Law: Wealth Tax Act, 1957

Section: 2

Wealth tax---Net wealth-Computation-Deductions allowable- Valuation of shares of company-Adoption of value of company's assets in company's wealth tax assessments for determining break-up value-Whether justified. In order to determine the break-up value of the shares of J Ltd., held by the assessee, the Tribunal directed the adoption of the net wealth as determined in that company's wealth tax assessment as the value of its net assets. On a reference to the High Court: Held, as for determining the break-up value of the shares, one has to ascertain the value of the company's physical assets and deduct there from the company's current liabilities and prior charge capital, the Tribunal was not justified in adopting the net wealth of the company as determined in its wealth tax assessments as its net assets: Held further, on the facts of the case, that (a) reduction of the value of the goodwill, (b) reduction in the value of the leasehold properties, (c) bad and doubtful debts, (d) amount of certificate under Public Demands Recovery Act, and (e) provision for taxation, should be allowed, but proposed dividends are not so allowable. Commissioner of Income-tax v. Jhagrakhand Collieries (Private) Ltd. (1968) 67 I T R 572 and Commissioner of Income-tax v. Scindia Steam Navigation Co. (1961) 42 I T R 589 ref. JUDGMENT SANKAR PRASAD MITRA, J.---This is a reference under section 27(1) of the Wealth Tax Act, 1957. The assessee is an individual. The wealth tax assessment years are 1957-58, 1958-59 and 1959-60, for which the relevant valuation dates are the 31st March 1957, the 31st March 1958, and the 31st March 1959, respectively. The assessee held 114 shares of Jhagrakhand Colliery (Private) Ltd. The valuation of these shares according to the assessee, the Wealth Tax Officer and the Appellate Assistant Commissioner was as follows: Assess-            Valuation per share                 Valuation per share                 Valuation…