1983 (7) TMI 73 - AT - Wealth-tax

Summary

Issues:
1. Valuation of shares held by the assessee.
2. Interpretation of Board circular on valuation of shares and securities.
3. Authority of taxing authorities to follow or not follow circular instructions.
4. Determining the open market for valuation under section 7(1) of the Wealth Tax Act, 1957.

Detailed Analysis:
The judgment by the Appellate Tribunal ITAT ALLAHABAD-B involved a dispute regarding the valuation of shares held by the assessee. The assessee had valued the shares at the lowest quotation from different stock exchanges, while the Income Tax Officer (ITO) contended that they should be valued at the highest quotation from any stock exchange in the country. The assessee appealed to the AAC, who, following a circular of the Board, directed the Wealth Tax Officer (WTO) to adopt the rates from the nearest stock exchange, which in this case was Delhi. The circular specified that if a share was not quoted at the nearest stock exchange, the rate at the next nearest stock exchange could be adopted (para 2).

The departmental representative pointed out that the AAC intended to follow a different Board circular from 1957, which provided guidelines for the valuation of shares and securities based on stock exchange prices. The circular stated that prices quoted on a recognized stock exchange nearest to the assessee's location should be considered for valuation. However, it was argued that this circular was not mandatory, and the taxing authorities had the discretion to follow it or not based on the circumstances of each case. Reference was made to a decision of the Bombay High Court to support this argument (para 3).

The Tribunal carefully considered the submissions and the relevant provisions of the Wealth Tax Act, 1957. Section 7(1) of the Act mandates that the value of an asset should be estimated based on the price it would fetch in the open market on the valuation date. The Tribunal agreed with the AAC's decision to adopt the rates from the Delhi stock exchange for valuation, as it was considered the nearest market for the assessee. The Tribunal emphasized that the Board's instructions were in line with the Act and should be followed unless there are specific facts or circumstances to justify deviation. Since no such circumstances were presented, the Tribunal upheld the valuation based on the rates from the Delhi stock exchange or, if unavailable, the Calcutta stock exchange (para 4).

Ultimately, the Tribunal dismissed the appeal, affirming the valuation of the shares based on the rates quoted at the nearest stock exchange as directed by the AAC, in accordance with the provisions of the Wealth Tax Act, 1957 (para 5).