1999 PLP 957 (PTD)

The compulsory deposit made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, is not an annuity and is an asset within the meaning of section 2(e)2(ii) of the Wealth Tax Act, 1957, and is to be included in the net wealth of the assessee. Smt. Sunanda Devi Singhania v. CWT (1993) 204 ITR 842 (Cal.) fol. Bharat Hari Singhania v. CWT (1994) 207 ITR 1 (SC) ref. R.C. Pandey with Mrs. Prem Lata Bansal for the Commissioner. S.K. Aggarwal for the Assessees. At the instance of the Revenue, the following questions are referred for the opinion of this Court: (1) Whether on the facts and in the circumstances of the case the Income-tax Tribunal was right in holding that the valuation of the shares of Modipon Ltd. held by the assessee was to be done in accordance with Rule 1D of the Wealth Tax Rules, 1957? (2) Whether the Income-tax Appellate Tribunal was correct in law in holding that the amounts deposited by the assessee under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, did not constitute the assessee's assets and were not includible in the wealth of the assessee under the Wealth Tax Act, 1957?" The aforesaid questions relate to the assessment year 1979-80 and common questions have been referred in respect of three assessees, viz. Seth Lalit Modi, Seth Mohinder Kumar Modi and Seth Satish Kumar Midi. Since the questions involved are purely legal and are substantially concluded by the decision of this Court, we dispense with the filing of the paper book. This Court in Mrs. Prem Shamsher Singh v. CWT (1994) 210 ITR 233, following the decision of the Supreme Court in Bharat Hari Singhania v. CWT (1994) 207 ITR 1, held that Rule 1D of the Wealth Tax Rules, 1957, was applicable to the valuation of shares as it was mandatory in character. Rule 1-D deals with market value of unquoted equity shares of companies other than an investment company and managing agency company. In view of this legal position, question No. l has to be answered in favour of the assessee. We may, however, notice the contention urged on behalf of the Revenue. It is pointed out that in the application filed under section 27(1) of the Wealth Tax Act, the Revenue had raised the question challenging the finding whether the shares of Modipon Limited were quoted regularly on the stock exchange or not. In these proceedings, we have to go by the question as referred and not as may have been raised in the application under section 27(1) of the Wealth Tax Act, 1957. We may notice that the Tribunal had confirmed the order of the Appellate Assistant Commissioner reversing that of the Wealth Tax Officer, holding that the shares of Modipon Limited were unquoted as against the stand of the Revenue that these should be treated as quoted shares, there being six quotations in the given year. In view of the fact that this finding of the Tribunal is not in challenge in the question referred to this Court at the instance of the Revenue, the question deserves to be answered in terms of the decision of this Court in Mrs. Prem Shamsher Singh's case (1994) 210 ITR

233. Accordingly, the question is answered in the affirmative, in favour of the assessee and against the Revenue. As regards question No.2, we may refer to the decision of the Calcutta High Court in Smt. Sunanda Devi Singhania v. CWT (1993) 204 ITR 842, holding that the compulsory deposit made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, was clearly a deposit and that the Tribunal was right in holding that such a deposit was not an annuity and was an asset. The Calcutta High Court, in a well reasoned judgment, has held that the Tribunal was justified in law in holding that the compulsory deposit should be taken into consideration for purposes of computing the net wealth of the assessee. We are entirely in agreement with the view expressed by the Calcutta High Court in the aforesaid case. It may also be noticed that as per the submissions made by Mr. Agarwal, a similar view as taken by the Calcutta High Court was taken by the Full Bench of the Tribunal, which has not been challenged by the assessee in the subsequent years. In this view, question No.2 is answered in the negative, in favour of the Revenue and against the assessee. No costs. M.B.A./1873/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.