D.K. Kapur, J.
1. In this application for reference under s. 27(3) of the W.T. Act, 1957, a reference is sought of the following question of law:
'(a) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the adjustment in the balance-sheet as envisaged under Explanationn II(i)(b) of the Wealth-tax Rules, 1957, is not limited to only a debit balance of the profits & loss account thereby excluding the investment of Rs. 17,85,600 in the share of M/s. Pibco Ltd. from the assets of the company, M/s. Punj sons (P.) Ltd., while valuing its shares
(b) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the balance-sheet of M/s Fedder Lloyd Corporation Pvt. Ltd., as drawn up on December 31, 1975, should be considered for the purpose of valuing the shares of the company which he acquired on March 29, 1975, and for which the valuation date 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. As the reference application has been rejected under s. 27(1) of the Act by the Income-tax Appellate Tribunal on the ground that it is a pure question of fact.
3. The facts of the case are that the assessed was a shareholder of M/s. Punj Sons (P.) Ltd., owning shares of a face value of Rs. 75,000. The CWT passed an order under s. 25(2) holding that the WTO's order accepting the face value as erroneous and prejudicial to the interest of the Revenue. He valued the shares of M/s. Punj Sons (P.) Ltd., under r. 1D of the W.T. Rules, 1957, at Rs. 192 per share. The assessed appealed to the Tribunal, who agreed that the shares had to be valued on the basis of r. 1D because these were unquoted shares.
4. In making the calculation under that rule, the balance-sheet of M/s. Punj Sons (P). Ltd., had to be referred to, which showed an investment of Rs. 17,85,600 in the shares of M/s. Pibco Ltd. However, M/s. Pibco Ltd., had its own balance-sheet which showed that against the share capital of Rs. 30,00,000 the accumulated losses in that company were Rs. 46,49,140 and hence, these shares which had a face value of Rs. 17,85,600 were valueless. The Tribunal, thereforee, excluded the sum of Rs. 17,85,600 from the assets of M/s Punj Sons (P.) Ltd., and found that there was no error by the WTO when taking the value of the shares of M/s. Punj Sons (P.) Ltd., as being the same as the face value. The Tribunal accordingly held that there was no error in the WTO's order which could lead to its revision under s. 25(2) of the Act, and nor was that order prejudicial or against the interest of the Revenue.
5. These are the circumstances which have led to the application for reference. It was urged for the Department that r. 1D had to be applied in the circumstances of the case to the balance-sheet of M/s. Punj Sons (P.) Ltd., and that the balance-sheet showed that there was an investment of Rs. 17,85,600 in the shares of M/s. Pibco Ltd. If that was so, it was not open to further determine was the true value of those Pibco shares. We have examined this contention with some interest because it involves a further question as to how far you can break-up the value of the amounts. mentioned in the balance-sheet of M/s. Punj Sons (P.) Ltd. Here is a case of a shareholder of a private limited company which, in turn, is a shareholder of a public limited company. The balance-sheet of the company of which the assessed holds shares is M/s. Punj Sons (P.) Ltd. If we merely adopt the balance-sheet figures without taking into consideration an the real value of the assets owned by M/s. Punj Sons (P.) Ltd. we will get an entirely artificial result. M/s. Punj Sons (P.) Ltd. invested as large a sum as Rs. 17,85,600 in shares of M/s. Pibco Ltd. These shares could be undervalued or they could go down in value. In the balances-sheet of M/s Punj sons (P.) Ltd. only the original purchase price would be mentioned so that even if the shares became immensely valuable, there would be no effect in the balance-sheet nor there would be effect even if these shares became valueless. We thought that this was an artificial way of applying r. 1D.
6. During the analysis of the rule, we were able to find that Expln. II appears to cover the case now under consideration. The relevant part of the Explanationn reads:
'For the purposes of this rule -
(i) the following amounts shown as assets in the balance-sheet shall not be treated as assets namely :-...
(b) any amount shown in the balance-sheet including the debit balance of the profits and loss account or the profit and loss appropriation account which does not represent the value of any assets ;......'
7. It would normally appear that as far as M/s Punj sons (P.) Ltd. are concerned, the shares of M/s. Pibco Ltd. are shown as assets and those assets are shown as involving an investment of Rs. 17,85,600. But that amount does not represent the value of any asset because the asset has became valueless. So far as this case is concerned, the Tribunal was right in its analysis and no question of law arises; it being a factual question as to how shares were to be valued and there being a special rule which allowed valueless assets being excluded from the balance-sheet of the company whose shares were being evaluated under a r.10.
8. We would accordingly decline to call for a reference, but leave the parties to bear their own costs.