1990 (11) TMI 64 - HC - Wealth-tax

Summary

Issues involved:
The issue involves the valuation of unquoted shares u/s 27(3) of the Wealth-tax Act, 1957, specifically focusing on the appropriate method for valuing shares in two companies, Messrs. Premnath Motors (Rajasthan) Pvt. Ltd. and Messrs. Saraf Textile Mills Pvt. Ltd.

Valuation of Shares in Messrs. Saraf Textile Mills Pvt. Ltd.:
The value of shares in Messrs. Saraf Textile Mills Pvt. Ltd. was determined based on the balance sheet, as they were unquoted.

Valuation of Shares in Messrs. Premnath Motors (Rajasthan) Pvt. Ltd.:
Initially, the face value was taken as the break-up value for shares in Messrs. Premnath Motors (Rajasthan) Pvt. Ltd. The Appellate Assistant Commissioner held that the profit earning method should be used for valuation, which was accepted on appeal.

Discrepancy in Valuation Methods:
A question of law arose regarding the valuation method for shares in M/s. Premnath Motors (Rajasthan) Pvt. Ltd., with the Tribunal holding that the yield method should be used, contrary to the petitioner's appeal.

Legal Interpretation of Rule 1D:
The debate centered around the nature of rule 1D, with conflicting views from different High Courts on whether it is mandatory or directory. The petitioner argued for the mandatory nature of the rule, citing relevant case law.

Decision and Rationale:
The Tribunal upheld the valuation on the yield method basis for unquoted shares, considering previous judgments and the nominal tax effect involved. The High Court, taking into account the insignificant tax amount and the age of the assessment years, declined interference in the matter to avoid unnecessary litigation costs and efforts, aligning with the principle of proportionality in legal proceedings.