1986 (1) TMI 146 - AT - Wealth-tax

Summary

Issues:
1. Valuation of unquoted equity shares under rule 1D of WT Rules.
2. Interpretation of rule 1D as mandatory or directory.
3. Application of rule 1D over statutory provisions.
4. Comparison of valuation methods for shares.
5. Precedents set by Supreme Court on valuation rules.

Analysis:
1. The judgment concerns the valuation of 20,000 unquoted equity shares of M/s Asiatic Wires Ltd. under rule 1D of the Wealth Tax Rules by the WTO for the assessment year 1979-80. The AAC directed the valuation of shares using the yield method, resulting in a nil valuation. The Department appealed this decision, arguing the mandatory nature of rule 1D.

2. The contention revolved around whether rule 1D is mandatory or directory. The Departmental Representative argued for the mandatory nature of the rule, citing precedents like Bharat Hari Singhania vs. CWT and CWT vs. Mamman Vargheses. On the other hand, the assessee's counsel contended that rule 1D is directory, referring to judgments by the Supreme Court and the Bombay High Court.

3. The Tribunal examined the nature of rule 1D in various cases and concluded that it is mandatory. Special Benches at Delhi also upheld the mandatory nature of rule 1D in different cases. The judgment emphasized that the principles for valuation of shares set by the Supreme Court were superseded by the enactment of rule 1D.

4. The judgment compared the valuation principles laid down by the Supreme Court with the application of rule 1D. It highlighted that the Supreme Court did not provide a rigid formula for valuation and considered various factors unique to each case. The Tribunal emphasized the importance of rule 1D in determining the value of shares.

5. The interpretation of section 7(1) of the Wealth Tax Act was discussed in light of the Supreme Court's rulings. The judgment emphasized that rules made under the Act, such as rule 1D, should prevail over statutory provisions. It referred to cases where statutory rules were considered integral to the legislation and must be followed accordingly.

6. Ultimately, the Tribunal held that rule 1D is mandatory and must prevail over the provisions of section 7(1) of the Wealth Tax Act. Even if argued otherwise, the application of rule 1D was deemed necessary in the valuation of shares. The judgment concluded by allowing the appeal and restoring the order of the WTO regarding the valuation of shares.