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TMI Blog2004 (7) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ad agreed to be assessed on the value of the unquoted equity shares worked out in accordance with rule 1D of the Wealth-tax Rules, 1957? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that arrears of dividends on cumulative preference shares and depreciation as allowed in the income-tax assessment was allowable as deduction in working out the break-up value of the shares?" Briefly stated the facts giving rise to the present reference are as follows: The original assessment in this case was made on December 30, 1971. The Income-tax Officer had valued the unquoted shares in accordance with the Wealth-tax Rules, 1957, hereinafter referred to as "the Rules", at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also argued before the Appellate Assistant Commissioner that even the valuation of shares should not have been made by recourse to the provisions of rule 1D of the Rules. The Appellate Assistant Commissioner held that in view of the concession allowed by Shri S.S. Pandey, it could not be said that the assessee was an aggrieved party and, therefore, he could not file an appeal against the assessment order. He also observed that it was now a settled law that unquoted equity shares could be valued by recourse to rule 1D of the Rules. With regard to the disallowance of deduction for the LIC loan, he referred to the decision of the Allahabad High Court in the case of Jiwan Lal Virmani v. CWT [1967] 66 ITR 338. Against the order of the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regarding deduction of arrears of dividends in respect of cumulative preference shares and depreciation is concerned, learned counsel invited the attention of the court to Explanation II to rule 1D of the Rules and submitted that the rule specifically provides for the amount which could not be treated as liability for the purposes of the determination of value of the shares. According to him, under rule 1D, where the amount set apart for payment of dividends of preference shares and equity shares where such dividends have not been declared before the valuation date at a general body meeting of the company and the amount of depreciation has not been set apart as liability in the balance-sheet, they cannot be allowed as deductions while com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reading of the aforesaid clause, it is absolutely clear that if the amount of dividend on preference shares has not been declared before the valuation date at a general body meeting of the company, the same cannot be allowed as deduction towards liability. Likewise, if the amount has not been set apart towards depreciation in the balance-sheet, the amount of such depreciation also cannot be allowed as deduction while valuing the unquoted equity shares under rule 1D of the Rules. From a perusal of the order of the Tribunal, it appears that before the Tribunal, the claim of the respondent-assessee was regarding unprovided depreciation which would be clear from the statement noted in para. 6 of the order of the Tribunal that in working out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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