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TMI Blog1977 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that rules 1C and 1D introduced by the Wealth-tax (Amendment) Rules, 1967, by notification dated October 6, 1967, do not have any retrospective effect and could not be applied for the valuation of the unquoted shares for the assessment years in question as the relevant valuation dates thereof preceded October 6, 1967? " Each of these references relates to a separate assessee, but in respect of the same assessment years, i.e., 1965-66 and 1966-67. In each of these cases the assessee had valued for the purpose of wealth-tax certain shares which had not been quoted in the stock exchange, by adopting the average of the break-up value thereof and the average yield of dividends therefrom. The Wealth-tax Officer valued these shares on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of section 46 of the Act empowers the Central Board of Direct Taxes to make rules for carrying out the purposes of the Act. Without prejudice to the generality of such power, sub-section (2) of this section provides, inter alia, that such rules may be made in regard to the manner in which the market value of any assets may be determined. Sub-section (3) of section 46 of the Act provides that such power to make rules shall, on the first occasion of exercise thereof, include the power to give retrospective effect to the rules or any of them from a date not earlier than the date of commencement of the Act. In exercise of the powers conferred by section 13 of the Wealth-tax Act, the Central Board of Direct Taxes issued Circular N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As stated earlier, the Tribunal took the view that these rules could not be applied for any of the assessment years prior to the coming into force of these rules. In these references, the learned standing counsel for the revenue contended that these rules are merely procedural in nature and do not affect the substantive rights and liabilities of the assessees and that hence these rules were applicable to pending proceedings. He maintained that since the ; assessments of these three assessees for the years 1965-66 and 1966-67 were made on March 31, 1970, i.e., subsequent to the coming into force of these two rules, the Wealth-tax Officer had to apply them for determining the market value of the unquoted shares of the assessees for assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of unquoted shares is merely a matter of procedure, it follows that rules 1C and 1D which prescribe the method of valuation of unquoted shares, would be applicable to assessments pending on the day those rules came into force though the assessments relate to assessment years prior to the coming into force of those rules. But, if the method of valuation of unquoted shares is a matter of substantive law and not merely of procedure, then it is clear that those rules could not be applied to assessments for the assessment years prior to the coming into force of those rules. As stated earlier, rules 1C and 1D prescribe the method of determining the market value of unquoted shares whose value cannot be ascertained on the basis of the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are prescribed by rule 1C as criteria, are undoubtedly relevant factors. Likewise, for determining the value of an unquoted equity share, rule 1D prescribes the break-up value as the basis. A well-accepted method of valuing an unquoted equity share is on the basis of its break-up value. Thus, the criterion prescribed by rule 1D is undoubtedly a relevant one for valuation. In the light of the enunciation of law by the Supreme Court in Izhar Ahmad Khan's case AIR 1962 SC 1052, these two rules must be regarded as rules of evidence or procedure and not rules of substantive law. It follows that rules 1C and 1D which were inserted in the Wealth-tax Rules by the Wealth-tax (Amendment) Rules, 1967, were applicable to pending assessments of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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