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TMI Blog1984 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... also did not choose to follow the method prescribed in rule 1D of the Wealth-tax Rules, 1957 ('the 1957 Rules') and, consequently, did not grant 15 per cent reduction in the break-up value as provided for therein. 3. On appeal, the Appellate Controller upheld the valuation of the Assistant Controller except for the purpose of determining the goodwill, he took the rate of capitalisation at three times of the average profit of three years which resulted in a reduction of Rs. 5,35,943 from the total assets of the company. The accountable person has come up in second appeal before us. 4. We have heard the representatives of the parties at length in this appeal. The point argued before us was rather fine. The Assistant Controller and the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of its shares, was that in order to determine the capacity of the company to maintain its profits the asset-backing would be a relevant consideration. The profit-earning capacity of the company would naturally have to take into account not only the profits which the company is actually making but also the profits which the company should be capable of making and in order to arrive at a proper estimate of the latter, the asset-backing would be a relevant factor in the case of an investment company. It is not correct to read the observation as suggesting that valuation of the assets would be a relevant factor in determining the valuation of the shares. " The contention of the representative of the accountable person was that in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies has been laid down. This was to avoid any controversy over the market value but it has been specifically mentioned therein that for the purpose of determining the same, the value of the assets shown in the balance sheet is to be considered. Similarly, the value of the liabilities shown in the balance sheet is to be considered subject to certain explanations. Therefore, the value of goodwill which is not shown in the balance sheet as an asset would not be considered according to this rule. Now, if the revenue is not satisfied with the valuation arrived at in accordance with this rule, the other safe method would be yield method as has been approved of by the Supreme Court in the two cases of Mahadeo Jalan and Smt. Kusumben D. Mahadevi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company a huge amount has to be paid for tax paid on account of income-tax so that the dividend declared on shares is comparatively less. The representative of the accountable person gave us a chart which shows that the rates of dividend for the calendar years 1967 to 1976 declared were 15, 13, 13, 12, 11, 12, 12 and 12 per cent, respectively. The face value of the shares was Rs. 100 and the market value assessable in accordance with rule 1D was stated to be Rs. 227.15 per share but the market value in accordance with the computation of the Assistant Controller comes to Rs. 452.31 per share. Even after the relief by the Appellate Controller, it would be more than Rs. 400. This does not reflect the true market values because then the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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