TMI Blog1977 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... side the original assessment made by the Wealth-tax Officer ? 2. Whether, on the facts and in the circumstances of the case, the principle of valuation under section 7(2)(a) of the Wealth-tax Act, 1957, applies while valuing the shares of Amritlal Co. Private Limited, in the hands of the assessee ? " The facts necessary for the first question need not be stated as the counsel for the assessee has not pressed that question. The facts relating to question No. 2 are as under: The assessees are four individuals. Question No. 2 relates to valuation of certain shares held by the assessees in a private limited company called Amritlal Co., Private Ltd. (hereinafter referred to as " the company "). The question has arisen for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth of the company which held the shares. The Tribunal was really concerned with evaluating the shares of the company held by the assessee. The Tribunal felt that the wealth of a shareholder arising from shareholdings is one thing, while the wealth of the company itself is a different matter. A company's net wealth under the Act is not the sum total of the net wealth of the individual shareholders. The company and the shareholders are different assessable entities under the Act and the computations of the net wealth of each are according to different principles. Question No. 2 above referred to arises from this order of the Tribunal. Mr. Dilip Dwarkadas, on behalf of the assessees, urged two contentions before us. First, he submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted in making the assessment on the company to wealth-tax should first be determined. This will be determined by adding to the paid-up capital the debentures, reserves and the balance as per profit and loss account. The provision for liabilities in the balance-sheet should particularly be scrutinised with a view to excluding therefrom items which should really form part of the reserves. From the total as arrived at the paid up value of the preference shares and the debentures should be subtracted. The resulting balance should be divided by the amount of the paid up ordinary share capital in order to arrive at the value of each rupee of paid up capital. On multiplying this result by the paid up value of the shares held by the assessee, thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as may be prescribed; (b) Where the assessee carrying on the business is a company not resident in India and a computation in accordance with clause (a) cannot be made by reason of the absence of any separate balance-sheet drawn up for the affairs of such business in India, the Wealth-tax Officer may take the net value of the assets of the business in India to be that proportion of the net value of the assets of the business as a whole wherever carried on determined as aforesaid as the income arising from the business in India during the year ending with the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness carried on by the assessee. In the present case we are concerned with valuation of an individual asset like a share owned by the assessee who is an individual. In such a case, cl. (2)(a) will neither directly nor by way of even analogy, be attracted. It is not the case of any one of the assessees before us that they are carrying on business and they want to have the assets of the business to be valued as a block. In this reference we are merely concerned with the valuation of the shares held by each one of the four assessees in the company. To such a case the provisions of subs. (2)(a) can neither directly nor inferentially be applied, nor the principle therein contained be attracted. Sub-section (2) does not contemplate valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,770 though they are shown on the basis of the book value in the balance-sheet and profit and loss account irrespective of the appreciation in, the price thereof. A prudent purchaser, before deciding to pay a particular price for the shares of the company, will bear in mind the market value of the assets. held by the company and he will not merely take into account the book value of the shares irrespective of its market quotation. Ordinarily, therefore, the valuation of the shares in the company ought to be arrived at on the footing that one of the assets held by the company was a block of shares of Amar Dye Chemicals Ltd. which are quoted at a particular rate in the market. However, in the present case, it appears from the order of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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