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TMI Blog1989 (11) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... umben D.Mahadevia [1980] 122 ITR 38 and on the decision of the Bombay High Court in the case of Smt. Kusumben D. Mahadevia v. N.C. Upadhya [1980] 124 ITR 799 held that since the shares were not quoted at the Stock Exchange and the companies in which these shares were held were going concerns, the shares should be valued by capitalising the yield and not in accordance with Rule 1D. The first appellate authority has relied on the principles laid down by the Supreme Court and the Bombay High Court referred to above for giving his finding. 3. While presenting the case for the department, Shri R. Prasad, the learned Sr. Departmental Representative urged that a fresh look at the issue of valuation of shares of private limited company, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rongly relied on the order of the first appellate authority and on the authorities cited therein. 5. We have considered the submissions made on both the sides. Firstly, the decisions of the Spl. Bench in Biju Patnaik's case was given in the context of application of Rule 1BB. The Spl. Bench held that a rule of procedure is retrospective in operation and applies to all pending proceedings. No doubt, it further observed that being procedural and retrospective, Rule 1BB would apply to all pending proceedings, whether they are pending before the WTO or the AAC or the CWT(Appeals) or the Tribunal. However, what is stated by the Spl. Bench in the context of retroactive application of a rule cannot be blindly applied for considering the applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h-tax Act shall be its value as on the valuation date determined in the manner laid down in Schedule III. The concept of market value which formed the basis of section 7 (before its amendment) does not find place in the amended section. After 1-4-1989, it is the value of an asset determined in the manner laid down in Schedule III which is to be adopted in the computation of net wealth, whereas before the amendment the value of an asset for the purposes of the Act was to be estimated on the basis of the price which, in the opinion of the assessing officer, it would fetch if sold in the open market on the valuation date. The rules (which were operative in the context of the old section 7) provided for the procedure of determining the market v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 retrospective, it would have stated so when the amendment to this section was brought about by the Direct Tax Laws (Amendment) Act, 1989. We are therefore, unable to accept Shri Prasad's argument that Schedule III should be made applicable to the present proceedings for considering the question of valuation of unquoted equity shares. 7. The second limb of Shri Prasad's arguments is that all the decisions relied upon by the first appellate authority did not have occasion to deal with the decision of the Supreme Court in Lohia Machines Ltd.'s case. In our opinion, the decision of the Supreme Court in Lohia Machines Ltd.'s case was given in the context of the controversy raised in that section and cannot be applied generally for interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pradesh High Court also considered the Bombay High Court decision in Smt. Kusumben D. Mahadevia's case and the Supreme Court decision in Mahadeo Jalan's case. Their Lordships of the Andhra Pradesh High Court at page 621 of the report (175 ITR) made the following observations which may usefully be quoted : " This is is a case where it is possible for the court to take either view. While the view commended by the Department is based upon a literal interpretation of the rule, the view contended for by the assessee cannot be said to be unreasonable. Indeed, it is this situation which has led to a sharp division of opinion between the High Courts in India - Allahabad and Kerala High Courts adopting the literal interpretation and the Bombay a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies which are not quoted at the Stock Exchange and not whether rule 1D is mandatory or directory. The Supreme Court has spelt out the principles that should be followed for making valuation of such shares. The Bombay High Court have relied on the decisions of the Supreme Court, namely, those in the case of Mahadeo Jalan and CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 for giving their finding in their latest pronouncement in Mrs. Shardaben D. Mafatlal' s case. Therefore, we do not consider it necessary to re-consider our decision of this issue. The arguments advanced by Shri Prasad in this regard are, therefore, rejected. 9. Consequently, we would confirm the orders of the first appellate authority for the resons stated therein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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