Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the CWT (Appeals) directing the valuation of shares of M/s Gedore Tools India P. Ltd. on yield basis as against the value of the shares worked out in accordance with r. 1D of the WT Rules ?

Counsel Appeared

P. N. Misra & R. C. Pandey, for the Petitioner : None appeared, for the Respondent

B. N. KIRPAL, J.:

The petitioner seeks reference of the following question of law to this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the CWT (Appeals) directing the valuation of shares of M/s Gedore Tools India P. Ltd. on yield basis as against the value of the shares worked out in accordance with r. 1D of the WT Rules ?”

The question involved is, in our opinion, covered by a Division Bench authority of this Court in the case of the assessee herself, namely, Sharbati Devi Jhalani vs. CWT (1986) 159 ITR 549.

Learned counsel for the petitioner states that the said decision of this Court has not been accepted by the Department and a special leave petition is pending in the Supreme Court. Be that as it may, as far as this Court is concerned, the decision in the aforesaid case clearly covers the present controversy before us and, as far as this Court is concerned, the question sought to be raised is academic.

Learned counsel for the petitioner then sought to contend that even if Sharbati Devi Jhalani’s case (supra) is correct, nevertheless it has not been correctly applied by the Tribunal. It is sought to be contended that this Court never meant that r. 1D would not apply if the valuation date of the company, whose shares are not quoted, and the valuation date of the assessee do not coincide. We do not agree with this submission. At page 559, this Court observed as follows : “In order to uphold the validity of r. 1D and at the same time not to do violence to the language of the relevant provisions, we are of the opinion that where the valuation date of the company and of the assessee is the same, then the application of r. 1D is mandatory. Where, however, the two dates do not coincide, then the applicability of r. 1D would be directory and not mandatory. In the latter case, it will be open to the assessee to show to the WTO that on his valuation date the value of it he unquoted shares was different from the value as arrived at by applying r. 1D. In the former case, where the dates of valuation are identical, the WTO will have to compute the value of the unquoted shares by applying r. 1 D. Where, however, like the present, the valuation dates are not the same, even the WTO may not be bound to take recourse to the provisions of r. 1D.”

The meaning of the aforesaid passage is very clear. It is this that r. 1D will apply compulsorily if the valuation date of the company and of the assessee is the same. If the two dates are different, then the assessee can show to the WTO that on his valuation date, the value of the unquoted shares arrived at by the yield method is the one which should be adopted. By saying that in such a case, namely, where the two dates are different, r. 1D is directory what is meant is that if the assessee chooses not to take recourse to valuing the shares as per the yield method, then it is open to the WTO to apply r. 1D. It is in this sense that it was observed by this Court that r. 1D is directory where the valuation date of the company and the valuation date of the assessee do not coincide. In such a case, if the WTO proposes to invoke rule ID, it Will be open to the assessee either to accept it, in which case the shares will be valued as per r. 1D, or to dispute the valuation and if the assessee chooses not to accept the valuation as per rule ID, then the shares have to be valued according to the yield method as has been specified by the Supreme Court in the cases of CWT vs. Mahadeo Jalan (1972) 86 ITR 621 and CGT vs. Kusumben D. Mahadevia (1980) 122 ITR 38. This is exactly what we have said in Sharbati Devi Jhalani’s case (supra). Reference to s. 16A was made because if there is a difference in the value as returned by the assessee and the value estimated by the WTO and that difference is more than what is prescribed by the Rules, then reference has to be made under s. 16A to the Valuation Officer. How the Valuation Officer is to value has been indicated at page 561 in the following words: “Once such a reference has been made, the valuation has then to be determined by the Valuation Officer. The value of the asset which has to be determined by the Valuation Officer has to be arrived at according to s. 7(3) of the Act. Sub-s. (3) of s. 7 clearly provides that the asset is to be valued by the Valuation Officer by determining what will be its price if sold in the open market on the valuation date. In case the asset is a house, then the determination is to be of its market value on the valuation date as specified in sub-s. (4). Sub-s. (3) opens with the words `notwithstanding anything contained in sub-s. (1)’. This will mean that notwithstanding there being anything contrary in sub- section (1), the Valuation Officer is to estimate the value of an asset in the manner specified in sub-s. (3). In other words, the powers of the Valuation Officer are not subject to any rules which may be made in determining the value of an asset. The Valuation Officer, therefore, is not bound to value the unquoted shares by adopting the method prescribed by r. 1D. The Valuation Officer is to value the unquoted shares by estimating what it would fetch if sold in the open market on the valuation date. How such shares are to be valued has been specified by the Supreme Court in CWT vs. Mahadeo Jalan (supra) and CGT vs. Smt. Kusumben D. Mahadevia (1980) 122 ITR 38.”

The Valuation Officer is not bound by the provisions of s. 7(1) and the rules framed thereunder and has to value the shares under s. 7(3) and in the case of unquoted shares, the valuation is to be in the manner specified in the aforesaid decisions of the Supreme Court. This is what is evident from the aforesaid observations in our judgment.

In our opinion, even though a question of law arises in this case, the same is academic because of our earlier decision in the assessee’s own case. Dismissed. There will be no order as to costs.

Petition dismissed.

[Citation :182 ITR 487]