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TMI Blog1987 (7) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... Sudhir Kumar Modi (1986) 24 TTJ (Del) 289 (SB) : (1985) 14 ITR 194 (Del) (SB) has followed the Allahabad High Court decision only for the reason that the jurisdiction of assessment in the case fell within the Allahabad High Court, which was binding as far as that assessee was concerned. Subsequently, the Delhi Bench in K.D. Detwani vs. WTO (1986) 15 ITD 360 (Del) had the occasion to consider the Delhi High Court decision in the case of Sharbati Devi Jhalani vs. CWT (1986) 54 CTR (Del) 85 : (1986) 159 ITR 549 (Del). In this decision, which was subsequent to the Special Bench decision of Tribunal there was no doubt no reference to the Special Bench decision but since the jurisdiction was within the Delhi High Court that decision was followed and, in fact, even if the Special Bench decision were to have been considered there was no option left with the Tribunal but to follow the Delhi High Court decision. He pleaded that under normal circumstances the decision of the Special Bench of the Tribunal would, by convention be binding on the Division Benches of the Tribunal, subject to the proposition that the facts of a case are ipso facto identical with the facts as were before the Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judgments, examined the issue of applicable of r. 1D with reference to s. 7(1)(Iii) and (iv) of the WT Act, 1957. Before we delve into the issues as examined by their Lordships of the Delhi High Court we would like to observe that their Lordships of the Bombay High Court in Kusumbeen D. Mahadevia examined the applicability of r. 1D by interpreting the word shall' as contained in r. 1D. They had come to the conclusion that any provision, which uses the word 'shall' can always be considered as directory. They have also observed that the rules should not override the provisions as are contained in the machinery s. 7(1). In page 827, their Lordships had considered the vires of the section but did not give any conclusion thereto but, came to the conclusion that the provision of r. 1D are not mandatory. 3.1. The Delhi High Court decision had also the occasion to consider the vires of the rules, which the learned Members of the Tribunal in the case of K.D. Dettwani vs. WTO (1986) 15 ITD 360 (Del) had considered and came to the conclusion that r. 1D is only directory and not mandatory. While coming to this conclusion, referring to Delhi High Court decision, the learned Members had held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the date on which the balance sheet is drawn up is different from the valuation date with reference to which the value of the asset has to be valued. The entire emphasis of the WT Act is on the value of an asset as on the valuation date. The value of share of a company whose balance sheet is drawn up on a date different from the valuation date, the value so determined cannot be said to be the value of the share as on the valuation date and therefore, cannot be adopted for wealth-tax purposes. The Explanation to r. 1D also is indicative of the fact that primarily the balance sheet with reference to which the value of the share has to be determined must have been drawn up as on the valuation date should be the basis and in case there is no such balance sheet, then the balance sheet as is drawn up immediately following the valuation date should be the basis and in case there is no such balance sheet, then the balance sheet as is drawn up immediately following the valuation date should be the basis. Their Lordships of the Delhi High Court in the case of Sharbatidevi Jhalani had observed: "If the contention of the respondents is accepted, who contended that the value has only to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er prescribed in rule 1D. If the value so determined is more than the value returned and the provisions of rule 3B are applicable, then the question of valuation of the said shares has to be referred by the WTO to the Valuation Officer, under section 16A. The Valuation Officer, when a reference has been made to him, has to determine the value of the unquoted share in accordance with the provisions of sec. 7(3) of the Act, i.e., he has to determine the price which those shares will fetch if sold in the open market on the valuation date. It is obvious that the Valuation Officer, is not to determine the value of the unquoted shares by applying the break-up value method. The correct method in valuing such shares would be the method as approved by the Supreme Court in CWT vs. Mahadeo Jalan Ors. 1972 CTR (SC) 395 : (1972) 86 ITR 621 (SC) and CIT vs. Smt. Kusumben D. Mahadevia (1980) 14 CTR (SC) 366 : (1980) 122 ITR 38 (SC), which is applying the yield method. The break-up (value) method is to be used only if the company, on the valuation date, is ripe for winding up." Their Lordships considered the decision of the Allahabad High Court in the case of Sripat Singhania and Bharat Hari S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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