1991 (7) TMI 8 - HC - Wealth-tax

Summary

Issues Involved:
1. Valuation of unquoted shares by applying the yield method.
2. Rejection of the valuation of the coffee estate made by the Wealth-tax Officer based on the Board's Circular No. 357 dated March 26, 1983.
3. Acceptance of the valuation of shares in the coffee estate as shown by the assessee based on the report of a registered valuer.

Detailed Analysis:

1. Valuation of Unquoted Shares by Applying the Yield Method:
The Tribunal directed the Assessing Officer to value the unquoted shares of certain companies by applying the yield method. The Wealth-tax Officer had initially valued the shares of the first four companies using the break-up method and the remaining two companies using the maintainable profit method. The court referenced the case of CWT v. India Exchange Traders' Association [1992] 197 ITR 356 (Cal), which held that rule 1D is mandatory, necessitating the use of the break-up method for valuing unquoted shares. Consequently, the court answered the first question in the negative for the shares of the first four companies, affirming the Wealth-tax Officer's method.

2. Rejection of Valuation of Coffee Estate Based on Board's Circular:
The assessee held a share in a coffee plantation known as Billigiri Rangan Estate. The Wealth-tax Officer valued the estate based on the Central Board of Direct Taxes (CBDT) Circular No. 357 dated March 26, 1983. The Commissioner of Wealth-tax (Appeals) found discrepancies between the valuations by the Wealth-tax Officer and the registered valuer and directed the Wealth-tax Officer to refer the matter to the Departmental Valuation Officer under section 16A of the Wealth-tax Act. The Tribunal, however, held that the Commissioner of Wealth-tax (Appeals) did not have the jurisdiction to direct such a referral if the Assessing Officer had not exercised that power initially.

The court noted that the circular is not binding on the assessee and that the valuation can be contested unless consented to by the assessee. The Wealth-tax Officer, believing the circular to be binding, did not consider the registered valuer's report. The court found that the matter should be referred to the Tribunal for fresh determination, considering both the circular and the registered valuer's report.

3. Acceptance of Valuation of Shares in the Coffee Estate Based on Registered Valuer's Report:
The Tribunal accepted the valuation of the coffee estate shares as shown by the assessee based on the registered valuer's report, following its previous decision in the case of K. K. Birla (HUF). The court highlighted that the Tribunal should reassess the valuation, considering the CBDT circular and the registered valuer's report, and if necessary, refer the matter to the Valuation Officer.

Conclusion:
The court declined to answer questions 2 and 3, remanding the matter to the Tribunal for fresh determination of the coffee estate's valuation, taking into account the CBDT circular, the registered valuer's report, and other relevant factors. The Tribunal was also advised to consider referring the matter to the Valuation Officer and to decide the issue after allowing the parties an opportunity to be heard. There was no order as to costs.