The advance tax paid should be deducted from the provision for taxes in valuing shares for wealth tax purposes, as the total tax payable is the gross tax as determined on book profits less the advance tax already paid.

Hakeem, J.—The Income Tax Appellate Tribunal, Bangalore Bench, Bangalore ("the Tribunal"), at the instance of the Revenue, has referred for the opinion of this court the following question of law :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 35 lakhs representing the advance tax paid by the company and shown on the assets side of the balance-sheet should not be deducted from the excess provision for taxation in valuing the shares of M/s. International Instruments (P) Ltd. ?"

2. In order to appreciate the question, it is necessary in the first instance to notice the facts as found by the Tribunal.

3. The assessee as an individual held equity shares in M/s. International Instruments Pvt. Ltd. For the assessment year 1974-75, the assessee declared in his return under the Wealth-tax Act, 1957 ("the Act"), before the Wealth-tax Officer the value of the equity shares held by him at Rs. 220.24 per share. On January 22, 1977, the Wealth-tax Officer completed the assessment determining the share value at Rs. 315. 26 per share and subjected the same to tax under the Act on that basis.

4. Aggrieved by the said order of the Wealth-tax Officer, the assessee appealed to the Appellate Assistant Commissioner who by his order dated July 30, 1977 (annexure-B), Allowed the same, inter alia, holding that under rule 1D of the Wealth-tax Rules, 1957 ("the Rules"), the amount of advance-tax paid was not to be disallowed out of the provision for taxation which was in excess of the tax payable with reference to the book profits.

5. Aggrieved by the said order of the Appellate Assistant Commissioner, the Department filed a second appeal before the Tribunal which by its order made on January 30, 1979, upheld the said order of the Appellate Assistant Commissioner. Hence this reference.

6. Sri K. Srinivasan, learned senior standing counsel for the Revenue, has contended that rule 1D of the rules properly interpreted makes it clear that for purposes of determining the break-up value of unquoted shares, the advance tax paid in the accounting year which was shown as an asset in the balance-sheet of the company, has to be deducted from the figure for provision only for such taxation shown on the liabilities side of the balance-sheet or make provision only for such taxation actually payable after deducting the advance tax already paid by the company and not the whole of the tax on the book profits. In support of his contention, Sri Srinivasan strongly relied on the Division Bench ruling of the Punjab and Haryana High Court in Ashok Kumar Oswal (Minor) Vs. Commissioner of Wealth-tax, (1984) 148 ITR 620 P&H.

7. Mr. G. Sarangan, learned counsel appearing for the assessee, laying great emphasis upon the words "other than the amount referred to in clause(i)(a)" occurring in rule 1D of the Rules and the meaning attached to the words "other than" in the law lexicon contended that it refers to the provision for taxation other provision for advance tax and they do not mean the amount paid as advance tax under the Income Tax Act. In support of his contention, Mr. Sarangan has strongly relied on a Division Bench ruling of the Gujarat High Court in Commissioner of Wealth-tax, Gujarat-I Vs. Ashok K. Parikh, (1981) 129 ITR 46 Guj.

8. Rule 1D of the Rules that is material reads thus :

"1D. The market value of an unquoted equity share of any company, other than an investment company or a managing agency company, shall be determined as follows:-

The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet. The net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet. The resultant amount multiplied by the paid-up value of each equity share shall be the break-up value of each unquoted equity share. The market value of each such share s