D.M. Chandrashekhar, CJ.

1. IN these three references under Section 27 of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), the following common question of law has been referred to this court by the INcome-tax Appellate Tribunal (hereinafter referred to as "the Tribunal" ):

"Whether, on the facts and in the circumstances of the case, the INcome-tax Appellate Tribunal was justified in holding that Rules 1C and ID introduced by the Wealth-tax (Amendment) Rules, 1967, by notification dated October 6, 1967, do not have any retrospective effect and could not be applied for the valuation of the unquoted shares for the assessment years in question as the relevant valuation dates thereof preceded October 6, 1967?"

2. EACH of these references relates to a separate assessee, but in respect of the same assessment years, i.e., 1965-66 and 1966-67. In each of these cases the assessee had valued for the purpose of wealth-tax certain shares which had not been quoted in the stock exchange, by adopting the average of the break-up value thereof and the average yield of dividends therefrom. The Wealth-tax Officer valued these shares on the basis of their break-up value only. But in appeals the Appellate Assistant Commissioner held that these shares should be valued according to Rules 1C and 1D, inserted by the Wealth-tax (Amendment) Rules, 1967, published by the notification dated October 6, 1967, and directed the Wealth-tax Officer to recompute the value of those shares accordingly.

In the further appeals by the assessees, the Tribunal held that the Appellate Assistant Commissioner was not justified in rejecting the valuation adopted by the assessees and in directing the Wealth-tax Officer to value those shares in accordance with Rules 1C and ID.

3. BEFORE considering the rival contentions of learned counsel in these references, it is useful to set out the relevant provisions of the Act and the Rules there under.

4. CLAUSE (m) of Section 2 of the Act defines "net wealth" as the amount by which the aggregate value computed in accordance with the provisions of the Act, of all the assets in excess of the aggregate value of all the debts owed by the assessee (except certain specified categories of debts), on the valuation date.

Sub-section (1) of Section 7 of the Act, as substituted by Central Act 46 of 1964 with effect from April 1, 1965, reads:

"7. (1) Subject to any Rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date."

5. SUB-section (1) of Section 46 of the Act empowers the Central Board of Direct Taxes to make rules for carrying out the purposes of the Act. Without prejudice to the generality of such power, SUB-section (2) of this section provides, inter alia, that such rules may be made in regard to the manner in which the market value of any assets may be determined. SUBsection (3) of Section 46 of the Act provides that such power to make rules shall, on the first occasion of exercise thereof, include the power to give retrospective effect to the rules or any of them from a date not earlier than the date of commencement of the Act.

6. IN exercise of the powers conferred by Section 13 of the Wealth-tax Act, the Central Board of Direct Taxes issued Circular No. 3 W. T. of 1957, dated September 28, 1957, containing instructions regarding valuation of unquoted shares. This circular was replaced by Rules 1C and 1D inserted in the Wealth-tax Rules, 1957 (hereinafter referred to as the Rules), by the Wealth-tax (Amendment) Rules, 1967, issued on October 6, 1967. Rule 1C prescribed the method of valuing unquoted preference shares, while Rule ID prescribes the method of valuing unquoted equity shares of companies (other than investment companies and managing agency companies). As these two rules were made long subsequent to the first exercise