1987 (11) TMI 62 - HC - Wealth-tax

Summary

Issues:
1. Valuation of shares held by the assessee in Collis Line P. Ltd. for assessment years 1967-68 to 1974-75.
2. Interpretation of rule 1D of the Wealth-tax Rules, 1957, regarding the valuation of assets for the assessment years 1967-68 to 1974-75.

Analysis:

Issue 1: Valuation of Shares
The court was asked whether the Tribunal was correct in valuing the shares held by the assessee in Collis Line P. Ltd. by applying rule 1D of the Wealth-tax Rules, 1957, for the years 1967-68 to 1974-75. Referring to a previous decision, the court ruled in favor of the Revenue, stating that the valuation should be made in accordance with rule 1D.

Issue 2: Interpretation of Rule 1D
The case involved the valuation of unquoted equity shares held by the assessee in a company that owned ships. The dispute arose from the method of valuation adopted by the Wealth-tax Officer, specifically regarding the deduction of depreciation from the value of the assets shown in the balance-sheet. The court clarified that the correct rate of depreciation recognized under the Income-tax Act and Rules must be applied for such deductions. The value of assets in the balance-sheet should be reduced by the depreciation allowable by law, not just the depreciation shown in the balance-sheet. The court emphasized that the statutory rate of depreciation must be strictly followed for computation, even if the balance-sheet depreciation is incorrect. The correct rates of depreciation applicable for the assets in question should be determined by the concerned officer. The court reframed the question to address whether the net wealth of the assessee's unquoted shares should be computed based on the full value of assets in the balance-sheet, reduced by depreciation at rates allowed under the Income-tax Act and Rules. While answering this question in principle in the affirmative, the court directed the appropriate officer to compute the actual net wealth according to the stated principle.

In conclusion, the court upheld the valuation method under rule 1D and emphasized the importance of applying the correct rates of depreciation for asset valuation under the Wealth-tax Act.