D.K. Kapur, J.
1. This application under s. 27(3) of the W. T. Act, 1957, seeks a reference on the following question of law:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the balance-sheet of M/s. Fodders Lloyd Corporation (P.) Ltd., as drawn up on December 31, 1975, should be considered for the purposes of valuating the shares of the company, which be acquired on March 29, 1975, and for which the valuation dates is March 31, 1975, when the balance-sheet as on December 31, 1974, already exists and thereby contravening the provisions of Explanationn I of rule 1D of the Wealth-tax Rules, 1957 ?'
2. This questions is the only question raised in this application, but there are a number of other applications where the questions is raised along with some other question, the Tribunal main judgment being in this case, the order in this case will also have effect on the other cases concerning this particular question.
3. The fact of the cases are that the assessed acquired 1,000 shares of M/s. Fodders Lloyd Corporation (Private) Ltd., of a face value of Rs. 100 each on March 29, 1975. This is part of a fresh issue of share capital. The valuation dated for the purpose of wealth-tax was March 31, 1975, i.e., only two days after the shares were acquired for Rs. 1,00,000. The assessed had claimed that these shares were worth Rs. 1,00,000 as he acquired them only two days before the valuation date. This was accepted by the WTO, but the CWT passed an order under s. 25(2) of the Act holding that the order of the WTO was erroneous and prejudicial to the interest of the Revenue and on an application of r. 1D of the W.T. Rules, 1957, the break-up value worked out to be Rs. 245 per share. The WTO was directly to make a fresh assessment.
4. On an appeal to the Tribunal, it was held that there was whether was no dispute that r. 1D was to be applied, but the only question was whether the balance-sheet of December 31, 1974, or that of December 31, 1975, should be considered for this purpose. The Tribunal applied the balance-sheet of December 31, 1975, and determined the value of the shares art Rs. 1,29,690. The Tribunal also held that the order of the WTO was erroneous, but it was not prejudicial to the interest of the Revenue, and, hence, the order of the CWT was set aside.
5. An application for reference to this court rejected on the ground that there was only a question of fact involved in the case.
6. Before us it was urged that there was a clear question of law as the balance-sheet of December 31, 1974, was to be applied and not that of December 31, 1975. We have examined this contention in the light of the W.T. Rules. The rule in question states a method for determining the market value of unquoted equity shares. There being no market price, the value has to be determined from the balance-sheet of the company. The rule elaborately deals with the method by which the value of a particular share is to be determined from the balance-sheet. It so happen that the rule contemplates by Expln. 1 that a reference should be made to the balance-sheet as drawn up on the valuation date which would mean March 31, 1975; it further provides that if there is no such balance-sheet then the immediately preceding balance-sheet is to be examined, and if neither of these exist, then a later balance-sheet is to be examined, i.e., the one for the succeeding year.
7. In this case, the company had no balance-sheet for March 31, 1975. So, the rule contemplates that the immediately proceeding balance-sheet, i.e., of December 31, 1974, should be examined to determine the value of the shares. Unfortunately, the particular share were issued by the company only on March 31, 1975, and so found no place in that balance-sheet. So, the rule could not be applied with reference to the balance-sheet of December 31, 1974. Learned counsel for the Department urged that even if the shares were not in existence at the time the previous balance-sheet was preparted, the rule required the same to be examined to determine the value. We cannot accept this proposition. The rule contemplates a method of evaluating the shares by breaking up the balance-sheet. If the shares were not in existence, then the breaking up of the balance-sheet will determine the price of the only the existing shars and not shares which did not exist. This is a mere problem in accountancy; it is apparent that when fresh shares capital is issued, then the break-up price of all the shares would be considerably alter. The shares issued on March 31, 1975, could not be evaluated on the basis of the balance-sheet of December 31, 1974.
8. The consequence would be that either the rule would not be available in the particular circumstance of is case of the balance-sheet of December 31, 1975, had to be applied. The questions of applying the balance-sheet of December 31, 1974, does not arise. The assessed might have urged that the rule does not apply, and hence, even the balance-sheet of December 31, so we need not examine the question whether any other method of evaluation is to be used in this case.
9. We agree with the Tribunal that no question of law arises, in the circumstances of this case, concerning the application of the balance-sheet of December 31, 1974, and this is a question of fact.
10. It may here be mentioned that the Rule are only meant to provide a convenient method of evaluating the market value of shares which are not normally sold or bought. The rule in order to be applied in the circumstance, of the present case requires the valuation to be done in accordance with the balance-sheet of the company in which that share is to be found. The balance-sheet of 1974 did not have these particular shares in its, so only a later had do be found for determining the market value.
11. As we see it, the rule in question, namely, r. 1D, cannot be used de hors in this essential assumption and object. A practical example will serve to illustrate the point. There is a company with a share capital of Rs. 10,000 whose assets as determine under the rule are Rs. 20,000, then the break-up value of each share will be Rs.200 against its face value of Rs. 100. If a further capital of Rs. 10,000 is issued, then the share capital will became Rs. 20,000 but the assets will become Rs. 30,000 so that the break-up value of each share will become Rs. 150 as against the previous value of Rs. 200. The value of the new shares can only be determined by examining the balance-sheet in which they are shown because only when can the value of Rs. 150 be determined. It is on this reasoning that we find that the proposed question of law does not arise in this case.
12. We accordingly dismiss the application, but leave the parties to bear their own costs.