Law: Wealth Tax Act, 1957

Section: 27(1),2(m)

Law: Wealth Tax Rules, 1957

Section: 1D

Wealth tax----- Valuation of assets---Valuation of unquoted equity shares ---Deductions­ Liability towards sales tax penalty---Sales Tax Appellate Tribunal modifying order of penalty subsequent to valuation date---Subsequent order must be taken into account in valuing share---Indian Wealth Tax Act, 1957---Indian Wealth Tax Rules, 1957, R.1D. Under rule 1D of the Wealth Tax Rules, 1957, the market value an unquoted equity share of any company shall be determined in the man prescribed in the said rules. Under the rules, the value of all the liabilities shown in the balance-sheet of the company shall be deducted from the value of the assets shown in the balance-sheet and then the value of the shares shall be determined. The crucial words found in rule 1D of the Rules as "value all the liabilities as shown in the balance-sheet". The rule emphasises that liability shown in the balance-sheet should be valued and that the value of liability should be deducted from the value of the assets of the company the valuation date. The final determination of the tax liability, whether way of appeal or revision cannot be ignored as the final order determining the ultimate tax liability would directly relate to the question whether on valuation date, there was any liability at all owed by the company. The assessee held shares in several companies which are not quoted in the regular stock exchange. While valuing the shares for the assessment year 1980-81, the Wealth Tax Officer excluded the liability towards the sales tax penalty not shown in the balance-sheet amounting to Rs.22,83,000. The Appellate Assistant Commissioner held that the liability should be taken into account. At the time of hearing the appeal before the Tribunal, it was submitted on behalf of the Department that the sales tax penalty was subsequently cancelled and., therefore, there was no justification for treating the same as the liability for determining the value of the share in terms of rule 1D of the Rules. The Appellate Tribunal, however, rejected the contention urged on behalf of the Department on the ground that the liability as on the date of valuation has to be taken into account irrespective of the…

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