1986 (12) TMI 54 - AT - Wealth-tax

Summary

Issues:
1. Valuation of shares - Yield method vs. Rule 1D of WT Rules
2. Rate of capitalization for valuation of shares on yield basis
3. Reduction in share value for non-transferability

Valuation of Shares - Yield method vs. Rule 1D of WT Rules:
The appeals involved a dispute regarding the valuation of shares by the assessees based on Rule 1D of the WT Rules, which was not accepted by the WTO. The AAC upheld the WTO's valuation using the yield method. The assessees contended that the shares should be valued as per Rule 1D, emphasizing their long-standing practice of using this method. The dispute centered on whether the WTO had the discretion to choose the valuation method. The ITAT referred to relevant precedents, including a Bombay High Court decision, highlighting that the yield method is generally preferred for unquoted shares unless exceptional circumstances warrant a different approach. The ITAT determined that in the absence of any exceptional circumstances or explanation by the assessees, the yield method was the appropriate valuation method, affirming the AAC's decision.

Rate of Capitalization for Valuation of Shares on Yield Basis:
Another issue addressed was the rate of capitalization to be applied while valuing shares on a yield basis. The assessees claimed a 15% rate, but the AAC opted for 10% citing a previous Tribunal decision in a similar case. The ITAT upheld the AAC's decision, aligning with the precedent and confirming the 10% rate for capitalization under the income capitalization method.

Reduction in Share Value for Non-Transferability:
The final issue concerned the AAC's refusal to accept the assessees' claim for a 15% reduction in share value due to non-transferability. The ITAT noted that the AAC's decision was based on a previous Tribunal order and found no new arguments presented by the assessees. Consequently, the ITAT upheld the AAC's decision on this matter, leading to the dismissal of the appeals.

In conclusion, the ITAT dismissed the appeals, emphasizing the preference for the yield method in valuing unquoted shares unless exceptional circumstances dictate otherwise. The decision also confirmed the 10% rate for capitalization in share valuation and upheld the denial of a reduction in share value for non-transferability.