SENGUPTA, J. - (1.) IN this reference under S. 27(1) of the WT Act, 1957 ('the Act') the following questions of law have been referred by the Tribunal for the asst. yr. 1980-81. "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the transfers to the reserve for band and doubtful debts and advances were not to be taken into account in calculating the maintainable profits of Karam Chand Thapar and Bros. Ltd.? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that deposit made under the Compulsory Deposit Scheme (Income tax Payers) Act, 1974 is includible in the net wealth of the assessee? Shortly stated, the facts, inter alia, are that the assessee, an individual, showed in the return of wealth the value of unquoted 399 shares of Karam Chand Thapar and Co. Ltd. and investment company, as on the valuation date being 31st March, 1980 at Rs.1,911 per share. The WTO while determining the value of the said shares applied the yield method prescribed by the Board in its Circular No. 332A, dt. 31st March, 1982, in 135 ITR (St) 12. However, in determining the value by the said method the WTO added back, inter alia, the reserve for bad and doubtful debts and advances for the purpose of arriving at maintainable profits.
(2.) IN appeal before the CWT (A), the assessee challenged such disallowance of the deduction, the CWT (A) however, upheld the WTO's action. Being aggrieved, the assessee came in appeal before the Tribunal. The Tribunal found that on identical facts the order of the CWT (A) in the assessee's case for the asst. yr. 1979-80 stood approved by the Tribunal ruling out any scope for interfering with the order under appeal. Thus, the appellate order of the CWT (A) was upheld by the Tribunal. Another point raised by the assessee before the Tribunal was that deposit under (CDS) should not have been included in the total wealth of the assessee. The Tribunal held that this point did not arise out of order of the CWT (A). The Tribunal further observed that in view of the order of the Tribunal for the asst. yr. 1979-80 and that of Special Bench in the case of Smt. Sushilaben A. Mafatlal vs. WTO (1986) 18 ITD 189 (Bom) CDS deposit has to be included in the total wealth of the assessee. The Tribunal accordingly, dismissed both the assessee's and Revenue's appeals. The second question relating to the includibility of the deposit under the CDS is concluded by the decisions of this Court in the case of Smt. Vinita Devi Singhania vs. CWT (Matter No. 1158 of 1984, dt. 18th Feb., 1991). Following the said decision we hold that CDS deposit is includible in the total wealth of the assessee. We, therefore, answer the second question in the affirmative and in favour of the Revenue and against the assessee.
(3.) WITH regard to the first question, the learned counsel, Dr. Pal, appearing for the assessee contended that there being consensus between the parties that the yield method, as prescribed by the Board in its Circular No. 332A dt. 31st March, 1982 (supra) should apply, there cannot be any manner of doubt as to the deductibility of the reserve for bad and doubtful debts in arriving at the maintainable profits of the company, whose shares are begin valued. According to him, the said circular holds that in the case of a company, which is a going concern and whose shares are not quoted in the Stock Exchange, the profit which the company has been making and should be capable of making or, in other words, the profit-earning capacity of the company, would ordinarily determine the value of its shares. He, further, pointed out that the circular requires that in determining the profit-earning capacity of the company the book profits of the company for the five years immediately preceding the valuation date have to be ascertained and certain adjustments are to be made in respect of such book profits, as laid down in para 4 of the said circular.;