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TMI Blog1991 (11) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in respect of quoted shares on the basis of the Poona Exchange ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that gross liability including advance tax was to be deducted while working out the valuation of the assessee's interest in partnership concerns/AOPs ?" Since points involved are common and applications under section 27(1) were disposed of by a common order by the Tribunal, these applications are heard together and are being disposed of by this order. Point No. 1 : This pertains to the valuation of quoted equity shares of limited companies. Various assessees are individual/Hindu undivided family and the material assessment years are 1985-86 to 1987-88. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht principle is not followed, and (iii) the valuation adopted is either against law or is perverse. Challenge to the Tribunal's findings of facts cannot be tampered with merely for the reason that another view is possible on the same material. As far as valuation of shares in a public limited company is concerned, a settled principle is that where they are quoted on a stock exchange and there are dealings in them, the price prevailing on the base date should normally be treated as the correct value, unless there are compelling reasons not to do so. It may be mentioned that Schedule III newly introduced from April 1, 1989, statutorily recognizes the fact that the prices quoted on recognised stock exchange, on the base date, or where there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions has to be found on the totality of the circumstances in each case. Keeping all these factors in view, it cannot be said that either any general principle of valuation is violated or there is any perversity in the conclusion reached. Indeed, the Tribunal has given good reasons for preferring the Poona quotations. Even if any other view on facts is possible, it cannot be said that any question of law needing reference had arisen. Point No. 2 : This pertains to the valuation of the assessee's interest in partnership-firms/associations of persons. At the material time, the said valuation was to be made as per the statutory formula prescribed by rule 2 to rule 2-1 of the Wealth-tax Rules, 1957. Rules 2A to 2G prescribe the method of val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liabilities have to be reduced by that amount as, otherwise, the assessee gets double benefit in the calculations which could not have been the intention of the framers of the Rules. According to the assessee, the language of rule 2E(b) plainly speaks about gross tax in entirety and not net tax, and the valuation is to be made as per statutory formula which even ignores certain actualities and, under the circumstances, there is no scope to reduce the provision for taxes by the advance tax paid. The Tribunal has upheld the assessee's submission and it seems to us that the Tribunal is right. Such a situation arises also in the Explanation II to rule 1D which deals with valuation of unquoted equity shares of certain companies. Sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto." "Rule 2E : Value of certain liabilities not to be taken. -The following amounts shown as liabilities in the balance-sheet shall not be taken into account for the purposes of rule 2A :- . . . (b) reserves by whatever name called . . . Explanation.-Provision for any purpose other than taxation shall be treated as a reserve." We may at this stage take a quick resume of the controversial caselaw. The Gujarat High Court in the case of CWT v. Ashok K. Parikh [1981] 129 ITR 46, the Bombay High Court in the case of CWT v. Pratap Bhogilal [1987] 167 ITR 501 and the Madras High Court in the case of L. G. Balakrishnan v. CW ..... X X X X Extracts X X X X X X X X Extracts X X X X
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