Law: Companies Ordinance, 1984

Section: 235

Law: Wealth Tax Rules, 1963

Section: 8(2)(c)(i),8(2)(c)(ii)

(a) Companies Ordinance (XLVII of 1984)---S.235---Wealth Tax Rules, 1963, R. 8(2)(c)(i)(ii) --- Valuation of shares of a company---Methodology. Rule 8(2)(c)(i) of Wealth Tax Rules, 1963 provides that for shares of an incorporated company not quoted at the Stock Exchange, out of the "face value" or the "break-up value" of the shares, whichever is higher is to be adopted as the share value. Under rule 8(2)(c)(ii), the total wealth of the company is to be computed by adding to paid-up capital, debentures, reserves and the balance as per the Profit and Loss Account and liabilities are to be accounted for by excluding items forming part of the reserves. And from that the total so arrived at, the paid-up value of the preference shares and debentures is deductible, and the resulting balance is to be divided by the amount of paid-up ordinary shares capital value of the shares held by an assessee. The break-up value of the shares of company will be negative irrespective of its "face value". (b) Companies Ordinance (XLVII of 1984)---S.235---Wealth Tax Rules, 1963, R. 8(2)(c)(i)(ii) --- Share of a dissolved company, valuation of---Mode---Such share would not be taken as an "asset" owned by its former shareholders---Such share would carry no value with reference to paid-up capital or subscribed capital of such company---Reasons stated. In the case of winding-up of a company, liquidation of its assets and ultimate dissolution of company, its share would carry no value with reference to paid-up capital or subscribed capital. The reason is that on dissolution of the company, its assets and capital are also liquidated either by adjustment or distribution or in the final accounts. A share being a unit of the capital also erodes with reference to the capital of company. On dissolution, the company is taken off the register of incorporated companies. The company, thus, ceases to exist and so do its share units. The shares of a dissolved company as such cannot be held to be an "asset" owned by its former shareholders. ORDER The Commissioner of Income Tax and Wealth Tax through this appeal has sought decision purportedly on the following question of law which are claimed to have…

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