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1971 (9) TMI 12 - SC - Wealth-taxWhether in determining the break up value of the shares held by the assessee in Messrs. Indra Singh and Sons Pvt. Ltd., the Estimated tax liability amounts should have been deducted from the assets shown in the balance-sheet of the said company - question is answered in favour of the department
Issues:
1. Determination of break-up value of shares held by the assessee in a company. Analysis: The Supreme Court judgment dealt with the issue of whether the estimated tax liability not provided for in the balance-sheet of a company should be deducted when determining the break-up value of shares held by the assessee in that company. The Tribunal initially ruled against the assessee, but the High Court later amended its answer to a specific question in favor of the assessee, citing a previous court decision. The Commissioner of Wealth-tax, West Bengal, appealed this amendment to the Supreme Court. The case involved the wealth-tax assessment of the assessee for the years 1957-58 and 1958-59. The assessee held 650 ordinary shares in the company, which were valued by the Wealth-tax Officer based on the company's balance sheets as the shares were not being traded in the market. The assessee argued that the tax liability of the company, not reflected in the balance-sheet, should be considered in determining the share value. The Wealth-tax Officer and the Appellate Assistant Commissioner rejected this argument, but the Tribunal concluded that the estimated tax liability should be deducted. However, the Tribunal found that the company's existing reserves and other factors were sufficient to cover the tax liability, and thus no provision needed to be made for it. The Supreme Court clarified that the High Court erred in its conclusion, as the Tribunal's finding that the "debt owed" was covered by other assets not considered in the valuation was crucial. The Court did not delve into the High Court's competence to amend its answer. Consequently, the Supreme Court allowed the appeals, discharged the High Court's answer in favor of the assessee, and ruled in favor of the department. The assessee was directed to pay the costs of the department in the appeals.
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