1987 (1) TMI 138 - AT - Wealth-tax

Summary

Issues:
1. Valuation of closing stock in wealth-tax return.
2. Valuation method for unquoted equity shares.
3. Inclusion of Compulsory Deposit under net wealth.

Analysis:

1. Valuation of Closing Stock:
The case involved the valuation of the closing stock in the wealth-tax return of an individual for the assessment year 1980-81. The WTO had substituted the market value for the cost of shares in the closing stock, resulting in an increase in the value of the proprietary business. However, the CWT(A) held that since the difference in values did not exceed 20%, there was no justification to disturb the value shown in the balance sheet. The ITAT upheld the CWT(A)'s decision, emphasizing that the market value did not significantly exceed the value adopted for income assessment, thus justifying the deletion of the additional amount.

2. Valuation Method for Unquoted Equity Shares:
The dispute also revolved around the valuation method for unquoted equity shares of a company, M/s Garware Plastics and Polyester Pvt. Ltd. The Revenue contended that the shares should be valued under the break-up method prescribed by the WT Rules, while the assessee argued for the yield capitalization method. The ITAT referred to various court judgments and concluded that for a going concern without special circumstances, the yield capitalization method based on profit earning capacity was appropriate. Therefore, the ITAT upheld the CWT(A)'s direction to value the shares under the yield capitalization method.

3. Inclusion of Compulsory Deposit under Net Wealth:
Regarding the inclusion of the discounted present value of the deposit under the Compulsory Deposit (Income Tax Payers) Act, 1974 in the assessee's net wealth, the ITAT noted that a similar issue had been referred to the High Court for a previous assessment year. The ITAT directed that the decision on this identical question of law, once finalized by the High Court, would apply for the current year as well. Consequently, the ITAT upheld the CWT(A)'s order on this issue, pending the final decision by the High Court.

In conclusion, the ITAT dismissed the appeals filed by both the Revenue and the assessee for statistical purposes, maintaining the decisions made by the CWT(A) on the valuation of closing stock, method for valuing unquoted equity shares, and the inclusion of the Compulsory Deposit under the net wealth.