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TMI Blog1997 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... alty should be allowed as a liability while valuing the unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957 ?" The assessment year involved in respect of both, the assessees is 1980-81. The assessees hold certain shares in several companies which are not quoted in the regular stock exchange. The assessees claimed before the Wealth-tax Officer that the shares held by them should be valued on yield basis. The Wealth-tax Officer, in completing the assessment, rejected the claim of the assessees and held that the valuation of the shares held by the assessees should be done under rule 1D of the Wealth-tax Rules (hereinafter referred to as the "Rules"). The Wealth-tax Officer while valuing the shares excluded the liability towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account for the purpose of valuation of shares in terms of rule 1D of the Rules. The Appellate Tribunal, following an earlier order of its own in the case of M.A. Murugappan (Individual) and others in W. T. A. No. 606(Mds) of 1986, etc., dated May 12, 1987, held that the sales tax penalty is a liability under the statute and till they are wiped out, they continue to exist as liabilities and it cannot be regarded as a contingent liability. In this view of the matter, the Appellate Tribunal upheld the orders of the Appellate Assistant Commissioner. At the time of hearing the appeal before the Tribunal. It was submitted on behalf of the Department that the sales tax penalty was subsequently cancelled and, therefore, there was no justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the valuation date the liability towards tax liability was existing and the proper amount that should be taken into account in determining the value of the shares under rule 1D of the Rules. He further submitted that it is not correct to say that the entire sales tax penalty was cancelled. He, therefore, submitted that the Tribunal should be directed to consider the question whether any liability towards the sales tax existed on the valuation date. We have carefully considered the rival submissions of learned counsel for the parties. The question involves the proper interpretation of rule 1D of the Wealth-tax Rules. Under rule 1D of the Rules, the market value of an unquoted equity shares of any company shall be determined in the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant valuation dates, the order would have effect in valuing the liability as such and the order of the Sales Tax Appellate Tribunal cannot be ignored in determining the quantum of the liability of the company. More or less, a similar situation came up for consideration before the Supreme Court with reference to the deduction of statutory liabilities under the direct tax laws under the head "debt" under the provisions of section 2(m) of the Wealth-tax Act. The Supreme Court in CWT v. K. S. N. Bhatt [1984] 145 ITR 1 held that in computing the net wealth of the assessee for the wealth-tax, the liabilities towards the income-tax, wealth-tax and gift-tax which crystallise on the relevant valuation date as determined in the respective a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision cannot be ignored as the final order determining the ultimate tax liability would directly relate to the question whether on the valuation date, there was any liability at all owed by the company towards the sales tax. It is seen that the Tamil Nadu Sales Tax Appellate Tribunal has cancelled the penalty and though the order of the said Tribunal was passed subsequent to the valuation date, that order would be a relevant piece of evidence to determine the value of liabilities as provided in rule 1D of the Rules. Therefore, though the view of the Appellate Tribunal that the liability as on the valuation date should be taken into account is correct, that the events that happened subsequent to the valuation date should be ignored, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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