1977 (5) TMI 8 - HC - Wealth-tax

Summary

Issues involved: Interpretation of rules 1C and 1D of the Wealth-tax Act, 1957 for valuation of unquoted shares in pending assessment proceedings for the assessment years 1965-66 and 1966-67.

Judgment Details:

Issue 1: Application of rules 1C and 1D for valuation of unquoted shares
The Tribunal questioned the application of rules 1C and 1D introduced by the Wealth-tax (Amendment) Rules, 1967, for the valuation of unquoted shares for assessment years 1965-66 and 1966-67. The Appellate Assistant Commissioner directed the Wealth-tax Officer to recompute the value of shares according to these rules, but the Tribunal disagreed, stating that the rules could not be applied retrospectively.

Relevant Legal Provisions:
- Section 2(m) of the Act defines "net wealth."
- Section 7(1) empowers valuation of assets for the Act.
- Section 46(1) allows the Central Board of Direct Taxes to make rules.
- Circular No. 3 W. T. of 1957 provided instructions on valuation of unquoted shares.
- Rules 1C and 1D were inserted in the Wealth-tax Rules in 1967.

Issue 2: Procedural vs. Substantive Law
The debate centered on whether the application of rules 1C and 1D constituted a procedural matter or affected substantive rights. The revenue argued that the rules were procedural and applicable to pending proceedings, while the assessees contended that the rules could not alter the substantive liability for wealth-tax.

Legal Interpretation:
- Maxwell on the Interpretation of Statutes states the principle of deciding rights based on the law at the start of an action.
- The determination of the market value of unquoted shares was analyzed as either procedural or substantive law.
- The Supreme Court's guidance in Izhar Ahmad Khan's case was referenced to determine if rules are of evidence or procedure.

Conclusion:
The High Court determined that rules 1C and 1D were rules of evidence or procedure, applicable to pending assessments even for years preceding their enactment. The Tribunal's decision was overturned, ruling in favor of the revenue regarding the application of these rules for the valuation of unquoted shares in the mentioned assessment years.