R.M.SAHAI, J. - (1.) THE Tribunal, Allahabad Bench, Allahabad, has referred the following two questions for the opinion of this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was competent to entertain and decide the question with regard to the vires of r. 1D of the WT Rules, 1957 ? 2. Whether, on the facts and in the circumstances of the case, the view taken by the Tribunal that r. 1D of the WT Rules, 1957, instead of serving the purpose of the Act, puts a severe curb on it, particularly on the provisions contained in ss. 7(1) and 24(6) of the WT Act, 1957, and hence it is ultra vires of those sections, is correct in law ?"
(2.) THE assessee owned shares in certain companies and these shares were not quoted in the stock exchange. For the purpose of assessment to Wealth -tax, he adopted certain method of valuation of these shares. This method was not accepted by the WTO who valued those shares in accordance with r. 1D of the WT Rules. This rule was inserted by the WT (Amendment) Rules, 1967. The application of this rule was upheld by the AAC against whose decision the assessee filed appeals. Before the Tribunal the validity of r. 1D was challenged. The Tribunal held that r. 1D was ultra vires the provisions of S. 7(1) r/w S. 24(6) of the WT Act. It consequently directed that the method adopted by the assessee for valuing these shares be accepted. On the first question referred to us, the learned standing counsel for the Department has urged that the Tribunal was not competent to entertain and decide the question with regard to the vires of r. 1D. He further urged that there is no conflict between r. 1D and ss. 7(1) and 24(6). The question whether provisions of a statute can be declared as ultra vires by a Tribunal created by or under a statute, is no longer res integra in view of the following pronouncement by the Supreme Court in K. S. Venkataraman & Co. (P) Ltd. vs. State of Madras (1966) 60 ITR 112, 130 ; (1966) 17 STC418, 437 (SC) : "As the Tribunal is a creature of a statute, it can only decide the dispute between the assessee and the CIT in terms of the provisions of the Act. The question of ultra vires is foreign to the scope of its jurisdiction. If an assessee raises such a question, the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the said objection or decide on it."
(3.) THIS principle was reiterated by the Supreme Court in CIT vs. Straw Products Ltd. (1966) 60 ITR 156 (SC) and C. T. Senthilnathan Chettiar vs. State of Madras (1968) 67 ITR 102 (SC). The learned counsel for the assessee has, however, submitted that what has been held by the Tribunal is invalid is not any section of the Act, but only a rule which is in direct conflict with the provisions contained in S. 7(1) of the Act. He has further submitted that rules can be framed under an Act only to carry out the purposes of the Act and that it is open to a Tribunal constituted under that Act to examine whether any of the rules framed thereunder are in conformity with the provisions contained in the Act or inconsistent therewith or beyond the scope thereof. It was also submitted by him that it is open to such Tribunal to ignore any rule which is inconsistent with the provisions of the Act and to follow the provisions of the Act in preference to such rules. He has placed reliance on the following observations in North British and Mercantile Insurance Co., In re (1937) 5 ITR 349 (Cal) (FB) : "Where there is a conflict between rules framed under a statute and the enactment of the statute itself, the enactment must be treated as the governing consideration and the rules as subordinate to it even though the rules may have statutory authority." ;