TMI Blog1994 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... res of a company (other than an investment company or a managing agency company) have to be valued. Rule 1D is exhaustive on the subject. Explanation I to rule 1D is a perfectly valid piece of delegated legislation and has to be followed and Explanation II in rule 1D contains two clauses : clause (i) provides that two items shown as assets in the balance-sheet shall not be treated as assets for the purpose of rule 1D and clause (ii) says that six items shown as liabilities in the balance-sheet shall not be treated as the liabilities for the purpose of rule 1D ; in other words, the balance-sheet of the company with the aforesaid modifications shall be the basis for working the rule. The instant case, however, is concerned with Explanations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the profit and loss account ; (e) any amount representing provision for taxation [other than the amount referred to in clause (i)(a)] to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto ; (f) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares." Explanation I fixes the balance-sheet that is to be taken into account for the purpose of arriving at the break-up value. It postulates the balance-sheet drawn up on a date immediately preceding the valuation date and in the absence of both, the balance-sheet drawn up on a date immediately after the valuation date. Explanation II provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer as well as the Commissioner (Appeals) disallowed the claim of deduction as, according to them, the proposed dividends could not be taken as a liability as per rule 1D. The Tribunal has analysed and interpreted rule 1D in terms of the Explanations aforementioned and, in our opinion, rightly. Explanation II(ii)(b) clearly says that the amount set apart for the payment of dividends on preference shares and equity shares are not included in the liabilities, but qualifies by saying that where such dividends have not been declared before the valuation date at a general body meeting of the company. It conveys nothing but the rule that if dividends on preference shares and equity shares are declared before the valuation date at a general bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
