against the assessee, stating that the valuation of the shares should be based on the value quoted on the stock exchange as per the provisions of the Wealth-tax Act, without any deductions. The judgment highlighted the importance of adhering to the statutory valuation methods without deviating or allowing unauthorized deductions in determining the market value of assets for wealth tax assessment.