Rule 1D of the WT Rules, 1957 is mandatory and not directory.

INDORE BENCH

A. R. TIWARI, J. :

At the instance of the CWT, Bhopal, the Tribunal, Indore has stated the case and referred the undernoted question of law, arising out of the orders passed in WTA Nos. 173 & 174/Ind/1989 on applications registered as RA Nos. 51 & 52/Ind/1990 in Misc. Civil Case No. 201 of 1991; and also stated the case and referred the undernoted questions of law, arising out of the orders passed in WTA Nos. 72, 73 & 74/Ind/1989 on applications registered as RA Nos. 53, 54 & 55/Ind/1990 in Misc. Civil Case No. 202 of 1991, under s. 27(1) of the WT Act, 1957 (for short the Act) for our opinion.

2. In Misc. Civil Case No. 201 of 1991, the undernoted question is referred :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that r. 1D of the WT Rules, 1957, is directory and not mandatory and, therefore, market value of the shares could be determined by yield method ?"

3. In Misc. Civil Case No. 202 of 1991, the undernoted questions are referred :

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that r. 1D of the WT Rules, 1957 is directory and not mandatory and, therefore, the market value of the shares could be determined by yield method?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the CWT treating the assessment orders accepting market value of shares on the basis of income capitalisation method, was wrong ?"

4. Briefly stated, the facts of the cases are that in MCC No. 201 of 1991 the years of assessment are 1987-88 and 1988-89; whereas in MCC No. 202 of 1991 the years of assessment are 1984-85, 1985-86 and 1986-87. The statement of the case in MCC No. 201 of 1991 is that the assessee owned 103 shares of Steel Ingots Pvt. Ltd., Indore. Its equity shares are unquoted within the value of these shares on the basis of the report of the registered valuer who worked out the market value of the shares on yield basis. While doing so, he also took into consideration the financial position of the company, nature of the activities carried out and marketability of the shares. The WTO rejected the value disclosed by the assessee and determined the value of the shares in accordance with the provisions of r. 1D of the WT Rules, 1957 at a higher figure. The assessee went in appeal before the CWT(A), who approved the method of the valuation adopted by the registered valuer. He thus allowed the appeals. The Department then came in appeal before the Tribunal. The Tribunal held that r. 1D of the WT Rules was directory and not mandatory and held that the CWT(A) was justified in adopting the yield method for valuation of these shares. Aggrieved, the Department filed the application under s. 27(1) of the Act and the Tribunal referred the aforesaid question. In MCC No. 202 of 1991, the statement of the case shows that the assessee owned unquoted shares of certain companies. The assessee disclosed the market value of those shares on the basis of income capitalisation method. Such valuation was accepted by the WTO. The CWT(A) considered the order of WTO as erroneous and prejudicial to the interest of the Revenue holding that r. 1D of the WT Rules were mandatory not directory. He, therefore, ordered to determine the value in accordance with this rule and not on yield basis. He, therefore, revised assessment orders under s. 25(2) of the WT Act. The assessee came in appeal before the Tribunal. The Tribunal held that r. 1D was directory and not mandatory. The Tribunal, therefore, passed the orders in favour of the assessee. Aggrieved, the Department filed the applications under s. 27(1) of the Act on which the Tribunal stated the case and referred the aforesaid questions for our opinion.

5. We have heard Shri D. D. Vyas, learned counsel for the applicant/Department and Shri Brajesh Pandiya, learned counsel for the non-applicant/assessee in both these reference applications.

6. Pla