Per Shri H. S. Ahluwalia, Judicial Member - The dispute in these appeals relates to the market value of unquoted equity shares in Orient Steel (P.) Ltd. and Ajay paper Mills for the purpose of computation of the net wealth of the assessee.
2. In the first appeal the assessee filed a return declaring the value of each share in Orient Steel (P.) Ltd. at Rs. 16.36 per share. Then he revised it to Rs. 4.99 per share on the yield basis as according to him, the shares were not quoted in any stock exchange and the company was not in liquidation. The WTO, however, computed the value at Rs. 18 per share in accordance with rule 1D of the Wealth-tax Rules, 1957 (the Rules). In the second year the dispute relates to the shares in Ajay Paper Mills which the assessee estimated at Rs. 10 per share but the WTO computed at Rs. 16.83 again in accordance with rule 1D. The assessee filed appeals for both the years in question before the AAC and relied upon the decision of the Supreme Court in the case of CGT v. Smt. Kusumben D. Mahadevia : 122ITR38(SC) for the proposition that the shares had to be valued according to the profit-yielding method, i.e., on the maintainable profit basis. The AAC accepted this contention and directed the WTO to value the shares on the yield method. The revenue has come up in second appeal before us.
3. We have heard the representatives of the parties at length in these appeals. A number of authorities were cited by the representative of the department for the proposition that the value of these shares should be computed in accordance with rule 1D. For example, reference was made to CWT v. Smt. Chandrakala Lal : 111ITR185(Cal) , which lays down that the proper method of valuation. Similarly, in CWT v. Laxmipat Singhania : 111ITR272(All) , it was held that rules 1C and 1D inserted in the Rules, 1967 were applicable to pending assessments even though assessment related to earlier years prior to the date of these Rules having come into force. Reference may next be made to another two judgments of the Allahabad High Court in CWT v. Sripat Singhania : 112ITR363(All) and Bharat Hari Singhania v. CWT : 119ITR258(All) , wherein the expression as it thinks fit in section 25 of the Wealth-tax Act, 1957 was held not to take away of whittle down the binding effect of rule 1D and it was held that the Tribunal was not justified in approving the assessees method of valuation of unquoted equity shares which were not in accordance with the Rules. Lastly, reference may be made of CWT v. Mamman Varghese : 139ITR351(Ker) . for the proposition that rule 1D was mandatory and its provision had to be followed in determining the value of the unquoted equity shares of companies for wealth-tax purpose.
4. On behalf of the assessee reliance was placed upon the well known decision of the Honble Supreme Court in Smt. Kusumben D. Madhadevias case (supra) for the proposition that the proper method of valuation to be adopted in case of shares of public limited company not quoted on the stock exchange or private limited companies would be the profit-earning method. Reference was also made to a decision of the Tribunal at Bombay in WT Appeal Nos. 471 to 476 (Bom) of 1979 wherein reference is made to Smt. Kusumben D. Mahadevia v. CWT  2 Taxman 225 in which the Bombay High Court had held that rule 1D is not mandatory and is merely directory. The learned Members, therefore, accepted the assessees claim that the value of the shares should be determined by the WTO according to the principles laid down in the case of Smt. Kusumben D. Mahadevia (supra) decided by the Supreme Court.
5. After carefully considering all the facts and circumstances of the case, we are not inclined to agree with the assessee. So far as the applicability of the Rules is concerned, notwithstanding the decision of the Bombay High Court in the case of Smt. Kusumben D. Mahadevia (supra), the Special Bench of the Tribunal at Delhi has already held in Biju Patnaik v. WTO  1 SOT 623 that rule 1BB of the Rules is procedural in nature and retrospective in operation. It, therefore, applies to pending assessments. The decision in the case of Smt. Kusumben D. Mahadevia (supra) by the Honble Supreme Court was in relation to a gift-tax matter and the applicability of rule 1D was not specifically in dispute in that case. Now that we have got a specific rule and a number of High Court authorities wherein they have held that the Tribunal has no discretion in the matter of valuing unquoted equity shares otherwise rule notwithstanding the fact that a Bench of the Tribunal has not properly considered the effect thereof. Accordingly, we accept these appeals, set aside the order of the AAC, and direct that the value of these shares shall be computed in accordance with rule 1D.
6. The appeals are accordingly allowed.