9911796707
TMI Blog1986 (11) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... up. These shares were valued by the WTO under rule 1D of the Wealth-tax Rules, 1957. On appeal, the AAC held that rule 1D was merely directory and not mandatory and besides this rule was net an appropriate method of valuation of unquoted equity shares of companies, which were a going concern. The AAC, therefore, directed the WTO to value the unquoted equity shares of companies in accordance with the Board's Circular No. 332A, dated 31-3-1982 with the only modification that since the profits of the non-investment companies go on fluctuating the rate of capitalisation should be taken at 12 per cent. The.revenue is aggrieved and has, therefore, come up in the present appeals before us. 3. The learned departmental representative, Shri Ray, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances like fluctuations of profits or uncertainty of conditions on the relevant valuation dates, which prevented any reasonable estimate of the profit earning capacity of these companies. In these circumstances, according to Shri Khandelwal, the rulings of the Hon'ble Supreme Court in the cases of CWT v. Mahadeo Jalan [1972] 86 ITR 621 and CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 will be fully applicable. Our attention was also invited to the ruling of the Hon'ble Bombay High Court in the case of Smt. Kusumben D. Mahadevia v. N. C. Upadhya [1980] 124 ITR 799 wherein their Lordships laid down that rule 1D was merely directory and not mandatory. He, therefore, vehementary argued before us that the only proper method of val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd income is earned but the market value of the share also increases from year to year and considering this fact the multiplier to be adopted under the income capitalisation method to the profit-earning capacity of the companies should be on the basis of a return of 10 per cent only and not 12 per cent as was directed by the AAC. 6. We have carefully considered the rival submissions. It is not under dispute that the various companies whose unquoted equity shares were the subject-matter of the valuation of the present appeals were all going concerns, which were not ripe for liquidation or winding up and besides there were no exceptional circumstances like fluctuation of profits or uncertainty of conditions on the relevant valuation dates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bank deposit where the amount of the deposit remains fixed and constant and only the interest income is earned, in the case of shares not only dividend income is earned but the value of the share also appreciates from year to year. The argument of the assessee's learned counsel, Shri Khandelwal that the dividend income in the case of shares of non-investment companies fluctuates unlike in the case of investment companies cuts both ways inasmuch as this also provides an opportunity for increase in income and consequent appreciation in the value of shares. It is also necessary here to point out that it is not the case of the assessee and in response to a specific query by the Bench, the assessee's learned counsel, Shri Khandelwal, submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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