B.L Hansaria, C.J:— These applications appertain to the assessment years 1959-60 to 1965-66. As a common question relating to valuation of shares held by the assessee in Messrs. Kalinga Tubes Ltd. came up for consideration during the aforesaid assessment years, the authorities including the learned Appellate Tribunal have passed a common order and have valued the shares as per the break-up method mentioned in rule 1D of the Wealth-tax Rules, 1957. At the behest of the assessee, the following question of law has been referred for the opinion of this court:
“Whether, on the peculair facts and in the circumstances of the case, rule 1D of the Wealth-tax Rules, 1957, should have been applied for the purpose of determining the value of the shares in Kalinga Tubes Limited held by the assessee?”
2. The peculiar facts about which mention has been made in the aforesaid question relate to a long line of litigation involving the assessee. This court also had occasion to deal with the dispute and vide its decision in Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1962 Orissa 202, it was held, inter alia, by this court that the shares with whose valuation we are concerned and of which at the relevant time the Central Bank of India was the registered holder/pledgee, would be transferred to Shanti Prasad Jain and/or his nominee at the face value of the said shares.
3. It is, therefore, required to be seen as to whether, on its peculiar facts, anything else than the face value is to be taken as the market value of the shares.
4. Section 7 of the Wealth-tax Act, 1957, dealing with the valuation of assets states that the same shall be estimated at the price which, in the opinion of the Wealth-tax Officer, they would fetch if sold in the open market on the valuation date. It has been held by the apex court in CWT v. Mahadeo Jalan, [1972] 86 ITR 621, that, for the aforesaid purpose, the Wealth-tax Officer has to ascertain what the assets would fetch if sold in the open market which would be the price which a willing seller would accept and a willing buyer would pay. As, in these cases, the shares were unquoted equity shares and as the Wealth-tax Officer was not in a position to know what a willing buyer would have paid for such shares, the breakup method as provided in rule 1D of the aforesaid rules was applied.
5. A perusal of the order of the learned Tribunal shows that it placed heavy reliance on the decision of the Allahabad High Court in CWT v. Laxmipat Singhania, [1978] 111 ITR 272. It was held that the well-accepted method of valuing an unquoted equity share was its break-up value. As against this, Shri Patnaik refers to the aforesaid decision of the apex court wherein it is said that the yield method is the generally applicable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation. As against this observation finding place at page 634 of the judgment, Shri Ray brings to our notice the observation in that page itself to the effect that the court did not propose to lay down any hard and fast rule in this connection, as the nature of the business, the prospects of profitability and other considerations will have to be taken into account as will be applicable to the facts of each case.
6. From the above, it appears to, us that the view taken by the learned Tribunal that the valuation method as spelt out in rule 1D is the normal method of valuation cannot be accepted as it had been clearly laid down in Mahadeo Jalan's case, [1972] 86 ITR 621 (SC), that break-up method is the one to be resorted to in exceptional circumstances or where the company is ripe for liquidation. There is nothing before us to show as to what is the [exceptional circumstance in the present case nor can it be said that the company in question is ripe for liquidation. Reliance on the break-up method by following Laxmipat Singhania's case, [1978] 111 ITR 272 (All) cannot, therefore, be upheld. This apart, in view of the peculiar facts of this case which are related to the long legal dispute between the parties in course of which this court had also required, as already noted, transfer of shares at face value, we are of the opinion that the valuation of the shares at the face value by the assessee as given in his returns was the proper valuation to be accepted and recourse to rule 1D was not justified.
7. We would, therefore, answer the question referred to us in the negative.
D.M Patnaik, J.:— I agree.
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