YATINDRA SINGH,J. - (1.) HEARD Sri R.S. Agarwal for the assessee and Sr Bharat Ji Agarwal and Sri A.N. Mahajan for the Department.
(2.) THIS is a reference under S. 27(1) of the WT Act in which the following question has been referred to us for our opinion : "Whether on the facts and in the circumstances of the case, the TRIBUNAL was right in upholding the order of the A.A.C., who has directed the WTO to accept the value of the unquoted equity shares of M/s Indian Textile Co. (P) Ltd. and M/s Banaras House Ltd. arrived at by the Chartered Accountant which is based on r. 1D of the W.T. Rules, while in calculating the value of these shares, deductions have been made for liabilities on account of gratuity and tax provision ?" For the sake of convenience we are reframing the above question into two issues : "1. Whether on the facts and in the circumstances of the case the value of the unquoted equity shares of M/s Indian Textile Co. (P) Ltd. and M/s Banaras House Ltd. should be arrived in accordance with r. 1D ? 2. Whether while calculating the liabilities in accordance with r. 1D the amount of gratuity and tax provision should be deducted ?" The questions as reframed by us have also been decided by the Supreme Court in Bharat Hari Singhania & Ors. vs. CWT & Ors. (1994) 118 CTR (SC) 125 : (1994) 207 ITR 1 (SC). The Supreme Court has held : (1) That r. 1D is perfectly valid and effective. The rule has to be followed in every case where unquoted equity shares of a company (other than an investment company or a managing agency company) have to be valued. All the authorities under the Act including the Valuation Officer are bound by the said rule. Rule 1D is mandatory. (2) While valuing the unquoted equity shares under r. 1D, no deductions on account of capital gains tax which would have been payable in case the said shares were sold on the valuation date can be made. Similarly, no other deductions including provision for taxation, provident fund and gratuity are admissible. Rule 1D is exhaustive on the subject.
(3.) IN view of the above, we answer the question No. 1 as reframed by us in the affirmative and question No. 2 in the negative i.e., in favour of the Department and against the assessee.;