Law: Wealth Tax Rules, 1957

Section: 1D

Law: Income Tax Act, 1961

Section: 41(2),45,10(2)(xv)

Wealth tax----- Valuation of shares---Tax liability of company upheld by High Court--­Tax liability to be deducted for purpose of determining break-up value of the shares of company---Indian Wealth Tax Rules, 1957, R.l-D. The assessee was a shareholder in a company, S, which was assessed to tax in a sum of Rs. 48,15,668 which was upheld by the High Court. The assessee was assessed to wealth tax for the assessment year 1980-81 and the question was as to whether the tax liability of Rs.48,15,668.of the company was to be deducted from the total assets of the company for the purpose of determining the break-up value of the shares of the company, S, under rule 1D of the Wealth Tax Rules, 1957. The a Income-tax Officer and the Appellate Assistant Commissioner held that the amount was riot deductible as the Appellate Assistant Commissioner had set aside the assessment of the company, S. On appeal, the Tribunal set aside the orders of the Appellate Assistant Commissioner so far as the deductibility of the sum was concerned for the purpose of determining the break-up value of the shares of the company, S. Held, that it was only if and when the Supreme Court reversed the decision of the High Court on the appeal of the company, S, that the company could be said to have no liability for the payment of the sum of Rs. 48,15,668. As things stood the said sum was a liability which the company had incurred and that sum was required to be deducted from its total assets for the purpose of determining the value of the shares. CWT v. Mohan Lal Nopany (1970) 78 ITR 435 (Cal:) distinguished. Kedarnath Jute Mfg. Co. Ltd. v. CIT (1971) 82 ITR 363; (1971) 28 STC 672 (SC) and CWT v. K.S.N. Bhatt (1984) 145 ITRJ (SC) fol. Southern Roadways Ltd. v. CIT (1999) 235 ITR 21 (Mad.) ref. JUDGMENT R. JAYASIMHA BABU, J.---As to whether tax liability Which had been assessed under an order of assessment, but which has been set aside in appeal was not to be regarded as a liability which could be deducted for the purpose of determining the break-up value of the shares of the company in terms of rule 1-D of the Wealth Tax Rules, 1957, is the question that has been referred to us at the instance of the…

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