B R DUGGAL Vs. WEALTH TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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P.L. Kanojia, Accountant Member -
(1.) THESE cross appeals arise out of the common order of the AAC and, hence, for the sake of convenience, they are disposed of by a common order.
(2.) The assessee, Shri B.R. Duggal, filed the original return of wealth-tax on 28-8-1976 declaring a net wealth at Rs. 8,20,538. In the original return, the assessee had shown the value of 3,360 shares in Atul Glass Industries (P.) Ltd., which he inherited from his late father, Shri F.C. Duggal, at Rs. 200 per share, i.e., the total value was shown at Rs. 6,72,000. Later on, along with a letter dated 14-9-1977, the assessee filed a revised return of net wealth. In this return, firstly the value of 780 shares of Atul Glass Industries (P.) Ltd. was excluded on the ground that these shares were given over to Smt. Shant Duggal by virtue of a probate issued in her favour. Secondly, the value of the remaining 2,580 shares was taken at Rs. 226 per share. This valuation was adopted on the basis of the order of the Assistant Controller in the case of late Shri F.C. Duggal, wherein the value of each share of Atul Glass Industries as on 16-11-1975 was taken at Rs. 226 per share. The WTO was of the view that the exclusion of 780 shares of the company could not be permitted as the ownership over these shares by Smt. Shant Duggal was under dispute in account of law and the assessee in the original return had already included these shares in the return of net wealth. With regard to the valuation of the shares, the WTO did not accept the value of the shares adopted by the assessee on the basis of the estate duty assessment of late Shri F.C. Duggal. According to the WTO the only method of valuation of these shares was by the break-up method as laid down in rule ID of the Wealth-tax Rules, 1957. Accordingly, he worked out the market value of each share of Atul Glass Industries (P.) Ltd. at Rs. 330 and the total value of 3,360 shares was determined at Rs. 11,08,800. This amount was included in the net wealth of the assessee as against the value declared by the assessee in the revised return at Rs. 5,83,828 in respect of 2,580 shares.
Against the decision of the WTO, the assessee went in appeal and submitted that the WTO was not justified in valuing the shares of Atul Glass Industries (P.) Ltd. on the break-up method on the basis of the balance sheet of the company for the assessment year 1976-77 as on 31-10-1975. The assessee also objected to the inclusion of the 780 shares whose ownership was claimed by Smt. Shant Duggal. It was argued on behalf of the assessee that the break-up method was not applicable in the case of a running concern and the valuation should have been arrived at only on the yield method. In this connection, reliance was placed on the decision of the Bombay High Court in Smt. Kusumben D. Mahadevia v. CWT  124 ITR 799. On the question of valuation, the AAC while agreeing with the assessee that since the company is a growing concern and is not ripe for winding up, the break-up method would not be applicable, at the same time observed that the correct market value of the shares could not be arrived at by the yield method. He was, therefore, of the opinion that the method adopted by the Assistant Controller in the case of late Shri F.C. Duggal, valuing the shares at Rs. 226.29 per share, was the correct method and the value of the shares should be determined on that basis. With regard to the exclusion of the 780 shares, the AAC observed that the mere issue of the probate in favour of Smt. Shant Duggal did not entitle her to the ownership in respect of these 780 shares and, therefore, the WTO was justified in including the value of these shares also towards the net wealth of the assessee.
(3.) AGAINST the above findings of the AAC, the assessee as well as the department have come up in the present cross appeals. The contention of the assessee is that firstly, the shares of Atul Glass Industries (P.) Ltd. should have been valued on the yield basis and not either on the break-up method or the method adopted in the estate duty case of late Shri F.C. Duggal. Secondly, it has been contended that the inclusion of the 780 shares for which probate was obtained in favour of Smt. Shant Duggal should not have been made towards the net wealth of the assessee. The contention of the department in its appeal is that the AAC was not justified in directing that the value of the shares of Atul Glass Industries (P.) Ltd. may be taken at Rs. 226.29 per share as adopted by the Assistant Controller as against the break-up value of Rs. 330 per share adopted for wealth-tax purposes in rule ID.;
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