1987 (1) TMI 124 - AT - Wealth-tax

A Partner, Assessment Year, Equity Shares, Immovable Property, Movable Property, Partnership Firm, Valuation Date

Summary

Issues: Valuation of shares for wealth tax assessment, Treatment of advance tax payment in valuation of unquoted equity shares

Valuation of shares for wealth tax assessment:
The appeal involved the valuation of 3,000 equity shares of Bajaj Auto Ltd. for wealth tax assessment for the assessment year 1979-80. The assessee converted these shares from capital investment to stock-in-trade for a partnership firm, Bajaj Trading Co. The dispute arose regarding the valuation of these shares at the end of the year, either at cost or market value. The Wealth-tax Officer valued the shares at Rs. 17,85,000, while the assessee claimed Rs. 17,25,000. The Commissioner of Wealth-tax (Appeals) upheld the officer's valuation, stating that until the formation of the partnership firm, no business was carried out by the assessee. The assessee argued that the shares should be valued at Rs. 17,25,000 based on the Balance Sheet prepared. The departmental representative contended that as no business was in existence on the valuation date, the shares should be valued at market rate. The Tribunal held that since no business was conducted by the assessee on the relevant valuation date, all assets, including the shares, should be valued at the market rate, i.e., Rs. 17,85,000, as determined by the Wealth-tax Officer and upheld by the Commissioner of Wealth-tax (Appeals).

Treatment of advance tax payment in valuation of unquoted equity shares:
The second issue pertained to the treatment of advance tax payment in the valuation of unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957. Both the assessee's counsel and the departmental representative referred to a similar issue in the previous year's appeal. The Tribunal, following its order in the appeal for the assessment year 1978-79, upheld the revenue authorities' decision on this issue as well. The Commissioner of Wealth-tax (Appeals) was found to have correctly held that advance tax payment should be deducted from the tax payable with reference to book profits to determine the excess amount representing the provision for taxation, which should not be treated as a liability.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the valuation of shares for wealth tax assessment and the treatment of advance tax payment in the valuation of unquoted equity shares as determined by the revenue authorities.