Satish Chandra, C.J. - (1.) THE assessee is an individual. In his return for the assessment year 1972-73, under the W.T. Act, he showed the value of certain unquoted shares held by him at a figure which was arrived at on the basis of the mean of the values obtained on the break-up basis and the yield basis. THE WTO did not accept this method of valuation of the unquoted shares. He held that they were liable to be valued by Rule 1-D of the W.T. Rules. He computed the value of the unquoted shares accordingly. He repelled the further submission of the assessee that while computing his own wealth on the valuation date the estimated amount of capital gains tax which would be payable by him in the event of the sale of these shares should be deducted. This view was upheld on appeal as well as on further appeal by the Tribunal. At the instance of the assessee, the Tribunal has referred the following questions of law for our opinion : "1. Whether the Tribunal was right in holding that rule 1-D of the Wealth-tax Rules was binding on the Wealth-tax Officer as well as the appellate authorities while valuing the unquoted equity shares ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction of the estimated amount of capital gains tax?"
(2.) THE first question is to be decided in favour of the department on the strength of a Division Bench decision of this court in CWT v. Sripat Singhania [1978] 112 ITR 363 (All). In that case, this court held that the value of unquoted equity shares was liable to be determined in accordance with the method prescribed by Rule 1-D. THE first question has to be answered against the assessee. In respect of the second question, the submission of Mr. Khare, learned counsel appearing for the assessee, was that since under Section 7(1) of the Act the value of unquoted shares in question was liable to be arrived at after notionally imagining a sale and then determining what should be the estimated value on such a sale, it was necessary that the capital gains tax which was liable to be paid by the assessee on the sale amount, should equally be taken into consideration. Section 7(1) of the Act provides : "7. (1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch, if sold in the open market on the valuation date." The relevant and material words are "which it would fetch". The WTO has to estimate the price. The method of valuation prescribed by Section 7(1) of the Act does not postulate deduction of any necessary expenses which the assessee was bound to incur in relation to such a sale. This view was accepted by the Supreme Court in Pandit Lakshmikant Jha v. CRT [1973] 90 ITR 97. It was observed (p. 103): "There is nothing in the language of Section 7(1) of the Act which permits any deduction on account of the expenses of sale which may be borne by the assessee if he were to sell the asset in question in the open market. The value according to Section 7(1) has to be the price which the asset would fetch if sold in the open market.....The vendor may, for example, have to pay for the brokerage commission or may have to incur other expenses for effectuating the sale. It is not, however, the amount which the vendor would receive after deduction of those expenses but the price which the asset would fetch when sold in the open market as would constitute the value of the asset for the purpose of Section 7(1) of the Act."
(3.) IN other words, the contention that the necessary expenses should be deducted would be the correct method of computing price, if the relevant words under Section 7(1) had been "the price which in the opinion of the Wealth-tax Officer the assessee would receive" instead of the words "which it would fetch". Such an interpolation in the Section is not permissible on the ground of equitable considerations. The learned counsel for the assessee relied upon a decision of the Supreme Court in CWT v. P. N. Sikand [1977] 107 ITR 922. In that case, the question of law was as to how the value of a leasehold interest in immovable property, in which the lessor had a right to share the price in case of sale, was to be valued under the W.T. Act. It was held that the lessee being the assessee, the interest belonging to him alone could be the subject-matter of valuation. Whatever interest the lessor had in the sale consideration was liable to be deducted so as to arrive at the correct value of the lessee's interest in the property. In this case, no question of making deduction by way of necessary expenses attachable to the event of sale was considered. The point emphasised by their Lordships was that in the case of an asset, which is owned by more than one person, the value of the assessee's interest alone is liable to be taken as the value of the asset in the hands of the assessee. This case is clearly distinguishable, because in the present case, the assessee is the exclusive and sole owner of the unquoted shares. No one else is entitled to share in the sale proceeds in case they "are sold.;