1986 (3) TMI 108 - AT - Wealth-tax

Summary

Issues:
- Valuation of unquoted equity shares of companies under the yield method versus the break-up method prescribed by rule 1D of the Wealth-tax Rules, 1957.

Detailed Analysis:
1. The revenue appealed against the direction of the Commissioner (Appeals) to value unquoted equity shares under the yield method instead of the break-up method. The revenue argued that rule 1D is binding on revenue and appellate authorities, citing precedents like the rulings of the Hon'ble Allahabad High Court and decisions of the Tribunal. They emphasized that the valuation under rule 1D by the WTO was justified and should be upheld.

2. The assessee's counsel contended that the Hon'ble Supreme Court and the Hon'ble Bombay High Court have held that the yield method is appropriate for valuation in certain circumstances. Referring to various judgments, including the case of CWT v. Mahadeo Jalan, it was argued that the break-up method should only be used in exceptional cases, and the yield method is generally applicable. The counsel strongly supported the direction of the Commissioner (Appeals) to value the shares under the yield method.

3. The Tribunal carefully considered the submissions from both parties. It clarified that the Supreme Court's ruling in Lohia Machines Ltd. did not establish that rules under a taxing statute are always binding. The Tribunal noted that previous Tribunal decisions did not address the specific issue of valuation methods for unquoted equity shares. The Tribunal differentiated its jurisdiction from that of the Allahabad High Court and highlighted the Bombay High Court's interpretation of rule 1D in various cases. Following the guidance of the Supreme Court and the Bombay High Court, the Tribunal concluded that the yield method is the appropriate valuation method for unquoted equity shares in the present appeals. Therefore, the direction of the Commissioner (Appeals) to use the yield method was deemed correct and upheld.

4. In conclusion, the appeals filed by the revenue were dismissed, affirming the decision to value the unquoted equity shares under the yield method instead of the break-up method prescribed by rule 1D.