| Case ID |
262955c5-0e48-4584-a114-aa165e1ab07b |
| Body |
View case body. Login to View |
| Case Number |
Matter No. 5668 of 1988 |
| Decision Date |
Jul 11, 1991 |
| Hearing Date |
|
| Decision |
The Tribunal was justified in holding that for the valuation of unquoted shares of investment companies, the net maintainable profits should be arrived at after deducting actuarially valued provisions for pension and gratuity. The principles laid down in the Central Board of Direct Taxes Circular No. 332-A, dated March 31, 1982, were applied correctly to ascertain the valuation method. The decision emphasized that the profit-earning capacity of the company must be taken into account and that provisions made on an actuarial basis represent a present liability. The judgment reinforced the notion that unquoted shares of a going concern should be valued based on their earning capacity rather than on a break-up basis unless the company is in liquidation. Thus, the adjustments for pension and gratuity liabilities were deemed necessary for determining the net maintainable profit, affirming the Tribunal's ruling. |
| Summary |
This case revolves around the valuation of unquoted shares of an investment company for wealth tax purposes, specifically under the Wealth Tax Act of 1957. The Calcutta High Court examined the principles defined in the Central Board of Direct Taxes Circular No. 332-A dated March 31, 1982, which provides guidelines for evaluating such assets. The court focused on the importance of profit-earning capacity in determining share value, emphasizing that provisions for pension and gratuity, when valued actuarially, must be deducted in calculating maintainable profits. The ruling highlights the legal framework governing wealth tax assessments and the methodologies applicable for investment companies, ensuring that accurate financial assessments reflect the true economic standing of the entities involved. This case is significant for tax professionals, accountants, and legal practitioners dealing with wealth tax evaluations and corporate financial assessments. Key terms include Wealth Tax Act, unquoted shares, valuation methodologies, profit-earning capacity, and actuarial provisions. |
| Court |
Calcutta High Court
|
| Entities Involved |
Not available
|
| Judges |
AJIT K. SENGUPTA,
SHYAMAL KUMAR SEN
|
| Lawyers |
Dr. Pal
|
| Petitioners |
COMMISSIONER OF Wealth Tax
|
| Respondents |
BRIJ MOHAN TRAPPER
|
| Citations |
1993 SLD 347,
1993 PTD 1270,
(1993) 199 ITR 642
|
| Other Citations |
CGT v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38 (SC),
CWT v. Mahadeo Jalan (1972) 86 ITR 621 (SC),
CWT v. Ram (S.) (1984) 147 ITR 278 (Mad.),
Vazir Sultan Tobacco Co. Ltd. v. CIT (1981) 132 ITR 559 (SC)
|
| Laws Involved |
Wealth Tax Act, 1957
|
| Sections |
27(1),
7
|