Sankar Prasad Mitra, J.
1. This is a reference under Section 27(1) of the Wealth-tax Act, 1957. The assessee is an individual. The Wealth-tax assessment years are 1957-58, 1958-59 and 1959-60, for which the relevant valuation dates are the 31st March, 1957, the 31st March, 1958, and the 31st March, 1959, respectively. The assessee held 114 shares of Jhagrakhand Colliery Private Ltd. The valuation of these shares, according to the assessee, the Wealth-tax Officer and the Appellate Assistant Commissioner was as follows :
Assessment yearValuation per share according to the assesses.Valuation per share according to the Wealth-tax Officer.Valuation per share according to the Appellate Assistant Commissioner.
Rs.Rs.1957-58Face value of Rs. 1,000 reduced on the basis of assets to Rs. 342 and on the basis of yield Rs. 537 per share.
2,3301,6601958-59Face value of Rs. 1,000 reduced on the basis of assets to Rs. 342 and on the basis of yield Rs. 537 per share.2,5061,5031959-60ditto2,2461,658
2. The Wealth-tax Officer, in determining the value of these shares, tried to find the break-up value on the basis of the assets and liabilities of the company as per balance-sheets on or near about the valuation dates. He did not, however, allow any deduction for provision for taxation and provision for wealth-tax aggregating to Rs. 51,35,097 for the assessment year 1958-59. The Appellate Assistant Commissioner recomputed the value of the shares by the same method by deducting from the value of the assets, bad debts amounting to Rs. 2,35,855 for 1957-58, Rs. 2,80,008 for 1958-59 and Rs. 3,15,889 for 1959-60. He had also granted reduction for all the years of the value of the goodwill to the extent of Rs. 10 lakhs and the value of the leasehold property to the extent of Rs. 5 lakhs. He made additions for the proposed dividends amounting to Rs. 1,20,000 for 1957-58 and Rs. 1,20,000 for 1959-60.
3. The department as well as the assessee were aggrieved by the Appellate Assistant Commissioner's valuation aforesaid and appeals were preferred to the Tribunal. Before the Appellate Tribunal there was no dispute that the break-up value did not reflect a fair estimate of the market value. The dispute was with regard to the deductions or additions as made by the Appellate Assistant Commissioner in computing the net assets of the company. The department agitated only the general condition as to whether the Appellate Assistant Commissioner was justified in reducing the valuation.
4. The Tribunal held that the best way of determining the net assets of the company, in the present case, for the purpose of break-up value, would be to take the net wealth as determined in the wealth-tax assessments of the Jhagrakhand Colliery Private Ltd., for the respective years. On this basis, the Tribunal's valuation per share was Rs. 1,458 for the assessment year 1957-58, Rs. 1,316 for the assessment year 1958-59 and Rs. 1,472 for the assessment year 1959-60. The Tribunal arrived at these values on the basis of its decision in the Wealth-tax Appeals (W.T.As. Nos. 850 of 1959-60 and 421 of 1961-62) of the Jhagrakhand Collieries Private Ltd. According to 1he computation which the Tribunal made in those appeals, the total wealth position of the said company was as follows :
Assessment yearWealth of the company
1957-58Rs. 35,00,8541958-59Rs. 31,60,625 (as the company had incurred a loss no wealth-tax assessment had been made but working on the basis of the wealth as assessed in the assessment year 1957-58, this amount was taken to be the value of the assets of the company.)1959-60Rs. 35,34,677
5. The value of each share was, therefore, determined by dividing the total net wealth of the company by the number of shares issued by it.
6. There was another contention before the Tribunal. It related to a sum of Rs. 9,30,498 which the assessee claimed in his return as a debt representing the outstanding of income-tax demands for the assessment years 1947-48 to 1951-52 for which certificates had been issued under the Public Demands Recovery Act before the valuation dates. The Wealth-tax Officer rejected the assessee's claim on the ground that the amount represented tax demand which had been raised in the years earlier to the valuation dates and which had remained outstanding for more than twelve months. He further observed that the assessee had been denying his liability to pay the same.
7. Before the Appellate Assistant Commissioner it was contended that the amendment to Section 2(m) of the Wealth-tax Act introduced by the Finance Act of 1959 was ultra vires the Constitution and, moreover, since the Income-tax Officer had started certificate proceedings for recovery of the said amount, it ceased to be an income-tax demand and became a civil debt and was, therefore, allowable to be deducted out of the assessee's net wealth. The Appellate Assistant Commissioner negatived these contentions. He held that just because the amount was covered by certificates for the tax arrears it did not cease to be arrears of taxes. So far as the amendment of Section 2(m) was concerned, the Appellate Assistant Commissioner observed that the Wealth-tax Act did not make a distinction between taxes covered by a certificate proceeding and a demand not covered by such coercive measure under the Income-tax Act and the legislature was competent to define the limit and the scope of the meaning of the word ' wealth '.
8. So far as these contentions are concerned the Tribunal held that, as the demand for arrears of income-tax were being sought to be realised through certificate proceeding, the assessee became a certificate debtor; the amount specified in the certificate became a certificate debt recoverable as an arrear of land revenne under the Public Demands Recovery Act; and the amount specified in the certificate could no longer be regarded as ' tax payable in consequence of any order passed under or in pursuance of any law relating to taxation of income or profits ', within the meaning of Section 2(m)(iii) of the Wealth-tax Act. The Tribunal accordingly ordered that, after verifying the correct figure of the outstanding sought to be recovered through certificate proceedings, such demand should be deducted out of the assessee's net wealth on the relevant dates.
9. On these facts the Tribunal has referred the following questions for the opinion of this court :
'1. Whether the provision of Section 2(m)(iii) of the Wealth-tax Act, 1957, as introduced by the Finance Act of 1959 (No. 12 of 1959) is ultra vires the Constitntion of India and the legislation which enacted the said provision ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the arrears of income-tax, for which certificate proceedings had been taken under the Public Demands Recovery Act, were not payable in consequence of any order passed under or in pursuance of any law relating to taxation of income or profits within the meaning of Section 2(m)(iii) of the Wealth-tax Act, 1957, and were, therefore, deductible in computing the net wealth of the assessee ?
3. Whether, on the facts and in the circumstances of the case, in determining the break-up value of the shares of Jhagrakhand Collieries Ltd. the Tribunal was justified in adopting the net wealth of the company as determined in its wealth-tax assessments as the net assets of the company '
10. There is a fourth question which was suggested to the Tribunal on behalf of the assessee during the course of hearing of the reference application. That question also has been referred to this court.
11. The question runs thus :
Question No. 4.--' If the answer to the above question No. 3 be in the negative, then whether, in determining the net assets of Jhagrakhand Collieries Private Ltd., the following deductions are to be made, namely, (i) reduction of the value of goodwill of Rs. 10 lakhs ; (ii) reduction in the value of the leasehold property of Rs. 5 lakhs ; (iii) bad and doubtful debts of Rs. 2,35,855 for 1957-58, Rs. 2,80,008 for 1958-59 and Rs. 3,15,889 for 1959-60; (iv) Rs. 28,37,282 being the amount of certificate under Public Demands Recovery Act; (v) provision for taxation; and (vi) proposed dividends in the years 1957-58 and 1959-60 ?'
12. With regard to question No. 1 in this reference, both parties agree that the Supreme Court has repeatedly held that this court in the exercise of the advisory jurisdiction under the Indian Income-tax Act, 1922, the Sales Tax Act and the Agricultural Income-tax Act cannot go into the question of the vires of the Constitution or of any legislation. In our view, the same principles would apply to a reference under the Wealth-tax Act, and, as such, the question is answered in the negative. Mr. Debi Pal, learned counsel for the assessee, however, wishes to have it recorded that he is not giving up this point and would try, if so advised, to agitate it before the appropriate court.
13. We now come to the second question. In Commissioner of Income-tax v. Jhagrakhand Collieries (Private) Ltd.,  67 I.T.R. 572, it has been held that if income-tax payable under an order of assessment made under the Income-tax Act remains outstandirg for a period of more than 12 months on the valuation date, the provisions of Section 2(m)(iii)(b) will disentitle the assessee from claiming deduction of the amount of such tax in the computation of the net wealth on which he can be assessed to wealth-tax, even though certificate under the Public Demands Recovery Act, 1913, had been issued for the recovery of the said amount and recovery proceedings under the said Act were pending on the valuation date. It has further been held that if income-tax dues, assessed and demanded, be not paid by the assessee and, if thereafter steps be taken for realisation of the dues by the procedure prescribed under Section 46(2) of the Indian Income-tax Act, that does not denature the income-tax demand, although the procedure for this recovery becomes the same as for a recovery of land revenue.
14. This judgment was delivered by Mr. Justice Banerjee with whom Mr. Justice K, L. Roy had concurred. It seems to us that the second question in this reference is fully covered by this judgment and, as such, we are answering the question in the negative.
15. Mr. Debi Pal, learned counsel for the assessee, wanted to argue that, since Section 3 of the Public Demands Recovery Act made the debt a charge on the property, the amount of the tax should be deducted from the value of the property on general principles. We are unable to allow Mr. Pal to raise this point in this court having regard to the contentions made before the tax authorities as well as the nature of the question that has been referred to us.
16. The third question in this reference relates to the meaning of ' breakup value ' of the shares of a company. The Tribunal in the instant case in determining the ' break-up value ' has adopted the net wealth of the company as determined in the wealth-tax assessments to be the net assets of the company. The question is whether this is a correct procedure for ascertainment of the ' break-up value ' of shares. Broadly speaking, the ''break-up value' of shares means the difference between the assets and the liabilities of a company. Now, the net wealth determined for purposes of wealth-tax assessment proceeds on the basis of the definition of assets in that Act and the provisions for exemption and computation laid down in that Act. There are special indications in the Wealth-tax Act as to the methods that are to be followed in determining the ' net wealth'. For instance, Section 2(e) says that ' assets ' includes property of every description, movable or immovable, but does not include, inter alia, (i) agricultural land and growing crops, grass or standing trees on such land, (ii) any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a dwelling-house or a store-house or an out-house, (iii) animals, etc.
17. The definition of 'assets' in the Wealth-tax Act, therefore, appears to be an artificial definition for purposes of this Act only.
18. Then again, Section 5 provides that wealth-tax shall not be payable by an assessee in respect of, inter alia, the tools and implements used by the assessee for the raising of agricultural produce ; ten-year treasury savings certificates, fifteen-year annuity certificates, deposits in post office savings banks, post office cash certificates, post office national savings certificates, twelve-year national plan savings certificates, ten-year defence deposit certificates and twelve-year national defence certificates held by the assessee, etc.
19. Here again, it is evident that numerous assets are excluded in the computation of wealth-tax payable by the assessee.
20. A further exclusion of assets and debts has been provided for, in certain cases, in Section 6 of the Act. It prescribes, inter alia, that in computing the net wealth of an individual who is not a citizen of India or of an individual or a Hindu undivided family not resident in India or resident but not ordinarily resident in India, or of a company not resident in India during the year ending on the valuation date--(i) the value of the assets and debts located ontside India, and (ii) the value of the assets in India represented by any loans or debts owing to the assessee in any case where interest, if any, payable on such loans or debts is not to be included in the total income of the assessee under Section 10 of the Income-tax Act, shall not be taken into account.
21. Lastly, Section 45(d) of the Wealth-tax Act runs thus :
' 45. The provisions of this Act shall not apply to--...
(d) any company established with the object of carrying on an industrial undertaking in India in any case where the company is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building, machinery or plant used in a business which was being previously carried on :
Provided that the exemption granted by Clause (d) shall apply to any such company as is referred to therein only for a period of five successive assessment years commencing with the assessment year next following the date on which the company is established which period shall, in the case of a company established before the commencement of this Act, be computed in accordance with this Act from the date of its establishment as if this Act had been in force on and from the date of its establishment. Explanation.--For purposes of Clause (d), ' industrial undertaking ' means an undertaking engaged in the manufacture, production or processing of goods or articles or in mining or in the generation or distribution of electricity or arty other form of power. '
22. In Section 5(xxi) it is stated that wealth-tax shall not be payable by an assessee in respect of, inter alia, that portion of the net wealth of a company established with the object of carrying on an industrial undertaking in India within the meaning of the Explanation to Clause (d) of Section 45 as is employed by it in a new and separate unit set up after the commencement of this Act by way of substantial expansion of its undertaking; provided that (a) a separate account is maintained in respect of such units, and (b) the conditions specified in Clause (d) of Section 45 are complied with in relation to the establishment of such unit; provided further that this exemption shall apply to any such company only for a period of five successive assessment years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit.
23. These provisions also show that certain industrial undertakings are completely exempted from payment of wealth-tax. We need not multiply these instances any further. The reason why we have referred to the above provisions of the Wealth-tax Act is that in determining the net wealth of a company for the purpose of ascertaining the ' break-up value ' of its shares, the net wealth computed in accordance with the provisions of the Wealth-tax Act cannot be a safe guide or a sound basis.
24. In Dymond on Death Duties, 14th edition, at page 578, it is stated that 'break-up value' is the net amount which the shareholder would receive in the event of liquidation.
25. In Alan Gilpin's Dictionary of Economic Terms at page 19, 'break-up value' has been defined as the net worth of a company the value of physical assets less current liabilities and prior charge capital. ' Prior charge ' means, the prior claims of the debenture and the preference share over the ordinary share in respect of capital repayment and interest or dividend distribution (vide page 164).
26. To our mind, when applied to a going concern, there is no difference between the two definitions referred to above. For determining the ' break-up value ', therefore, one has to ascertain the value of a company's physical assets and deduct therefrom the company's current liabilities and prior charge capital. We are, therefore, of opinion that the Tribunal, in the instant case, was not justified in adopting the net wealth of the company as determined in its wealth-tax assessment as the net assets of the company and we answer the question in the negative.
27. The only other question that remains to be answered is question No. 4. Mr. Balai Pal, learned counsel for the Commissioner, contends that the question does not arise out of the Tribunal's order. The items referred to therein have not even been mentioned in any form in the order the Tribunal has passed.
28. Now, the Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., : 42ITR589(SC) has said that when a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. Let us, therefore, see whether question No. 4 was raised before the Tribunal but the Tribunal has failed to deal with it. The Appellate Assistant Commissioner in paragraph 6 (at page 30) of his order states as follows :
' 6. Under the Wealth-tax Act the Wealth-tax Officer has to value any asset at the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. On this basis a prudent buyer will look at the balance-sheet of the company.
The assets as per balance-sheet totalled 1,69,52,900From this the following will be deducted2,35,000 Goodwill (taken as nil because the 30 years lease expires in 1959 as shown in b/s)10,00,000 Value of leasehold land (lease rights expired in 1959 b/s value reduced to replace it by actual value)5,00,000 Other liabilities as per b/s.1,13,52,000
38,65,900Add Proposed dividend 1,20,000
This divided by 2,400 shares gives the value of Rs. 1,660 per share. In allowing the liabilities of Rs. 1,13,52,000 I have allowed the entire provision for taxation and unpaid dividends, etc., as a deduction. Taking into account the facts of the case the value of the shares seems to be reasonable. The Wealth-tax Officer should substitute the value of Rs. 1,660 per share in the place of Rs. 2,330 taken by him.'
29. This paragraph shows that (1) bad debts, (2) goodwill, (3) value of leasehold lands, (4) provision for taxation, and (5) unpaid dividends were allowed as deductions by the Appellate Assistant Commissioner.
30. The Tribunal has said at pages 38 and 39 :
' Regarding the shares of Jhagrakhand Collieries the value per share shall now be taken to be the one as found by the Tribunal while valuing the net wealth of the colliery itself, mention of which has been made in our order passed in W.T.As. Nos. 777 to 779 of 1961-62, which are appeals by the department. In accordance with that discussion, the value of the shares of Jhagrakhand Collieries Pvt. Ltd. should now be taken at Rs. 1,458 for the assessment year 1957-58, Rs. 1,316 for the assessment year 1958-59 and Rs. 1,472 for the assessment year 1959-60.'
31. True, in these observations of the Tribunal, there is no reference to any of the items specified in question No. 4. The Tribunal has proceeded purely on the wealth-tax assessments of the company in W.T.As. Nos. 777 to 779 of 1961-62.
32. Now, the order of the Income-tax Appellate Tribunal in W.T.As. Nos. 777, 778 and 779 of 1961-62 has been printed at pages 58 to 60 of this paper-book. At page 59, we find, in discussing the valuation of 114 shares of Jhagrakhand Collieries Private Ltd. the Tribunal has observed :
' Various contentions relating to the facts which have or have not to be taken into consideration in determining the value of these shares have been raised on behalf of the department as also by the assessee. The dispute must, however, be set at rest on the basis of the decision of the Tribunal which has had an occasion to value the wealth of Jhagrakhand Collieries Private Limited and on such valuation it found out the value of each share of the said colliery company.'
33. These statements in the Tribunal's order are rather significant. They indicate that there were ' various contentions ' raised both by the department and the assessee.
34. Let us now come back to page 4 of the paper-book. In the last paragraph of the statement of the case we are dealing with in this reference, it is stated as follows :
' In making this statement of the case we have followed the statement of the case in R. As. Nos. 853, 855 and 857 of 1963-64 in the case of Shri Narendra Singh Singhi, a relation of the present assessee. The facts and circumstances in the two cases are identical and the questions to be referred are also the same. The statement in the case of Shri Narendra Singh Singhi had been prepared by a Bench of which Sri S. P. Sinha was a member and who was also in the Bench which had heard the appeals and also the Section 27(1) applications. As neither of the members of the present Bench had either heard the appeals or the applications under Section 27(1) and had to finalise the draft statement prepared by Shri S. P. Sinha, the statement already made by Shri Sinha has been adopted in this case also.'
35. The statement of the case herein has been drawn up by Sri N. Srini-vasan, Accountant Member, and Sri K L. Roy (as he then was), the Judicial Member. We have naturally to refer to the facts and circumstances in Narendra Singh Singhi's case. These are the subject-matters of Wealth-tax Reference No. 11 of 1965 now pending before this court. We have looked into the paper-book of this reference. We find from page 40 of the paper-book (in the Wealth-tax Reference No. 11 of 1965) that the Tribunal has made more or less the same order which we have already quoted above. In this statement of the case, however, question No. 4 has been referred to this court in the same form as has been done in the instant reference. And in paragraphs 11 and 12 of this statement of the case signed by Sri S. P. Sinha, Judicial Member, and Sri J, Das, Accountant Member, it is stated as follows :
Paragraph 11.--' It was next suggested that question No. 4 of the questions of law framed ought not to be referred because according to the Commissioner of Wealth-tax, firstly, it did not arise out of the Tribunal's order...'
Paragraph 12.--' We do not agree with the suggestion......
Firstly, this question, namely, question No. 4, obviously arises out of the Tribunal's order inasmuch as the same had been raised before it by the assessee but, in the light of the view the Tribunal took in the matter, it was not considered necessary to deal with it......'
36. It is abundantly clear, therefore, that the items mentioned in question No. 4 were dealt with by the Appellate Assistant Commissioner; the Tribunal overruled the order of the Appellate Assistant Commissioner and took the view that the wealth-tax assessments records of the Jhagrakhand Collieries Private Ltd. should form the basis for determining the net wealth for purpose of ascertainment of the ' break-up value ' of its shares. That is why it was uot necessary for the Tribunal to refer to the said items specifically. In other words, this is a case in which a question of law was raised before the Tribunal but the Tribunal had failed to deal with it and, as such, it must be deemed to have been dealt with by the Tribunal and arise out of the Tribunal's order.
37. With these observations we proceed to answer question No. 4. In our view, on the test to be applied to ascertain the 'break-up value' of shares as indicated by us in this judgment, (a) reduction of the value of the goodwill; (b) reduction in the value of the leasehold property ; (c) bad and doubtful debts ; (d) amount of certificate under Public Demands Recovery Act; and (e) provision for taxation should be allowed as deductions, but the proposed dividends are not allowable. Our answer, therefore, to question No. 4 is that in determining the net assets of Jhagrakhand Collieries Private Ltd., deductions are to be made in respect of items Nos. (i), (ii), (iii), (iv) and (v) of the said question but not No. (vi).
38. There will be no order as to costs.
39. I agree.