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TMI Blog1984 (2) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of rule 1D of the Wealth-tax Rules, 1957 ('the Rules'). 2. The assessee held shares of Madhu Jayanti (P.) Ltd. and Jay Bharat Cotton Textiles (P). Ltd. According to the assessee, the shares were to be valued on the basis of the principle laid down by the Supreme Court in the case of Mahadeo Jalan so also on the basis of the decision of the Bombay High Court in the case of Smt. Kusumben D. Mahadevia v. CWT [1980] 124 ITR 799. The WTO rejected the assessee's submission inasmuch as he was of the opinion that the valuation of unquoted shares was to be made keeping in view the provisions of rule 1D. 3. On appeal to the AAC, it was contended on behalf of the assessee that the method of break-up value was not the only method and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative urged that the Hon'ble Supreme Court had no occasion to consider the provisions of rule 1BB while deciding the case of Mahadeo Jalan. He, therefore, urged that the AAC was entirely wrong in applying the principle laid down by the Supreme Court in the case of Mahadeo Jalan while determining the value of the shares held by the assessee. The learned counsel for the assessee, on the other hand, strongly supported the order of the AAC. He relied on the decisions in Mahadeo Jalan's case, CIT v. Swadeshi Mining Mfg. Co. Ltd. [1979] 116 ITR 259 (Cal.), CWT v. Executors to the Estate of Sir E.C. Benthal [1980] 121 ITR 814 (Cal.), CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC) and Smt. Kusumben D. Mahadevia v. CWT [1980] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interference. The Supreme Court in the case of Mahadeo Jalan held: "The factors which are likely to determine the value of a share on any particular day or at any particular time are : (i) the profit-earning capacity of the company on a reasonable commercial basis ; (ii) its capacity to maintain these profits or a reasonable return for the capital invested ; and in special cases such as investment companies, the asset backing; and (iii) the prospects of capitalisation of its earning in the shape of declaration of bonus shares or where the company is financially and commercially sound, the prospects of issue of further capital where the existing shareholders have a right to apply for and obtain them at a certain price which is generally le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay High Court in the case of Smt. Kusumben D. Mahadevia wherein it is has been held that rule 1D prescribing the break-up method for valuing unquoted equity shares is directory and not mandatory. The observation of the learned author, Sampath Iyengar, as reproduced hereinbefore, cannot be lost sight of. As has been observed by him, in reality, as an instance the method prescribed by the Board by rule 1D as a mandatory one is only one of the several methods for the valuation of shares ; the other important methods are to capitalise the actual yield of dividend, or to take the market quotations of similar shares which are quoted on the stock exchange. That being the position, we are of the opinion that the order of the AAC does not require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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