Law:

Section:

Section 27(3), read with section 7, of the Wealth-tax Act, 1957 and rule ID of the Wealth-tax Rules, 1957 - Reference to High Court - Question of fact - Tribunal held that while working out value of shares, deduction on account of gross liabilities including advance tax was permissible within meaning of rule ID - In doing so Tribunal followed decision of jurisdictional High Court in CWT v. Pratap Bhogilal [1987] 167 ITR 501/ 32 Taxman 438 (Bom.) - Whether a question of law arose from Tribunal's order - Held, no Interpretation of statutes - Rule of beneficial construction FACTS The assessee was holding unquoted equity shares of a company (other than an investment company or a managing company agency). The assessee, while determining the value of aforesaid shares, claimed that 'tax payable' under clause (ii)( e) of Explanation II to rule 1D means gross tax imposable on the book profits in accordance with law without taking into consideration the advance tax. However, the department held that tax 'payable' means 'actually payable' after deducting advance tax. On appeal, the Commissioner (Appeals) allowed the assessee's claim. On appeal by the revenue the Tribunal upheld the order of the Commissioner (Appeals). The Tribunal also refused to make reference on the ground that the point was settled in favour of the assessee by the binding decision of the Bombay High Court in Pratap Bhogilal'scase (supra). On an application under section 27(3): HELD Giving the expression 'tax payable with reference to book profits in accordance with the law applicable thereto', the literal meaning - which normally ought to be given to a taxing statute - it means the gross tax imposable on the book profits and not the net tax payable after deducting the amount representing the advance tax paid. As the operative part of rule 1D indicates broadly the value of unquoted shares is computed by dividing the surplus assets over the liabilities by the number of fully paid-up equity shares. In this computation, certain assets and certain liabilities (though real) are to be ignored if they are not provided for in the balance sheet of the company. Clause (i) of Explanation II lists the assets in the…

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