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CWT v. Shri Yadupat Singhania - WEALTH TAX REFERENCE No. 117 of 1984 [2004] RD-AH 482 (9 August 2004)


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Court No.37

Wealth Tax Reference No. 117 of 1984

The Commissioner of Wealth-Tax

(Central), Kanpur .................. Applicant


Shri Yadupat Singhania, Kanpur  .............. Respondent


Hon'ble R.K.Agrawal, J.

Hon'ble K.N.Ojha, J.

The Income-Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 27(1) of the Wealth Tax Act 1957 , hereinafter referred to as the Act for opinion to this Court :

"1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that in determining the value of the shares of J.K.Jute Mills Ltd. under rule 1D of the Wealth Tax Rules, 1957, deduction was to be allowed in respect of accumulated dividend as cumulative preference shares ?

2.  Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that in determining the value of the shares of J.K.Jute Mills Ltd. under rule 1D of the Wealth Tax Rules, deduction should be allowed of depreciation as worked out in the income Tax assessment of the company.?"

Briefly stated  the facts giving rise to the present reference is as follows :

The assessee holds 1860 shares in J.K.Jute Mills Ltd. They were not quoted in the stock exchange. The Wealth Tax Officer referred the matter of their valuation to the Valuation officer. The Valuation officer valued them at the rate of Rs. 7.76 per share. In doing so, he applied rule 1D of the Wealth Tax Rules, 1957.

The respondent assessee preferred an appeal before the Commissioner of Wealth Tax (Appeals) who while allowing the appeal  directed the Wealth Tax Officer to rework out the value of shares of J.K.Jute Mills Ltd. under Rule 1D after deducting the accumulated outstanding dividend  as per income tax assessments in the case of the above company  and accordingly modified the   value of the shares to that extent.

The appeal filed by the Revenue had been dismissed by the Tribunal.

We have heard Shri Shambhu Chopra, learned counsel for the revenue and Shri Vikram Gulati who has put in appearance on behalf of the assessee .

Under Rule 1D of the Wealth Tax Rules Explanation II (2) as it stood during the relevant period had provided that certain liabilities in the balance sheet shall not be treated as liabilities among which the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the valuation date at a general body meeting of the company; and reserves, by whatever name called, other than those set apart towards depreciation were included. It is admitted case that the depreciation has not been provided for in the income tax proceedings. So far as cumulative outstanding dividend on preference shares are concerned there is nothing on record to show that there had been any declaration at a general body meeting of the company before the valuation date. This Court in the case of Commissioner of Wealth Tax Vs. Dr. Gaur Hari Singhania W.T.Reference No. 343 of 1983 decided on 26th July, 2004 had considered same question in respect of another person of the same group and had held in favour of the revenue.

Respectfully following the aforesaid decision we answer both the questions of law in the negative i.e. in favour of the revenue and against the assessee. There shall be no order as to costs.

Dt. 9.8.2004



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