Law: Wealth Tax Act, 1957

Section: 27(1)

Law: Income Tax Act, 1961

Section: 40A(7),36(1)(v)

Law: Wealth Tax Rules, 1957

Section: 1D

(a) Wealth tax--- ----Valuation of assets ---Unquoted shares must be valued in accordance with rule 1-D---Indian Wealth Tax Act, 1957---Indian Wealth Tax Rules, 1957, R.1-D. The market value of unquoted shares should be valued only in accordance with rule 1-D of the Wealth Tax Rules, 1957. CWT v. India Exchange Traders, Association (1992) 197 ITR 356 (Cal.) fol. (b) Wealth tax--- ---- Valuation of assets ---Unquoted shares---Contribution to approved gratuity fund is deductible from net worth of company---Wealth Tax Act, 1957---Indian Income-tax Act, 1961, Ss.36 & 40-A. The contribution payable to an approved gratuity fund can be said to be an ascertained liability and not a contingent liability and, consequently, the same has to be deducted for arriving at the net worth of the company for the purpose of working out the valuation of its shares. Standard Mills Co. Ltd. v. CWT (1967) 63 TTR 470 (SC) and CWT v. Ramaswami (S.) (1983) 140 ITR 606 (Mad.) applied. Held, that it was not clear whether the provision for gratuity represented the liability which was covered by section 36(1)(v) read with section 40-A(7) of the Income-tax Act, 1961. It was only in that case that the gratuity liability could be a deduction from the net worth of the company of which the shares were to be valued. Bombay Dyeing and Mfg. Co. Ltd. v. CWT (1974) 93 ITR 603 (SC); CWT v. Ram (S.) (1984) 147 ITR 278 (Mad.); Metal Box Co. of India Ltd. v. Their Workmen (1969) 73 ITR 53; 39 Comp Cas 410; 35 FJR 181 (SC) and Shree Sajjan Mills Ltd. v. CIT (1985) 156 ITR 585 (SC) ref. JUDGMENT ART K. SENGUPTA, J.---In this reference under section 27(1) of the Wealth Tax Act, 1957, the following questions of law have been referred to this Court for the assessment years 1976-77 and 1977-78: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the market-value of unquoted shares should be valued only in accordance with rule 1-D of the Wealth Tax Rules, 1957? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provision for gratuity made by the company was deductible from the assets of the company for…

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