Sabyasachi Mukharji, J. - (1.) In this reference under Section 27(1) of the W.T. Act, 1957, we are concerned with the assessment years 1961-62 to 1964-65 for which the relevant valuation dates were March 31, 1961, March 31, 1962, March 31, 1963 and March 31, 1964, respectively. The assessee is an individual and the issue relates to the valuation of certain shares held by the assessee in limited companies which were not quoted on the stock exchange. The Revenue had gone up in appeal before the Tribunal in respect of these four wealth-tax assessment years because it was not satisfied with the valuation of shares as sustained by the AAC in respect of the following companies: 1. General Investment Co. Ltd. 2. Indian Investment Co. Ltd. 3. Oriental Company Ltd., and 4. Luxmi Salt Company Ltd.
(2.) The assessee also had gone up in appeal before the Tribunal in respect of the said four wealth-tax assessment years as the assessee felt aggrieved with the valuation of shares as sustained by the AAC in respect of Mugneeram Bangur & Co. Pvt. Ltd. The face value of the said shares of the five companies was Rs. 100 each. The WTO valued the shares of the five companies on the basis of break-up value method. We will not go into the details of the said valuation. When the matter went up in appeal before the AAC, he found that the valuation of shares of General Investment Co. Ltd., Indian Investment Co. Ltd., Oriental Co. Ltd. and Luxmi Salt Co. Ltd. had been discussed threadbare by the Income-tax Appellate Tribunal in its order pertaining to the appeals of various shareholders for the assessment year 1960-61 and earlier years. The AAC, therefore, agreed with the contentions of the assessee that the yield basis was a very fair and reasonable method for arriving at the market value of the shares of the said four companies. The AAC considered the increase in bank rates of interest from 1960 onwards, the issue of new shares carrying dividend yield of over 9% from 1960 onwards, the report of the bonus commission and various other factors put forth to him on behalf of the assessee. The AAC, accordingly, held that the value of the shares of the said four companies should be computed on the basis of average yield of the immediately preceding five years at fourteen years' purchase price for the assessment year 1961-62, thirteen years' purchase price for the assessment year 1962-63, twelve years' purchase price for the assessment year 1963-64 and ten years' purchase price for the assessment year 1964-65 after deducting 10% from the yield for lack of negotiability and other adverse factors. The valuation of the shares on the said basis was directed to be adopted by the WTO after verification of the correctness of the figures as mentioned in the order of the AAC. It is not necessary for us to set out these in detail.
(3.) So far as the valuation of shares of Mugneeram Bangur & Co. Pvt. Ltd. was concerned, the AAC agreed with the WTO that the break-up method of valuation, as was adopted by him, was the only fair and reasonable one. However, the AAC directed the WTO to work out the breakup valuation of the shares of Mugneeram Bangur & Co. Pvt. Ltd., after taking into consideration the market value of the shares held by the said Mugneeram Bangur & Co. Pvt. Ltd. As mentioned hereinbefore, the matter went up before the Income-tax Appellate Tribunal. The Tribunal, after taking into consideration the rival contentions, observed in its order, inter alia, as follows: " After hearing the rival contentions, we are convinced that there is no substance in the appeals of the Department for the four years under consideration. The Appellate Assistant Commissioner has followed a well-founded and scientific method as suggested by the Tribunal in its elaborate order in respect of earlier years. No material has been placed before us for any interference on our part. In our opinion, therefore, the four appeals of the Department have no merit. So far as the assessee's appeals are concerned, the only grievance of the assessee is in respect of the valuation of share of Mugneeram Bangur & Co. Private Ltd. The Wealth-tax Officer had valued the said shares on the basis of break-up value method. The Appellate Assistant Commissioner, in appeals, agreed with the orders of the Wealth-tax Officer and upheld the break-up value method adopted by him. However, the Appellate Assistant Commissioner directed {the ITO) to work out the break-up value after taking into consideration the market value of the shares held by the said Mugneeram Bangur & Co. Private Ltd. Before us, the learned counsel appearing for the assessee has urged that there was no difference between Mugneeram Bangur & Co. Private Ltd. and the other four companies. According to the learned counsel, therefore, the Appellate Assistant Commissioner was not justified in adopting the break-up value method in respect of shares of Mugneeram Bangur & Co. Pvt. Ltd., whereas, while valuing the shares of the other four companies, the Appellate Assistant Commissioner followed the yield basis as suggested by the Tribunal in respect of earlier years. Our attention is drawn by the learned counsel for the assessee to the fact that the business of Mugneeram Bangur & Co. Pvt. Ltd. was being carried on by a partnership firm and that the said business was converted into a private limited company. But this fact was of no consequence, because the yield for earlier years when the business was done by a partnership firm could be treated as the profit of the limited company for purposes of arriving at the average yield. According to the learned counsel, therefore, the departmental authorities were not justified in adopting the break-up value method merely because Mugneeram Bangur & Co. Private Ltd. came into existence only in the present assessment year. The learned counsel made a statement at the bar that the assessee would have no objection whatsoever if the profits of the partnership firm are treated as profits of the limited company for purposes of arriving at the average yield and then applying the same formula as has been applied in respect of shares of General Investment Co. Ltd., Indian Investment Co. Ltd. and the other two companies. The departmental representative, on the other hand, urged that Mugneeram Bangur & Co. Private Ltd. was a newly formed company and, therefore, its average yield could not be worked out. Because of the peculiar position of the said company, the only course open to the departmental authorities was to work out the shares on the basis of break-up value method. The departmental representative also urged that the direction as given by the Appellate Assistant Commissioner for working out the break-up value is reasonable. After hearing the rival contentions we are of opinion that the departmental authorities had no choice but to work out the value of the shares of Mugneerm Bangur & Co. Private Ltd. on the basis of break-up value method, because the assessee did not concede the position that profits of the partnership firm should be treated as profits of the limited company for working out the average yield. However, there can be no dispute that for working out the value of shares of an investment company, which are not quoted, the most scientific method is the potential yield or the average yield method as has been adopted by the Appellate Assistant Commissioner in respect of shares of General Investment Co. Ltd., Indian Investment Co. Ltd., etc. Now, that the assessee has conceded the position that the profits of the partnership firm in earlier years may be treated as profits of the limited company for purposes of computing the average yield, there should be no dispute in valuing the shares accordingly. We, therefore, direct that the value of shares of Mugneeram Bangur & Co. Private Ltd. should also be valued according to the same formula of yield basis as the shares of the other four limited companies have been valued for the four years under consideration. The assessment orders shall be modified accordingly. ";