Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 22,83,000 being the sales- tax penalty should be allowed as a liability while valuing the unquoted equity shares under rule 1D of the WT Rules, 1957 ?

High Court Of Madras

Commissioner Of Wealth Tax vs. M.V.Ar. Meenakshi

Sections WT RULE 1D

R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.

Tax Case No. 171 of 1990

2nd November, 1998

Counsel AppearedMrs. Chitra Venkataraman, for the Revenue : Philip George, for the Assessee

JUDGMENT

Mrs. a. subbulakshmy, j.:

At the instance of the Revenue, the following question of law has been referred to us : “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 22,83,000 being the sales- tax penalty should be allowed as a liability while valuing the unquoted equity shares under rule 1D of the WT Rules, 1957 ?”

The assessee claimed that the sum of Rs. 22,83,000 being the sales tax penalty should be allowed as a liability while valuing her shares under r. 1D of the WT Rules. This claim was rejected by the WTO. On appeal, the AAC directed the WTO to allow this liability in valuing the shares in view of his decision in the case of M.V. Arunachalam, another shareholder and also following the Tribunal’s order in the case of M.V. Seetha Subbiah decided in 12th May,1987, for the asst. yrs. 1982-83 and 1980-81. On appeal, the Tribunal dismissed the Department’s appeal confirming the order of the AAC.

A similar question in the case of CWT vs. M.V. Arunachalam (2000) 241 ITR 686 (Mad), was considered and held that the order of the Tribunal cannot be ignored in determining the quantum of liability of the company that it would be a relevant piece of evidence to determine the value of liabilities as provided in rule 1D and that, therefore, the Tribunal should go into the question against and determine what was the exact quantum of sale tax liability towards penalty on the valuation date and, on that basis, direct the WTO to determine the value of the shares in terms or r. 1D.

4. Following the above decision and for the reasons stated therein, we remit the matter back to the Tribunal to go into the question again and determine what was the exact quantum of sales tax liability towards penalty on the valuation date and, on that date, direct the WTO to determine the value of the shares in terms of rule 1D.

[Citation : 247 ITR 689]

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