9911796707
TMI Blog1982 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ble thereon was fixed at Rs. 5,47,041.31. It appears from the said estate duty assessment order that one of the items shown was the face value of 500 shares worth Rs. 50,000 of Raja D. N. Mullick Sons (P.) Ltd. These shares were shown in the return at Rs. 1,42,160. The Dy. Controller by his order of assessment valued the same at Rs. 3,64,140. Another item shown was the shares of the face value of Rs. 2,19,500. This item was shown as of nil value. The Dy. Controller accepted this position and did not alter the valuation in respect of the same. Another item which was entered in the computation was the debt due from K. C. Mullick Sons Ltd. The value shown in the return was nil but in the assessment order the valuation had been determined at Rs. 6,84,448. It may incidentally be mentioned that among the immovable properties included was premises No. 17/1A, E, F, G, H, K and L, Marquis Lane, Calcutta, and the value and was given in the estate duty return at Rs. 31,300. The Dy. Controller estimated the fair market value of the same at Rs. 1,60,000. He thus arrived at the total value of the movables at Rs. 13,00,950 and immovables at Rs. 13,85,359 totalling a sum of Rs. 26,86,309. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the person accountable to submit an account of the estate of the deceased under section 53 or section 56 or to disclose fully and truly all material facts necessary for assessment, any property chargeable to estate duty has escaped assessment by reason of under valuation of the property included in the account or of omission to include therein any property which ought to have been included or of assessment at too low a rate or otherwise, or (b) has, in consequence of any information in his possession, reason to believe notwithstanding that there has not been such omission or failure as is referred to in clause (a) that any property chargeable to estate duty has escaped assessment, whether by reason of under-valuation of the property included in the account or of omission to include therein any property which ought to have been included, or of assessment at too low a rate or otherwise, he may at any time, subject to the provisions of section 73A, require the person accountable to submit an account as required under section 53 and may proceed to assess or reassess such property as if the provisions of section 58 applied thereto:" In the appeal before the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that their application for financial assistance from the Corporation was not likely to meet with success. The original letter from the Corporation dated 18th December, 1950, was filed. It was then pointed out that the balance-sheet of the company for the year ended 31st March, 1950, was also filed. It was argued with reference to the balance-sheet ended 31st March, 1955, that the company was heavily indebted to the managing agents as well as to the United Bank of India. Copies of the plaints in civil suits filed by the United Bank against the company as a result of which the Calcutta High Court passed an order on 28th January, 1959, appointing Shri Lalchand Mullick, a son of the deceased and one of the executors of his will, as a receiver for the rents of the premises No., 17/1A, Marquis Lane, Calcutta, which had been given as a security to the bank, were also produced. Other executors also issued a notice under s. 434 of the Companies Act demanding Rs. 64,448 from the company and thereupon moved the High Court for the liquidation of the said company. On 25th June, 1958, the Calcutta High Court had passed orders for the winding-up of the company and those papers were produced bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of the death of the deceased, i.e., 17th November, 1955. According to the balance-sheets of the company immediately before and after the said date, there was no reason to consider any portion, of the debts as being doubtful of recovery. The correspondence between the company and the Industrial Finance Corporation to which attention was drawn took place as far back as 1950. The letter dated the 18th December, 1950, from the Corporation merely stated that the company was unlikely to obtain any financial assistance from the Corporation in view of the fact that according to its balance-sheet dated the 31st March, 1950, the company was heavily indebted to the banks and for working capital and the settling of old indebtedness of this nature was not one of the purposes for which the Corporation ordinarily gave financial assistance. Another reason was given for refusal of the Corporation to give financial assistance. The Board also considered the statement that the balance-sheet was highly inflated. The Board took into consideration that in the schedule of assets accompanying the petition for probate filed on 6th September, 1957, the accountable persons had estimated the recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty for goods 22,545 Liability for expenses 54,667 Liability for other finance 12,588 Unpaid dividend 416 -------- 8,64,234 As the net assets will he utilised pro-rata for satisfaction of unsecured creditors, the amount payable to the deceased towards his debt of Rs. 6,84,448 would be worked as under: 6,84,448 ---------- X 6,62,660 : Rs. 5,24,800 8,64,234 I would, therefore, value the debt due from M/s. K. C. Mullick and Sons Ltd. at Rs. 5,24,800. This will mean a reduction of Rs. 1,59,648." This was one aspect of the claim which is before us. The second aspect of the first question is regarding 500 shares in Raja D. N. Mullick and Sons Ltd. of the face value of Rs. 1,000 each which was valued at Rs. 3,45,500 as we have mentioned before. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder, Shri H. C. Mullick, who died on November 6, 1955, the value of each share was fixed at Rs. 691 in round figure and this was accepted by all the parties in that case. On this basis, the value of the 500 shares held by the deceased would come to Rs. 3,45,500. 1 would, therefore, adopt this figure in place of the amount of Rs. 3,65,140 taken by the Deputy Controller. Hence, the principal value of the estate will be reduced by Rs. 19,460." The next question related to the disallowance of certain debts due from the deceased to the United Bank of India. This point was held against the accountable persons by the Board. We shall deal with the reasons in detail given by the Board. Upon this an application was made for reference of certain questions which the Board refused to refer. Thereupon an application was made to this court under s. 64(2) of the E.D. Act, 1953. Two questions have been referred to this court pursuant to the order of the court. The two questions are as follows : It I Whether, on the facts and in the circumstances of the case, the valuation of the undermentioned assets by the Central Board of Direct Taxes at the respective sums shown against each are in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the first question is concerned, in our opinion, the first question is sufficiently clear enough to bring out the controversy in this case and it does not require any reframing by us. So far as the second question is concerned, firstly, there is one error which has not been referred in terms of the order of the court and, secondly, it appears to us that the figure has been wrongly mentioned. From the estate duty return which is at p. 24, Pt., II of this paper-book, it appears that there was a claim of the accountable persons for a sum of Rs. 2,52,252 as deduction on account of the debt owed by the deceased. Therefore, we reframe the question as follows : " Whether, on the facts and in the circumstances of the case, the non-allowance of the secured debt of Rs. 2,52,252 owed to the United Bank of India was not perverse and wholly unjustified ? " This will bring out the true controversy between the parties. So far as the first question is concerned, it was contended before us that so far as the valuation of the debt (unsecured) to the estate of K. C. Mullick Sons Ltd. is concerned, the same was under the requirements of law. It was contended that the Asst. Controlle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been referred to two valuers which was mandatory in sub-s. (4) of s. 63 and the power under sub-s. (3) of s. 63 was dependent upon exercise of the jurisdiction under sub-s. (4) of s. 63. It was pointed out that, ill any event, on this aspect all the questions were not agitated before the Board and it had no occasion to deal with these questions. On this aspect our attention was drawn to several decisions which we will briefly note though these are not relevant for the present case. Our attention was drawn to a decision in the case of United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC), and reliance was placed at p. 703 of the report in aid of the proposition that different aspects of question might be gone into in appropriate cases by the court in answering a reference. Similarly, our attention was drawn to a decision of the Supreme Court in the case of Indore Malwa United Mills Ltd. v. [1966] 59 ITR 738. Reliance was also placed in the case of CIT v. Metal Corporation of India Ltd. [1982] 133 ITR 130 (Cal). Reliance was placed on the observations at page 136 of the report. Similarly, our attention was drawn to a decision in the case of Mahamaya Dassi v. CIT [1980] 126 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for us to embark upon this controversy. One of the main contentions that was urged, as we noted before, was that in this case the Board had no jurisdiction to value itself in the manner it had done, because if there was a, dispute as to the valuation of the property, then according to the accountable persons the Board was bound to refer to two valuers as enjoined by sub-s. (4) of s. 63. It was contended that the power given to the Board by sub-s. (3) of s. 63 of the E.D. Act, 1953, as it stood at the relevant time, could be exercised only if the condition stipulated in sub-s. (4) of s. 63 of the said Act at the relevant time had been fulfilled. It was submitted that the expression " may ", though it had been used, and the expression " shall " in sub-s. (4), in respect of two different contingencies, must be construed as mandatory and, therefore, the Board having not referred to two valuers, the order was bad. In aid of this proposition reliance was placed on Craies on Statute Law, 7th Edn., at p. 266. But we must also note that at pp. 286, 287, the learned editor of the book had referred that in respect of, the same statute if two expressions " may " and " shall " were used, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: " Section 540 is intended to be wide as the repeated use of the word 'any' throughout its length clearly indicates. The section is in two parts. The first part gives a discretionary power but the latter part is mandatory. The use of the word ' may ' in the first part and of the word 'shall' in the second firmly establishes this difference. Under the first part, which is permissive, the court may act in one of three ways : (a) summon any person as a witness, (b) examine any person present in court although not summoned, and (c) recall or re-examine a witness already examined. The second part is obligatory and compels the Court to act in these three ways or any one of them, if the just decision of the case demands it. As the section stands there is no limitation on the power of Court arising from the stage to which the trial may have reached, provided the Court is bona fide of the opinion that for the just decision of the case, the step must be taken. It is clear that the requirement of just decision of the case does not limit the action to something in the interest of the accused only. In this case, as we find in sub-s. (4) of s. 63 of the E.D. Act, 1953, as it stood a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was unable to meet its debts for very small sums of Rs. 1,826 and Rs. 1,215 for which attachments had to be levied and there were suits pending; by not giving proper weight to those features, only the calculation was sought to be made from the book value or the assets and liabilities. The valuation of a debt of a private limited company of this nature cannot, in our opinion, be done in this fashion. The valuation is always a difficult task, as was observed by Viscount Simon, in the case of Gold Coast Selection Trust Ltd. v. Humphrey[1949] 17 ITR (Suppl.) 19 (HL) at p. 26, that if the asset was difficult to value, the best possible valuation should be made, and that valuation was an art and not an exact science. Viscount Simon observed at pp. 26, 27 of the said decision as follows: If the asset is difficult to value but is none the less of a money value, the best valuation possible must be made. Valuation is an art, not an exact science. Mathematical certainty is not demanded, nor is it possible. It is for the Commissioners to express in the money value attributed by them to the asset from estimate, and this is a conclusion of fact to be drawn from the evidence before them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons have agitated before us, that is to say, no opportunity was given. But, we have dealt with this aspect generally hereinbefore. It now remains for us to deal with the second question as refrained by us. It appears to us that on this aspect the Board went on the rental basis. It is quite clear from the estate duty assessment that for premises No. 17/1 A, E, F, G, H, N L, Marquis Lane, Calcutta, the value given was Rs. 31,300. The fair market value was estimated by the Asst. Controller at Rs. 1,60,000. After taking into account the fact that the property was subject to a mortgage and after taking into consideration that they had valued the premises at Rs. 1,60,000, he had included the entirety of that amount in the assessment but the Board had deducted only a sum of Rs. 12,000. If this aspect was taken into consideration then in considering the debt, which was indisputably owed by the deceased to the United Bank of India, though as a guarantor, where the liability was several and joint this factor was wholly irrelevant because that was secured by a property which was subject to mortgage and the debt was owed by the deceased for the amount claimed. The discussion of the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs into consideration and valued the property, as it thought fit and proper. But that is not under challenge before us. But ,the fact is that this aspect does not enter into the computation of the amount which was owed by the accountable persons. Before we conclude we must mention that our attention was drawn to a decision in the case of Pingle Venkatarama Reddy v. CWT [1972] 85 ITR 132 (AP). In the view we have taken in this matter, it is not necessary for us to go into the details of this decision. In the premises, we are of the opinion that the Board had applied wrong yardstick which was not in accordance with the law. The decision of the Board is, therefore, perverse in law and not justified in law. Therefore in view of what we have stated before, so far as item No. (i) of question No. 1 is concerned, we answer by saying that the Board did not act in accordance with law and would be at liberty to act in the light of the observations made hereinbefore. So far as item No. (ii) of question No. 1 is concerned we are of the opinion that the Board acted in accordance with law and, therefore, this question is answered in the affirmative. So far as the reframed question, being ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
