1. ORDER A.A. Zuberi (Accountant Member).-This Estate Duty Appeal impugns the assessment framed on 7-10-1978 of the Estate left behind by A.H.M. Who died on 4-5-1976. Against the declared proposed value of Rs. 1,92,123 the D. C. E. D. Determined the value at Rs. 42,85,917. The following issues came up before us for adjudication:- Cash-in-hand.-The Assessee had not declared any Cash. The assessing officer proposed (and assessed) Rs. 5,000. it was explained by the learned counsel that the stand before the assessing officer was that the assessee had a Bank Account hence he had not kept any cash at home. This plea was rejected for the reason that the assessing officer discovered, from the wealth statement, that amounts nearing Rs. 1,00,000 were shown as "Notes & Coins" as on 31-12-1973 and 31-12-1974.
2. The learned counsel argued that the assessing officer completely ignored the factual position obtaining in the latest wealth-statement in respect of the period ended 31st December, 1975. In that statement, which is obtaining on record, no Cash-in-Hand was shown. The Assessee had a Savings Bank Account from which small withdrawals were made almost weekly to meet day-to-day expenses. The last withdrawal was on 20-4-1976 for Rs. 500. The arguments appear to us convincing and in view of a specific amount having been withdrawn just a few days before the death of the deceased, in our view, it would be unjust to presume that enough cash-in-hand was available. This view was taken by us in several other appeals also. We, therefore, KNOCK OFF this addition.
3. Jewellery.-This was declared at Rs. 3,750 against which the proposed (and the assessed) amount is Rs. 9,500. The main reason for the enhance-j ment by the assessing officer was that he did not accept the plea that 150: Gold Guinea Coins, which the assessee had been declaring in wealth statements upto 31-10-1975, had not been recovered by the A. Ps. and, therefore, did not pass on to them. Aithough the learned A. R. attempted to argue that there being no evidence in the possession of the Department about the A. Ps. having got possession of the Guinea and there being no evidence about the availability of these at the time of death, it would not justify to include-their value. We find no force in this argument, because the Guinea were in the possession of the assessee for a long time and he could not be said to have disposed these of in a period of 4 months, which passed between the date of his last wealth statement (30-12-1975) and the date of death. We, therefore, see no cause to interfere and MAINTAIN the addition.
4. Share in Frontier Textile Mills.-Against the declared amount of Rs. 28,636 assessed figure stands at Rs. 5,00,000. The learned counsel explained that the Assessee was the partner of this firm but the same was dissolved on 30-9-1964 and, after disposal and division of assets, the Assessee came to have a credit balance of Rs. 28,636 which could not be recovered because of the non-availability of assets (or funds) of the defunct firm. The amount could easily be written off in the books but, for.facility of reconciliation of wealth from year to year, it was shown as a receivable amount.
5. This was done in the Estate Duty Return also although it apparently was a mistake and the amount should have been totally excluded as nothing passed on to A. Ps. The assessing officer did not accept this plea and observed that the land on which the factory was constructed was over 10 Kanals the valuation whereof was then taken at Rs. 5,00,000. The learned counsel produced before us documentary evidence in the shape of Sale Deed of this land to prove that on dissolution of the firm this asset had been disposed of (on 25-3-1965) at Rs. 1,00,000 and hence was not available at the time of the death of the deceased. The evidence now led before us had not been examined by the assessing officer. Moreover, it is not clear as on what basis the assessing officer still believed that 10 Kanals of factory land was the property passing. We, therefore, set aside the matter quo ad hoc for fresh scrutiny.
6. Liabilities.-Among the- liabilities the A. Ps. had claimed Rs. 3,914 as relating to Income-tax and Rs.
7. 34,063 as relating to wealth-tax. These two amounts were disallowed by the assessing officer. The learned counsel argued that although the income tax liability remained at Rs. 3,914 the wealth-tax liability was finally determined at Rs. 1,00,332 hence that amount should be allowed now. The D. R. submitted, and rightly so, that the matter could be rectified if the same had been brought to the notice of the assessing officer. It was pointed out that even in the assessment while discussing the claim it was mentioned "not allowed at this stage as no documentary evidence has been furnished............................. ". An assurance was, however, given by the assessing officer that if the evidence about payment of the liabilities is made available the claim would be admitted. We, therefore, set aside the assessm ent quo-ad Accounts issue also for ascertainment of factual position.
8. Stock in Shares.-it was explained by the learned counsel that the deceased was the owner of 1,31,250 shares of the face value of Rs. 10 each of a private limited company, known as UIL (hereinafter referred to as UIL). In fact, the entire paid-up capital of Rs. 35,00,000 (divided into 3,50,000 shares) was owned by the deceased and his family members. The management of this company was 'taken-over' by the Federal Government on 2-9-1973, in pursuance of Hydrogenated Vegetable Oil Industry (Control and Development) Act, 1973 hereinafter referred to as HVOI Act).
9. Aithough Section 5 of the said Act empowered the Government to acquire the whole (or a portion of shares from all, or any of the shareholders, no such acquisition in respect of the deceased's share was done, nor indicated, till the time of his death, in fact, all such events as the acquisition of shares, issuance of Compensation Bond etc., happened subsequent to the demise of the deceased. The learned counsel drew our attention to the last paragraph on page 7 of the Assessm ent Order, wherein the assessing officer held that Section 39 of the Estate Duty Act was applicable to this case. Agreeing with this view, the learned counsel added further support by submitting that Articles of Association of the UIL (clauses 4-c, 10, 11, 14, 15 & 16) were such that placed restriction on the alienation of shares. Section 39 of the Estate Duty Act, the learned counsel recalled, provided that if the value of shares was not ascertainable with reference to the assets of the company (i.e. the Break-up Value) then it was to be taken at the Open Market Value. With reference to Section 4 of the Estate Duty Act, it was explained that this 'open market value' was to be adopted as obtaining on the death of the deceased. The assessing officer went with the stand of the A. Ps. as for as the applicability of Section 39 was concerned as he conceded that the value was not ascertainable with reference to total assets of the company, but disagreed as respects determination of the 'open market value'. Instead of adhering to the date of death, as provided in Section 4, he was carried away by the amount of compensation awarded on 11-11-1976 (intimated to A. Ps. vide letter dated 6-1-1977). The value of Compensation Bond at Rs. 30,95,622 was then included in the Principal Value of the Estate Placing reliance on a case reported as 1974 PTD 119 it was pleaded by the learned counsel for the A. Ps. that only published documents could be taken note of and not the unpublished information. It was submitted that as long as the affairs of UIL were in the hands of the deceased, or his family members accounts were properly audited and published. The last published position was the Balance sheet as on 31-10-1972. No dividens were, however, ever declared as long as the company remained in private hands. At the time of take- over and on appointment of Managing Director in terms of the HVOI Act. a 'proprietary audit, was carried out by independent public auditors and a Balance Sheet drawn up which showed loss of Rs.
10. 42,59,569 as on 2-9-1973 as a resuit of which value of each share came to Rs. 9.01 as against the face value Rs.
10. The Proprietary Audit Report however did not see the light of the day till 12-9-1976 although it was communicated to the Punjab Industrial Development Board on 18-9-1974, Where it remained a classified document. The learned counsel argued that under Section 39, two possibilities were envisaged once it was found that there were restriction on the alienation of shares and this section was applicable. The first was to ascertain whether the value of the share was determinable with reference to the value of Total Assets' of the company (i.e. Break-up Value) if not then second, the value of the shares was to be taken at the 'open market value' i.e. the price which the shares would fetch if sold on the terms of the purchaser who were to become entitled to be registered as a holder subject to the Articles, but the possibility of a special buyer, for his own special consideration, offering a higher price than the price in the 'open market' was to be excluded. The learned counsel referred to Section 18 of the E. D. Act wherein it was incumbent on the assessing officer to adopt the 'Break-up-Value' even if the 'Face Value' was higher. This provision of law, in the submissions of the learned counsel, was distinct from Rule 8 of the wealth Tax Rules which provided that in the case of Private Companies the value of shares was to be at the higher of the face value or the break-up-value. The learned counsel pointed out that in wealth- tax Assessm ents of the deceased, for the years 1973-74, 74-75 and 1975-76 which were completed on 27-5-1978, these very share were taken at the face value which proved Department's acceptance of the fact that the Break-up-value was lower than the face value. The learned counsel highlighted the contradiction in the treatment between the wealth-tax Assessment vis-a- vis the Estate Duty by contending that in the wealth-tax assessment it was admitted that the Face Value was higher which meant that the value of each share was at the most Rs. 10 but in the Estate Duty Assessm ent a much higher value i.e. Rs. 23,586 was assigned. It was pleaded that Section 18 of Estate Duty Act read with Section 39 made it abundantly clear that the UIL was a private limited company in which the deceased had a controlling interest and that the Articles of Association contained restrictions on the alienation of shares and, moreover, it was not possible to ascertain the break-up value with reference to the assets of the company as on the date of death, because the Company was in the hands of the Government and no published documents were available so as to enable any prospective buyer to look into the financial affairs of the company. But, at the same time, it was impossible to dispose of the shares in question and thus the 'open market value' of these was 'Nil'. The learned counsel dilated at length on the uncertain conditions prevailing at the relevant time when capital had become shy for fear of take-over and nationalization of Industries and, in fact there was no hope of receiving even the guaranteed "minimum return" as per Section 26 of the HVOI Act. The learned counsel proponed that any Investor intending to buy shares is (i) utmost interested in the security of investment, (ii) respects reasonable return, and (iii) is anxious to have a regular income over a period. All these prospects were uncertain and the capital of those, whose industries were taken-over/nationalized stood indefinitely blocked with transferability and negotiability of the shares having been frozen by the operation of law and the financial affairs kept secret as'classified information'not open to public review. The learned counsel attempted to persuade us to believe that the affairs of the UIL and the financial position became classified information as soon as the management passed on the Federal Government and these were not disclosed even to the ex-shareholders. Therefore, the determination of the value of shares on the basis of Break-up value was just out of question. In this regard reliance was place on a case of Indian jurisdiction, in which it was held that published documents can be taken note of but not the unpublished classified information. The learned counsel tried to afresh our memory about the circumstances and the background of the 'take-over' as also the 'frequent nationalization' of the industries which made the Capital shy with the resuit that no prudent Investor could even imagine to acquire such a big chunk of holding (1,31,250 shares) whose return was uncertain and even the receipt of "minimum return" deferred for an indefinite period. According to the contention of the learned counsel it was necessary to remember that although under Section 5 of the HVOI Act, the "minimum return" was guaranteed but as to when it was to be disbursed was unforeseeable.
11. Therefore, in the opinion of the learned counsel, even if an attempt was made to sell the shares there was absolutely no likelihood of any buyer coming forward.
12. The D.R. Who happened to be the assessing officer in this case, in his submission, agreed with the factual position. He, however, expressed the opinion that what passed on to the A. Ps. was the property in the shape of UIL shares for which compensation was promised under Section 5 of the HVOI Act. Therefore the A.Ps. fully well knew that compensation would, sooner or later, be paid out to them. It was, therefore wrong to say that the shares in question were worthless scrap of paper having no value at all.
13. Having given our anxious and patient consideration to the arguments addressed to us and having laboriously perused the assessm ent as well as the relevant documents we find ourselves faced with a very ticklish though interesting proposition which warrants detailed discussion for adjudication.
14. According to Section 4, Estate Duty is leviable upon the 'Principal Value'of the property passing on the death of a person. Therefore, not only it is necessary that there should be (i) passing of the property, but (ii) the property must be capable of being valued. The Principal Value is to be determined as set out in Section 38 of the Act. It is to be the price which, in the opinion of the Controller, the property would fetch if sold in the open market at the time of deceased's death. Part V. Section 38 to 44 of the Estate Duty Act explain the manner in which the 'Principal Value' is to be computed. It is purely a Notional value and it is the money-worth of the property which passes that determines the extent of the liability. Coming to Section 38, we find that. "The Principal Value of any property shall be estimated to be the price which........................ it would fetch if sold in the open market at the time of deceased's death". This 'open market' is a hypothetical one where it is free for anyone who has a will and resources to come in and to bid. The predominant assumption is that the market is an open market as distinguished from an older from a limited class only such as members of a family. Sometimes, by law or contract, there are restrictions on the sale, hence the property cannot be sold at all or can be sold only to certain persons, like the share of Private Limited Company. The difficulties, arising in the case of valuation of the shares of Private Limited Companies (or unquoted securities) have been looked after in Section 39, which reads as under:- "39. Valuation of shares in a private company where alienation is restricted.-'Where the Articles of Association of a private Company contain restrictive provisions as to the alienation of shares, the value of the shares, if not ascertainable by reference to the value of the total assets of the Company, shall be estimated to be what they would fetch if they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the Articles, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded".
15. It is to be remembered that this section is mandatory for valuing the shares (firstly) in the case of a private Company when (secondly) there are restrictions on the alienation of shares, hence (thirdly) the value is to be the open market price, if (fourthly) valuation is not ascertainable with reference to the value of the assets of the Company and (fifthly) the open market price is to be the one on the terms of the purchaser, the (sixthly) is entitled to be registered as a holder of the shares.
16. In the case before us, there being no dispute that 1,31,250 shares of U.I.L. were the property passing on the death of the deceased, the first question which falls for determination is whether these were to be valued in terms of Section 38 or Section 39, but we have no difficulty in answering that U.I.L. being a Private Limited Company with Articles of Association (clauses 4-c, 10, 11, 14, 15 & 16) having restrictions on the alienation of shares, the value of its shares was to be taken under Section 39 of the Estate Duty Act.
17. Before proceeding further it would be advantageous to have a careful look at the chronology of events like to take over of the Industry, Payment of Compensation etc.:- 31-10-1972... Accounts closed by the old Management and the Balance Sheet showed a loss of Rs.
18. 27,65,944. These were published also.
19. 2-9-1973... Management taken over by the Government under HVOI Act.
20. 4- 5-1976... Date of death of the deceased (..M.....A....H...M.).
21. 31-7-1976... Order given under Section 5 of the HVOI Act, acquiring shares of the deceased by the Government.
22. 12-9-1976... "Propriety Audit Report" showing loss of Rs. 44,61,302 as on 2-9-1973 circulated, Balance-sheet as on 30-6-1975 (drawn up on 17-11-1975) made public by being circulated to the Share-holders.
23. Also circulated Accounts closing on 31-10-1973 and 30-6-1974.
24. 11- 11-1976... Compensation of deceased's share determined at Rs. 23,586 per share (Rs. 30,95,600 for 1,31,250 shares).
25. The next question, and a vital one, is whether the valuation was possible on the date of death (i.e. 4-5-1976) with reference to the Total Value of the assets of the Company. The most important document which helps to determine the total value of the assets of a Company, be it public or private, is its Balance-Sheet. It would have been much easier if, from the books of accounts, it was possible to draw up a Balance Sheet as on 4-5-1976 (i.e. the date of death). This unfortunately was not possible in the instant case because, with effect from 2-9-1973, the Hydrogenated Vegetable Oil Industry had been taken over by the Federal Government to the exclusion of all other persons (except a foreign investor). As a resuit of this legislative action, a M.... D.... had been appointed under Section6 of the said Act, the entire administration and management of U. I. L. stood vested in the Managing Director and the old Management had been divested of all powers/and functions. At the material time, the latest drawn up, circulated and approved Balance-Sheet was as on 31-12- 1972 because, after the take over by the Federal Government, no Balance Sheet (nor even the Proprietary Audit Report as envisaged in the said Act itself) was available at the time of the deceased's death. The old Management, the ex-directors and the ex-shareholders, were completely stripped of all powers to have the knowledge of the real state of affairs of the Company except a very limited right (Section 21 of the said Act) to complain to the Board in respect of any action taken by the Managing Director in relation to the affairs of the establishment. They definitely could not obtain the final accounts or the Balance-Sheet etc. Therefore, at the time of deceased's death, the published Balance Sheet as on 31-10 1972 was too old to have any relevance on 4-5-1976 and there were no other financial analysis open for inspection, in fact, the Proprietary Audit Report (which ultimately disclosed considerable loss) though conducted in 1974 was approved at the Annual General Meeting as late as 12-9-1976 and was gazetted by the Ghee Corporation of Pakistan on 31-12-1976. It has already been held in C.E.D. v. J. Krishan Murty [{1974) 96 ITR 87\ that the break-up value of the share can be determined only on the basis of published information or the information which the Directors would give in answer to a reasonable question likely to be asked by any share-holder or intending purchaser. Similar finding was given in Lynall v. I.R.C.
26. [{1969) Ch. 421 - 1974 PTD 119] which was confirmed by the Court of Appeal in England and reported as (1969) 3 WIR 771 =(1970) 75 ITR 564, when the question came up whether unpublished information could be relied on for the purposes of valuation of shares of a Private Limited Company. It is thus beyond doubt that the value of U.I.L. shares held by the deceased could not be reckoned with reference to the total assets of the Company, because at the time of the death on 4-5-1976, the value of such assets was not known to the public at large nor even to the ex- shareholders. The method adopted by the Assessing Officer in valuing the shares on the basis of compensation determined on 11-11-1976 is apparently unsustainable, in view of the clear provision of Section 4 of the E.D. Act and the settled legal position that the value is to be determined with reference to the death of the land owner and not to any event or happening before or after (1966)
27. 13 Taxation 26 (Trib), wherein reliance was placed on (1898) IQB 365. We, therefore, have no hesitation in accepting the appellant's plea that in the circumstances obtaining on 4-5-1976 the break-up value method of valuation for the shares was just not possible.
28. Now we should attempt to discover the price the share could fetch if sold in the 'open market' on the terms of purchaser being entitled to be registered as a holder of these scriptures. The second limb of this method of valuation needs to be sorted out first. It would be relevant here to reproduce subsection (2) of section 5 of the HVOI Act:- "(2) Where the Federal Government makes an order under subsection (1) in. respect of the shares of any Company, no dealings or business relating to such shares shall be transacted on any stock exchange and no transfer of such share shall be registered in the share register of the Company for a period of ninety days from the date of such order or such shorter period as may be notified by Government."
29. There can be no two opinions that in the face of this enactment no purchaser of shares in question could be registered as a holder of the scriptures even after a genuine purchase, which by itself stood prohibited or, at least, suspended. This remained so even at the time of death because the Government by that time had not decided to acquire (or not to acquire) the whole, or a portion, of the Deceased's holding in the taken- over industry. It is known to all and sundry that values of stocks and shares quoted on the stock exchange presents little difficulty but values of unquoted shares always present considerable hardship. In Salvesen's Trustees v. I. R. C. (1930) SIT 386 a leading case on this subject* Lord Fleming clarified the position that a prudent investor, knowing the circumstances, would still be willing to pay for the charges on evaluating relevant factor from four angles, as under-
1. Applying the above principles to the present case, we are inclined to hold that the advances made by the applicants to the Trust for purchasing the raw materials etc. while they were themselves running the business cannot be termed as a capital expenditure as has been held by the Income Tax Authorities but a revenue expenditure/trading expenditure incidental^ to the applicant's business as to entitle them to claim under Section 10(1) of the Act. In our view it is a matter of no consequence that the above expenses were incurred by the applicants while managing a new business and not in connection with their normal business of Karyana merchant or of commission agent. The applicants were operating Trust's business on part-
2. Mr. Ali Ather had objected to the filing of any affidavit by the Sales Tax Officer at this stage which challenges the factum of a declaration under M. L. R.
32. Mr. Ali Athar relied upon A IR 1940 P C 158 and further {1974) 29 Taxation 32 where it was held that in deciding a reference under Section 66 of the Income Tax Act, the High Court's jurisdiction is merely advisory and is restricted to answering the only question referred to it. We found that the provisions of Section 17 of the Sales Tax Act, 1951 are in pari materia with Section 66 of Income Tax Act in respect of Refe-i
3. (a) Adverting to Mr. Ali Athar's contentions that the Finance Ordinance (XXI of 1972) had lapsed by virtue of Sub-Article (3) of Article 94 of the Interim Constitution of 1972 on the expiry of 6 weeks from the date of re-assembly of the National Assembly, that post-Constitution (President's Order V of 1972) did not amend any provision of the Constitution, and therefore, it did not extend the period of the Finance Ordinance (XXI of 1972) and that in any case the amendment could not have been retrospective for a period prior to 20th December, 1972, it may be observed that it was vehemently urged by Mr. Aziz Munshi, learned Deputy Attorney General that the above post-Constitution (President Order V of 1972) is an instrument of the nature of supra-constitutional and, therefore, anything repugnant/contained in the Interim Constitution 1972 would give way to the provisions of the above order. He has further pointed out that clause (2) of the above President's order begins with the words "Notwithstanding anything contained in the Constitution". It has been further contended by him that the effect of clause (2) of the above President's order is that the provision of Sub-Article (3) of Article 94 of the Interim Constitution to the effect that an Ordinance shall cease to operate on the expiration or six weeks from the re-assembly was no longer applicable to the Finance Ordinance (XXI of 1972). On the other hand it was contended by Mr. Ali Athar that in fact Article 297 of the Interim Constitution contemplates amendments in the Constitution and since no amendment was made in the Constitution by the President's Order (V of 1972) it could
(i) History of the Industry;
(ii) History of the Company since its inception to date of the death of vendors;
(iii) The prospects of the Industry generally at the relevant time; and
(iv) the Scope of restriction from the transfer of shares.
30. Applying these tests to the U.I.L. shares, it emerges that the past record of performance by the Industry was by no standard meritorious because no dividends stood declared in the past and the latest available Balance-Sheet (as on 31-12-1972) showed an accumulated loss of Rs. 27,75,944 and even the public auditors in their Proprietary Audit Report (for position obtaining as on 2-9-1973) certified a loss of Rs. 42,50,569 though that document appeared on the scene must too late.
31. Moreover, the Vegetable Oil Industry had been completely taken over by the Government thus leaving no scope for new enterprenures who could maKe endeavour to improve a sick unit by injuncting their own skill and acumenl. The future prospectus also were bleak, as least from a private investor's points of view, because none had the fore-knowledge as to how much of the share-capital would be acquired by the Government and whether the Government would at all be able to run the Industry successfully so as to offer a reasonable, regular and safe return to the shareholders. The Return guaranteed to ex-shareholders was only an interim measure hedged with several conditions depending on the operational results reflected in the latest annual Balance- Sheet. No such guaranteed return was given out (or even declared) between 2-9-1973 to 4-5-1976, i.e. date of take over vis-a-vis date of death. The lack of faith which the private sector has for efficiency of the public sector is no secret and no sooner an operation, an industry, goes into public sector, the expectation both for the efficiency and profitability registers a shortfall. Thus, the prospects, looking from o private investors angle of vision, were certainly discouraging, if not positively frustrating. Finally, the freeze imposed by the HVOI Act on the transfer and dealings of shares on the Stock Exchange definitely acted as a bar for a prospective buyer against his entitlement to get registered as a shareholder. In these circumstances, the possibility of any sale at arm's length, stood completely rule out in the face of concealed financial position (their being no published statement of accounts) and restrictions obtaining in the Article of Memorandum on the alienation of shares which persisted in the HVOI Act. In a nutshell, the shares stood vested in the Government, who was to pay the compensation, to be determined subsequently at their will but on the relevant date (date of death) everything was shrouded in mystery as neither was it known as to now much of the deceased's holding were to be acquired nor the mode and manner of compensation foreseeable. We are undoubtedly faced with a very typical case, but looking to the double restrictions on sale transfer of shares with probability of their complete acquisition by the Government, as the frustration due to so-called nationalization of the Industries are such glaring facts to which we cannot shut our eyes. Nor can we conveniently overlook the reality of unmarketability of the shares in question, and complete absence of an 'open market' as envisaged by law. It is not to be forgotten that a throw away price offered by a reckless investor who, in spite of all the pitfalls, would still be willing to take a plunge in the dark already stands debarred by section 39 of E. D. A. itself. In our opinion, therefore, the shares in question had no marketability and as such their open market value was 'NIL'. It would be pertinent here to focus attention on a subtle difference between the method of valuation prescribed in section 39 as against section 38 of the E.
32. D. Act. On the one hand, subsection (2) of section 38 debars the Controller from making "any reduction" in the estimate for certain assumptions, on the other hand, section 39 prohibits regard to "a higher price" realisable from a special buyer. This shows the anxiety of the Legislature to save shares of a Private Limited Company from being assigned higher value and hence a distinct or, if we may like to call it so, comparatively lenient method of valuation was consciously prescribed for shares vis-a-vis for other property.
33. Before proceeding further, it would be appropriate to evaluate the findings of the Assessing Officer in the light of the foregoing discussion:-
(1) The view of the Assessing Officer that at the time filing of Return on 5-12-1976 the Accountable Person had, in fact, received compensation at Rs. 23,586 per share and hence the valuation was possible is of no avail, in view of the unambiguous legal position (discussed in the earlier part of the order) that the valuation is to be made as "at the time of deceased's death"-section 38 of the Estate Duty Act.
(2) The Assessing Officer's observation that once the amount of compensation was known the A.
34. Ps. should have revised the return under subsection (4) of section 53 of the Estate Duty Act, has no force because that provision Sof law relates to a case where value (or amount) as on the date of death is not known and is not included in the declared principal value. In the case in hand the position is entirely different inasmuch as on the date of death, the shares were said to have zero value and the same was declared in the return.
(3) We have already discussed the argument of the Assessing Officer that the promise for compensation was specific, precise and well- defined because the amount of compensation to the determined was contingent on the break-up value which was to be worked out on the basis of the accounts. Our conclusion had been that accounts were not made public before 12-9-1976, i.e. after the death of the deceased and hence are excluded from consideration on that date.
35. The plea of the Assessing Officer that what passed on the Accountable Person was right and liabilities in existence under the HVOI Act does not appear tenable to us, as the assessing officer himself assessed the shares as 'property' as not a 'right to compensation. In the absence of actual quantification of value was to be taken as on the date of the death of the deceased and any subsequent happening stood debarred consideration, in view of clear provisions of sections 4 and 38 of the Estate Duty Act.
36. To sum up, our conclusion on the facts and circumstances of the present case is that while the valuation of the UIL stocks, held by the deceased, was to be mede under section 39 of the Estate Duty Act; because of the undisputed restrictive provisions in the Articles of Association on the alienation of shares, their value could not be ascertained with reference to the value of total assets of the company, particularly when no published document or any other information was available; and, at the same time, these had no "open market" value because of the unfavourable investment climate prevailing in the country as a consequence of 'take-over of the industry by the Government more so when no intending vendee could be entitled to be registered as a holder of the shares, not could offer a reasonable price, on his turn, as distinct from special buyer having special reasons for making a purchase. We therefore, ADJUDGE that the defunct shares in the take- over industry, known as UIL had 'NIL' (or zero) value on the date of the assessing of the property i.e. 4-5-1976 Hence we ORDER for the EXCLUSION of the estimated value of Rs.i 30,95,622 from the principal Value of the Estate.
37. Before parting it seems essential to make a pointed reference to our decision reported as (1978) 37 Taxation 41 (Trib).) wherein we had distinguished our earlier decision reported as (1977) 45 Taxation 14 (Trib.) to finally determine that the vested rights of the share holders were not the least disturbed by the the steps for take-over of the companies and consequently, the value was to be included in the net wealth of the assessee. There is obviously no contradiction between that decision and the one pronounced now, because wealth-tax rule 8 for valuation of assets other than cash provided only to methods (i.e. the break-up value, or the face value) while the Estate Duty Act very consciously prescribes a third alternative, viz. the open market value which has been considered ex extense by us before reaching the above conclusion on the issue.
38. Conclusion No other ground was pressed.
39. For the reasons recorded hereinabove, the appeal succeeds to the extent specified under each head.
40. Muhammad Mazhar Ali (Judicial Member).-I concur at the order proposed to be passed by my learned brother in respect of all the issues save that of the valuation of 1,31,250 shares of the (J... I...
41. L... L... a private limited company (hereinafter referred to as the Company). On a very careful consideration of the question involved 1 have not without regret, come to the conclusion different from that of my learned brother. In my humble opinion the value of these shares was ascertainable by reference to the value of the total assets of the Company, or to put it differently, on the basis of the break-up value. And this is what the learned Deputy Controller of Estate Duty, Lahore; while considering the case as! set up by the Accountable persons, has held: "The contention of the counsel that because of the non-disclosure or non-circulation of the accounts of the Company by the Government, the value of these shares was not ascertainable by reference to the value of the total assets of the Company has no factual or legal merit. The law does not visualise that the financial information necessary for the ascertainment of value by reference to total assets of the Company must on the date of death be known to the deceased or the Accountable Persons. It is not a subjective valuation depending upon the state or extent of the knowledge of the accountable persons etc. but independent of it, is referable to the financial position of the Company on the material date. As already mentioned that the balance-sheet of the Company as at 30-6-1975 had been drawn up on 17-11-1975 and was thus in point of fact in existence prior to the date of death.
42. Even if it was not so that balance-sheet could be struck on the date required as business had until that date been conducted and entries thereof had been made in the books of accounts and all that remain to be done was to draw up a statement of affairs based on these entries. The counsel's plea that the share should be valued not by reference to the value of the total assets of the Company but according to the open market value thereof which a hypothetical buyer will pay for these is not acceptable. These must, on the other hand, be valued by reference to the total assets of the company or in other words the 'break-up value.
43. "The latest relevant balance-sheet of the Company is of 3Q-6-1975 and this discloses the following position: - Rs. Rs.
44. Capital 3,50,000 share of Rs. 10 each Reserved 55,57,626 35,00,000 Less adverse balance 2,86,491 52,71,135 Break up value per share 87,71,135 87,71,135 25,11 Value of 13132.50 shares 3,50,000 32,95,685 Considering that the amount realised by way of compensation was Rs. 30,95,600 only, the principal value is restricted to the said amount of Rs. 30,95,000."
45. The learned counsel for the appellant was, therefore, patently wrong in considering and submitting that the Assessing Officer had conceded that the value of the shares is not ascertainable by reference to the value of total assets of the Company. The learned counsel developed his arguments on the premises that the shares in question were to be valued in terms of section 39 of the Estate Duty Act, 1950 (hereinafter to be called "the E.D. Act") on the basis 'what they would fetch if sold in the open market*. In order to fall back upon it, the learned counsel submitted that at the time of the death of the deceased A... H... M... the latest published balance-sheet available was as on 31-10-1972. And it disclosed a net loss of Rs. 27,65,944. But it being too remote in time could not be made the basis for working out the break-up value of the share as on 4-5-1976. Moreover, he strenuously urged that consequent to the Management of the Company having been taken over by the Federal Government with effect from 2-9-1973, by virtue of the Hydrogenated Vegetable Oil Industry (Control and Development) Act, 1973 (hereinafter referred to as "the Act of 1973"), the value of the shares was not ascertainable by reference to the value of the total assets of the company.
46. After the take over by the Federal Government, the counsel so contended, no balance- sheet was published up to the date of the death of the deceased. And hence the residuary method for valuation of shares propound by section 39 of the E.D. Act was to be adopted. The learned counsel then at length made his submission on the proposition that the shares were actually unmarketable and they could fetch no price in an open market' on the date of death of the deceased. It was in this connection that the learned counsel with the assistance of the cases reported as: (i) In re: Lynell; (ii) In re: Lynell, deed (Court of appeal) and (iii) Controller of Estate Duty, Mysore v. J. Krishna Murthy draw our attention to the several factors which were to be taken into consideration for determining the market value of the shares. The learned Deputy Controller of Estate Duty who, appeared to defend his impugned order, on the other hand, states that the break-up value of the shares was available and hence the question of estimation of their value on 'open market value' basis, not arise. He submitted that the value of the shares has been taken at the figures on which compensation had been paid to the accountable persons. He repelled the counsel's contention that the shares had no open market value on the date of the death of the deceased, by contending that in view of the clear and specific provision of the Act of 1973, in respect of the guaranteed minimum return to every shareholder, besides the possibility to the extent of certainty of the acquisition of shares by the Government on payment of compensation.
47. I would at the outset like to make it clear that the learned Deputy Controller of Estate Duty was definitely wrong in holding, that: " The fact that actual qualification of these rights etc. took place after the date of death will not alter the position or rate of the shares of their value. In this view of the matter, the amount includable in the Estate will be compensation value of the shares which the deceased or failing him successor-in-interest were bound to receive in accordance with the law."
48. In my opinion what passed on to the accountable persons on the death of the deceased in this case were the shares of the company and not the right to receive the compensation inasmuch as it was admittedly on 31-7-1976 i.e., after the death of the deceased, that the shares in question were acquired by the Federal Government. Before proceeding further, I would like to advert to section of the E.D. Act, which is the charging section. It inter alia, lays down that "there shall, save as hereinafter provided, be levied and paid upon the principal value ascertained as hereinafter provided, of all property, settled or unsettled, which passes on the death of the deceased person, a duty called "estate duty". Now reverting to the main issue, what I find is that there is no iota of evidence or the slightest material available on record on the basis whereof it could be held that the value of shares in question was not ascertainable by reference to the value of the total assets of the company. The only circumstances, on the basis of which the learned counsel for the appellant wants us to agree with his contention are, that the Management of the company had been taken over by the Federal Government and that no balance-sheets or statements of accounts of the company for any year after 1972 were circulated or made available to the shareholders of the company, including the deceased. While making these submissions the learned counsel for the appellant seems to have conveniently ignored the provisions of section 131 of the Companies Act, 1913 which lays down that a private company is not required to send a copy of the balance-sheet to every member of the company, Similarly it is under no legal obligation to circulate or published a balance-sheet or profit and loss account. Hence we are clearly of the view that the mere non- communication of the statement of account and balance-sheet for any year by the company to its members was of no legal significance or conclusive on the point that the value of its shares was not ascertainable by reference to the value of the total assets of the company. Besides it is pertinent to note that neither it was pleaded nor any attempt was made on behalf of the accountable persons appellants to prove that the Management of the company had refused to supply or expressed their inability to furnish the break-up value of the shares in question or to provide the necessary information and data of taking out the break-up value of these shares on the date of death of the deceased. On the contrary, the Management of the company did, in fact, communicate to the Accountable Persons that the amount of compensation worked out on the basis of the break-up value of these shares as per balance-sheet of the company as on 30-6-1975, which was admittedly drawn up on 17-11-1975 and hence it was in questionably relevant for valuing the shares for the purpose of Estate Duty. The Accountable Persons, I would also like to point out, have neither asserted nor brought any material on record to prove or even to suggest that the break-up value of the shares was in any manner adversely affected or undergone a change between 30-6-1975 and the date of death of the deceased i.e. 4-5-1976. I am therefore, satisfied that in the instant case the break-up value of the shares was definitely ascertainable and it was actually worked out at Rs. 23,586 per share as per balance- sheet of the company as on 30-6-1975.
49. In my opinion, it is one thing to say that the value of shares was not ascertainable on break-up value basis and it is entirely a different matter to suggest that because of the nonavailability of the balance-sheet to the deceased or Accountable Persons the value of the shares was not ascertainable up to the date of the Estate Duty Return (Form E.D.I), It cannot, however, be said that the deceased was legally entitled to get copies of the balance-sheets and profit and loss accounts etc. on payment of annual fees as laid down by section 135 of the Companies Act, 1913. And after the death of the deceased, it was open to the Accountable persons to do so, if they so desired. In short, therefore, there exists combination of circumstances which in my judgment, make the contentions of the learned counsel for the appellant untenable and even, if I may say so with respect unarguable so far as the unascertainable- ability of the break-up value of the shares is concerned.
50. However, there can be no denying the fact that as per section 42 of the E.D. Act, it is the responsibility of the Controller to ascertain the value of any property for purpose of estate duty.
51. And hence. I think he did not fall into an error in accepting the break-up value of the shares as per balance-sheet of the company as on 30-6-1975 as communicated by the Management of the company to the Accountable Persons vide their letter dated 6-1-1977.
52. Lastly, I would also like to put it on record that the contents of the wealth tax returns and the orders in wealth tax proceedings for the years 1971- 74, 1974-75 and 1975-76, which are reported to have become final also go a long way to demolish the plea of the appellant inasmuch as in those proceedings the value of these very shares was admittedly determined and assessed on the break-up value basis and it is, therefore, definitely open to us to place reliance upon that material which is obviously relevant for deciding the issue in hand under the Estates Duty Act. However, while doing so, 1 do not feel persuaded to hold that the same value as estimated there should be accepted here also that the simple reason that the appellants have, as already stated, usually failed to pin point any mistake or calculational error in working out the break-up value of shares as per relevant balance-sheets of the company.
53. For the foregoing reasons, I would hold that the correct method of valuation of the shares of the company is the "break-up value method" and not the 'open market method'. In the resuit, I would dismiss the appeal on this issue and direct the Deputy Controller of Estate Duty to pass appropriate order in accordance with law.
54. As the matter may not be allowed to rest here, I would express my views on the residuary method of valuation of shares of private company laid down by section 39 of the 'E. D. Act' for what they are worth.
55. For valuing the shares of private company on open market valuation basis, the law requires us to proceed on certain presumptions, suppositions and expectations by this connection, firstly, section 39 of E. D. Act itself provides a definite basis and then the decided cases long way to furnish the most dependable and marked guidelines to understand the implications of the law and legal problem with which we are faced. I think it would be advisable if 1 first reproduce hereunder some excerpts from celebrated authorities relevant to the issue in hand. While considering section 7(5) of the Finance Act, 1894 which is in these terms:- "The principal value of any property shall be estimated to be the price which in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased." the House of Lords, in Inland Revenue, The Commissioner v. Crossman [(1937) A C 26] held that the shares must be valued on the basis of hypothetical sale on the date of the death of the deceased in a hypothetical open market between the hypothetical willing vendor and a hypothetical willing purchaser on the hypothesis that no one is excluded from buying and that the purchaser would be registered as the holder of his shares but would then hold them subject to the Articles of Association of the Company including the restriction on transfer.
56. In Finlay's Trustees v. Inland Revenue, Commissioner [(1938) 22 A T C 43] Lord Flaming of the Court of section said:- "In estimating the price which might be fetched in the open market for the good will of the business it must be assumed that the transaction takes place between a willing seller and a willing purchaser and that the purchaser is a person of reasonable prudence who has informed himself with regard to all the relevant facts such as the history of the business, its present position, its future prospects and the general conditions of the industry; and also that he had access to the accounts of the business for a number of years."
57. And a little later, the same Lord Justice said at page 573 of the report: "What the Act says that the sale is to be treated as an open market sale, that is to say, the restrictions on transfer are to be ignored for the purpose of hypothetical sale which is to fix the price, but I cannot see why the hypothetical sellers are not to be treated as being what they are, namely, directors in possession of the information which a purchaser would reasonable requires and which on the evidence he would have obtained if he were to be a willing purchaser."
58. I would now quote from the speech of Widgery, L. J. delivered In re: Lynall (deed.), and appears at page 576 of the above report: - "Section 7(5) of the Act of 1894 applies to all forms of property passing on a death, it makes the hypothetical market price the test of values, and prescribed only two of the conditions to which the sale is subject, namely, that it must be a sale in open market and conducted at the time of the death of the deceased. In so far as other conditions need to be inferred, the court must supply those which will give effect to the intention of the section, Thus it is established that the sale is wholly hypothetical one conducted between hypothetical parties."
59. Now keeping in view the provision of Section 39 of E.D. Act and the principles of law as communicated by the above-cited rulings, there can be no denying the fact that it would be contrary to the spirit and the relevant provision of law to presume or hold, as argued by the learned counsel for the appellant, that there was absolutely no likelihood of any buyer coming forward looking to the circumstances prevalent at the time of the death of the deceased. The contention of the learned counsel for the appellant that only the "published information", which was available at the time of the death of the deceased, could only be taken note of and not the unpublished information is, in my humble opinion, contrary to what has been held unanimously by the Court of Appeal In re: Lynall which has been relied upon by appellant's counsel. No doubt, Polowman, J. In re: Lynall was farculably inclined to adopt the view that published information alone ought to be taken into account. But he feit constrained to follow the decision of Dauckberts, J. In re; Hoit [(7955) 1 WLR 148 wherein it is held that besides published documents the purchaser must be taken to be in possession of all such further information (if any) as member of the Board would have afforded, but the Court of Appeal, however, allowing the appeal held: "That it must be assumed that the purchaser would make all reasonable enquiries which a prudent purchaser would wish to make and that he would receive true and factual answers to such enquiries; that in the present case such enquiries would have disclosed the Category 'B' documents and those documents were therefore, admissible." (Quoted from head-notes). The Category 'B' documents, it may be noted, consisted of the interim monthly statements in possession of directors and facts known to the Board to show the prospectus or the likelihood of the company going public. The submissions of Mr Ahmed Shuja Khan, the learned counsel for the appellant are thus without substance. Their Lordships of Mysore High Court in Controller of Estate Duty v. J. Krishna Murthy [{1974) 96 ITR 5] if I may say with all humility at may command, have wrongly observed that the view of Polowman, J.
60. In re: Mrs. Lynell was affirmed by the House of Lords. He has advanced his arguments, so far as I could see on the presumptions that the buyer is neither willing buyer nor is he a prudent man. He has completely overlooked all the important facts and circumstances which would have made a prudent and willing purchaser to purchase the shares in question after obtaining all the necessary information which would have been made available to him by a willing seller. The learned counsel for the appellant was also wrong in considering that the 'Act of 1973' had placed restrictions on the transfer of shares of the private limited companies or that there was, in fact, any such restriction existing at the time of the death of the deceased. What is provided for in subsection (2) of Section 5 of the Act of 1973 is that'where the Federal Government makes an order under subsection (1) in respect of the shares of any company, no dealing or business relating to such share shall he transacted on any Stock Exchange and no transfer of such share shall be registered in the Share Register of the company for a period of 90 days from the date of such order or such shorter period as may be notified by the Government.' The Federal Government did not admittedly make any order under sub-section (1) in respect of the shares of the "the company" before the date of the death of the deceased. The learned counsel for the appellant also did not pay due heed to the provisions of the Act of 1973 which ensure the payment of minimum annual rate of return equal to 2% above the bank rate and the payment of compensation on the acquisition of shares on the basis of the price set out in the Schedule attached to the Act. However if I were to hold that the open market basis was to be adopted in this case for estimating the value of the shares in question. I would have preferred to remit the cost to the D.C.E.D, for passing de novo orders since he had neither adjudicated upon nor estimated the open market value of the shares of the company.
61. The appeal stands finally disposed of in respect of all the issues discussed and decided by the order of the Accountant Member save that of valuation of 1,3,150 shares of United Industries Limited, Lyallpur. As we differ about the method of valuation of the said shares as well as their estimated value, we direct that the case be laid before the learned President for obtaining a third Member's opinion on the following points:- Whether the shares of the U.............. I...... L...... L...... are to be assessed on the basis of the market value method as envisaged by Section 39 of the E.D. Act?
62. If so, whether their open market value was to be assessed at Nil, or the matter may be referred back to the D.C.E.D. for further enquiry and determination of their market value on the date of the death of the deceased.
63. [Dated 29-1-1979] Abrar Hussain Naqvi (Judicial Member).-This estate duty case has been referred to me for my opinion as the learned man learned AM, who heard the appeal, had differed in their views on the following questions:-
(1) Whether the shares of the U. I. L. L. are to be assessed on the basis of the market value method as envisaged by Section 39 of the E.D. Act?
(2) If so, whether their open market value was to be assessed at Nil or the matter may be referred back to the D.C.E.D. for further enquiry and determination of their market value on the date of the death of the deceased.
(3) Whether the D.C.E.D. should accept as correct the liability of the deceased in respect of affairs of U.I.L.L. to the extent these were adjusted by the G.C.P. out of the sum due on account of minimum Guaranteed Return.
64. Originally questions Nos. 1 and 2 above were referred vide order of the Bench dated 28-1-1979.
65. Subsequently a miscellaneous application was moved before the same Bench for rectification of a mistake. According to the said application the question in regard to minimum guaranteed return, though argued, was left out of consideration by the Bench. Consequently that mistake was rectified and both the learned Members have expressed their views on that issue. But they differed on that issue as well and question No. 3 was framed and referred to me for my opinion.
66. 2, The brief facts of the case under which the aforesaid question arose, at the cost of repetition but for convenience are restated. One Mr. A. H. M. died on 4-5-1976 leaving behind considerable property including 131250 shares in a private limited company known as U. I. L. The shares had the face value of Rs. 10 each. This limited company was in fact a family affair and the entire paid up capital of Rs. 35 00,000 divided into 3,50,0 shares of the face value Rs. 10 each was owned by Mr. A.
67. H. M. and his family members, in 1973 Hydrogenated Vegetable oil Industry (Control and Development) Act, 1973 (hereinafter referred to as HVOI Act) was promulgated and under Section 5 of the said Act the Government was empowered, (i) to take over the management of any Establishment of the kind of the deceased's company and (ii) to acquire whole or a portion of the shares from all, or any of the Share-holders of such a company. Consequently in exercise of these powers, the Federal Government took over the management of the company of the deceased on 2-9-1973. On taking over the management on the same date a proprietary audit report was prepared which showed a loss of Rs. 42,59,569. According to this report the break-up value of each share was worked out Rs. 9.58. This report was submitted to the Punjab Industrial Development Board on 18-9-1974 (This has wrongly been stated by the learned A. M. that it did not see the light of day till 12-6-1976 when it was approved). Since it was not a statutory audit report, no approval was necessary and in any case it has been submitted to the Government on 18-9-1974 and, as has been stated by the learned counsel for the assessee, it became a public document and thus available to general public.
68. The statutory audit reports and balance-sheet were prepared by the auditors as on 31-10-1973, 30- 6-1974 and 30-6-1975. The last noted balance- sheet was drawn up on 17-11-1975. All these reports and balance-sheets however were approved on 12-9-1976. The break-up value of the shares on the basis of the balance-sheet as on 3-6-1975, was worked out at Rs. 25.11 per shares. The shares ultimately acquired by the Federal Government under Section 5 of the HVOI Act on 31-7-1976 i.e. after the death of the deceased on 4-5-1976. Compensation had to be paid to the share holders after acquisition which was determined by the Government on 11-11-1976 at the rate of Rs. 23,586 per share. Finally after making certain adjustment of the liabilities the compensation was worked out by the Government at Rs. 30,65,922.
69. The accountable Persons declared Nil value of these shares but the assessing officer did not accept this plea and held the shares having been passed on to the accountable persons and worked out the value of the shares as under:- Capital Rs. 3,50,000 share of Rs. 10 each. Rs. 35,00,000 Reserves Rs. 55,57,626 Less adverse balance Rs. 2,86,491 Total assets Rs. 87,71,135 Break up value @ Rs. 25.11 per share value of 131250 Rs. 32,95,685 shares The assessing officer however, did not adopt the figure worked out by him on the ground that ultimately compensation of Rs. 30,95,622 had been received by the accountable persons consequently this amount of Rs. 30,95,622 was added to the Principal value of the estate. The case of the Accountable persons before the assessing officer as well as before the Tribunal was firstly, that this being a private Limited Company and its Article of Association contained restriction of alienation of shares, Section 39 of the Estate Duty Act was applicable for determination of the value of the shares. There has been no dispute between the two learned members on the application of this section. This section provides: "that the value of the shares if not ascertainable by reference to value of total assets of the Company, shall be estimated by what they would fetch if they could be sold in the open market."
70. The learned A. M. has accepted the plea of the assessee firstly that the value of the shares was not ascertainable in this case and that for various circumstances the market value of these shares was Nil. The learned J.M. on the other hand has held that the value of these shares was ascertainable. It has further been held by him that in the alternative if the value is to be determined on the basis of open market basis the case has to be remitted back to the D. C. E. D, as he has not ascertained open market value of the shares of the Company.
71. Under Section 26 of the HVOI Act it has been provided that in case where the Government, has taken over management of establishment it would guarantee to the share holders the minimum annual rate of return equal to 2% above the bank rate. Consequently in accordance with this section the Government worked out the amount of Rs. 4,07,788 as minimum guaranteed return which was to be paid to the deceased for the period 2-9-1973 (date of taking over the management) to 31-7-1976. However out of this total amount the G. C. of P. adjusted liabilities to the extent of Rs. 3,73,001 and only balance of Rs. 33,887 was paid to the accountable persons on 8- 2-1978. The assessing officer has however, included the entire amount of Rs. 4,07,788 while calculating the total assets of the deceased. The case of the assessee before the Tribunal was firstly that it was not a property passing on the death of the deceased as this amount had been paid after the death of the deceased. On this point both the Members had agreed that the amount which was to be paid as minimum guaranteed return was includable in the deceased's assets.
72. Both the learned Members also agreed on two more points that the minimum guaranteed return related to the period from 2-9-1973 to 31-7-1976 although the deceased had died on 4-5-1976.
73. Therefore proportionate adjustment was to be made so as to include the amount calculated up to 4-5-1976. Secondly out of the liabilities the amount of Rs. 2,59,261 was due to U. I. L. out of which accountable persons had already availed of claim at Rs. 11,956 and therefore this amount was to be adjusted. But the learned Members have differed on the point as to whether the liabilities determined and adjusted by the G. C. of P. were to be assumed as correct and should be given credit or the D. C. E. D. should first satisfy himself as to whether the alleged debits in question warranted allowance in terms of Section 45 of the Estate Duty Act. While the leamed A. M. has held that the liabilities determined by the G. C. of P. should be accepted as correct the learned J. M. has held that the D. C. E. D. should come to an independent conclusion and should not accept the liabilities without satisfying himself in this regard. Since, according to the learned J. M. specific opportunity of adducing evidence had not been provided to the accountable persons in his view the case should be remitted back to the D. C. E. D. so as to allow the accountable persons an opportunity to adduce evidence to prove the alleged debits of the deceased.
74. The entire case of the accountable persons has been built up on one point i.e.-since no balance- sheet from the date of taking over the management to the date of death of the deceased has been approved therefore the value of the shares could not be ascertained. The argument of the A.
75. R. was that it is only the published information on the basis of which the value of the shares could be ascertained and that the unpublished information is inadmissible and could not be taken into account for the purpose of ascertaining the value of the shares of a private limited company. In support of this contention the learned A. R. relied upon a number of cases which 1 would presently discuss. The leading case on which the learned A. R. has based his argument is the case of Lynall and another v. Inland Revenue [(1972) I T R 563] decided by House of Lords. This case would be discussed at length when I would discuss the question of market value of the shares. For the present moment this case has been cited in support of the contention that only a published information could be taken into consideration for ascertaining the value of the shares. But from the aforementioned case I could not find even the slightest support to the contention of the learned A.
76. R. so far as it relates to ascertainment of the value of the shares. In this case the factors and circumstances which could influence the market value of the shares have been discussed but nowhere it has been stated that non-publishing of accounts and balance-sheet would be in any way relevant for consideration as to whether the value of the shares could be ascertained or not.
77. On the contrary Lord Donovan observed in his judgment as follows: "I concur in the view that confidential information ought not to be regarded as available to a hypothetical purchaser under section 7(5) of the Finance Act, 1894, though I would think it right not to treat as confidential information for this purpose accounts of the Company already prepared and awaiting presentation to the Share-holders. I have in mind the accounts of the present Company for the year to July 31, 1961.
78. In that case, almost in similar circumstances, the balance-sheet and the accounts had been prepared up to July 31, 1961 before the death of the deceased on 21-5-1962 but this balance-sheet was passed on 7-6-1962 i.e. 17 days after the death of the deceased. In the present case as well as the balance-sheets on 31-10-1973, 30-6-1974 and 10-6-1975 though prepared earlier were approved after the death of the deceased on 12-9-1976. Under section 39 of the Estate Duty Act market value of shares of a private limited Company having restriction to the transfer of shares can only be determined if it is not ascertainable by reference to the value of the total assets of the company. I am in full agreement with the learned J. M. when he says that no iota of evidence is available on record to show that the value of the shares could not be ascertained with reference to the value of the total assets of the company, This is condition precedent to coming to the second mode of valuation on the basis of open market value. The learned A.R. could not clear this hurdle so as to base his claim on the second method of valuation, in order to prove that the value of the shares was not ascertainable it has to be first established that the value of the total assets of the company could not be ascertained. If by some method value of the total assets of the company could be ascertained the value of the shares could obviously be determined. The learned A. R. argued that the deceased and arter his death the accountable persons had no knowledge about the affairs of the company and thus the value of the shares of the company was not available to them. The value of a thing is not dependent on the knowledge of a particular person. For instance if 'A' dies without knowing that he had inherited certain property which is subsequently discovered to the accountable persons, can it be said that the said property did not pass or did not have any value because the de- ceased,had no knowledge of it.? Similarly a deceased owning a house at the time of his death might not necessarily had the knowledge of the true value of the house. Can it be said that since the deceased did not know the value of the house therefore the value could not be ascertained or it should be taken as NIL. Again supposing a person owns a valuable diamond but he has he no idea about its value till his death. Can it be said that the value of the diamond could not be ascertained? Here the question arises who is to ascertain the value and therefore whose knowledge is relevant? Obviously it is neither the deceased nor the accountable persons.
79. Ascertainment of value is to be done by the authorities which have been created under the Estate Duty Act. Therefore it is the knowledge of these authorities which is relevant. The question therefore is whether the D.C.E.D, had any material before hint to ascertain the value of the shares in a private limited company within the meaning of section 39. If the D. C. E. D. had some material and information on the basis of which value of the shares could be determined and ascertained, the fact that some information and material was not available to the deceased before his death or to the accountable persons after his death, is entirely irrelevant. The object of the Estate Duty Act is to charge duty on the assets of a person who has died. It has not been the case of the accountable persons that the shares of the deceased were not included in the assets. The case of the accountable persons is that the shares had Nil value.
80. Section 4 of the Estate Duty Act creates charge on the value of all properties which pass on the death of a person. Obviously the shares of the deceased were property, and since they were acquired after his death they did pass to the accountable persons. Section 39 only provides the method of valuing such shares. This method is for the guidance of the assessing officer and not for the deceased or the accountable persons. In the present case the latest balance-sheet as on 30- 6-1975 which was drawn up on 25-11-1975 was available and according to which the value per share was Rs. 25.11. The learned A. R. wanted the Tribunal to believe that notwithstanding the fact that such value was ascertainable this should be treated as Nil merely on the ground that this balance-sheet was approved after the death of the deceased. The learned A. R. could not quote any authority to support his view. As I have stated above the learned A. R. has unnecessarily played up the point that unpublished information is inadmissible for the purpose of ascertainment of the value of the shares. In the leading case of Lynall and another v. Inland Revenue Commissioners (quoted above) no such observation which could be helpful to the learned A. R. can be found. On the contrary at page 752 of the Judgment of the House of Lords relied a contrary view had been expressed. In that case the balance-sheet had been drawn up to 31-7-1961 between this date and the date of death the trading had been done for about 10 months and during that period sales had arisen and profit had increased. The question arose as to whether in fixing the market value of the shares the information in regard to current financial position could be said to be available to a hypothetical purchaser. In that context it was held that higher figure could be adopted only on the basis that hypothetical purchaser would be in possession of information contained in category B document as well as information concerning the current financial position of the company. In that case it was never disputed that the account of the company for the year ending July 31, 1961 though approved after the death of the deceased, were not relevant consideration. What was disputed was that the current financial position, namely after closing of the accounts on 31-7-1961 till the date of death, could not be a relevant factor for determination of the market value of the shares. In the present case, since the assets of the company could be valued therefore the value of the shares could also be ascertained from the material on record. I may venture to say with utmost respect, that the learned A.M. has not given any cogent reasons for holding the view that the value of the shares was not ascertainable with reference to the assets of the company. The reasons which he has advanced are:
(i) It was not possible to draw balance-sheet as the management of the company had been taken over by the Government on 2-9-1973.
(ii) After taking over the management no balance-sheet or proprietary audit report was available at the time of death of the deceased. {iii) because the shareholders had no knowledge of the real state of affairs of the company nor they could obtain the final accounts or the balance-sheet. The proprietary audit report was approved in a general meeting of the company held on 12th September, 1976 and gazetted on 31- 12-1976.
(iv) The value of the assets of the company was not information to the public at large and not even to the shareholders.
81. None of the above reasons, are relevant to see as to whether the value of the shares could be ascertained with reference to assets of the company. It may incidentally be pointed out that it is factually incorrect that no proprietary report was prepared after taking over the management of the company which was in fact prepared on 2-9-1973 and the report was submitted to the Punjab Industrial Development Board on 18-9-1974. Since it was not a statutory audit report it did not require any approval nor in fact t was approved on 12-9-1976. As I have stated above the learned counsel has laid unnecessary stress on the knowledge of the ex-shareholders or the public which has no relevancy so far as the application of section 39 is concerned ascertainment of assets on the company or for that the value of the shares with reference to them is not dependent on the knowledge of the ex-shareholders. It may be pertinent to note that the value of the shares is to be ascertained by reference to the value of the total assets of the company. It could not be said that there were no assets of the company or that the assets of the company had Nil value. It also cannot be proved that the value of the assets could not be ascertained. The value of the shares is ascertainable with reference to the value of the assets. What the Dy. Controller had to do was to first ascertain the value of the total assets of the company and then the value of the shares of the deceased had to ascertained with reference to the value of the assets so arrived at. I entirely $gree with the learned J. M. that it was absolutely unarguable case so far as ascertainment of the value of the shares was concerned. Since the value of the shares could be ascertained and has in fact been ascertained it was absolutely unnecessary to come to second mode of valuation i.e. the market value. It may also be noted that no alternative had been prescribed by law nor any mode has been suggested for ascertainment of value of assets or value of shares with reference to them.
82. This gives vide discretion to the deceased to take into consideration whatever facts could be made available to him or whatever material which could be relevant for valuation of assets. Therefore the question of published or unpublished information or one balance-sheet or the other is irrelevant consideration. The fact remains that certain documents including balance-sheet were available to the deceased at the time of assessm ent which he could certainly make use of for ascertainment of value of the shares with reference to the assets of the company. I would go even so far that any material or facts discovered subsequent to the death of the deceased which could throw some light for the ascertainment of the value of the assets of the company as on the date of death of the deceased can also not be said as irrelevant consideration. Mere fact that certain material, came to light after the death of the deceased, cannot be a ground ipso facto for rejecting it. As I have stated above the valuation has to be made by the deceased and it is his information which matters. Unless it could be shown that the accountable persons have been prejudiced because of the use of some material or that the valuation made by the deceased was perverse, the valuation cannot be brushed raised merely because certain balance-sheet had not been published or certain material which was not available at the time of death of the deceased had been made use of. In this case the balance- sheet as on 30-6-1975 was available which could give a reasonable basis for the ascertainment of the value of the assets of the company. Similarly when shares had been acquired by the Federal Government on 31-7-1976 i.e. about two months after the death of the deceased, and the compensation was paid to the accountable persons which was determined as on 31-7-1976. This was certainly a relevant fact or for the ascertainment of the value of the shares of the deceased with reference to the assets of the company on the date of his death. The compensation paid by the Federal Government, was on the value as on 31-7-1976 which date coincides approximately with the death of the deceased. In these circumstances I entirely agree with the learned J. M. that the value of the shares in this case should be made with reference to the value of total assets of the company and in other words the break-up value. The answer fo question No. 1 is therefore in the negative.
83. Since my answer to Question No. 1 is in the negative the answer to Question No. 2 really does not arise. However since both the learned Member given their opinion on this issue as well I also give my opinion on this issue. At the outset I have no hesitation in saying that the view of the learned J.
84. M. is correct and I entirely agree with him. My reasons for arriving at this conclusion are given below.
85. The appellant's whole case is again bassed on the same point namely that while determining the market value it is the published document or information which can be taken into account and no other document which had not been published could be made the baj^s for determining the market value. This argument is based on the case-law which has been cited by the learned A. R.
86. The leading case on this subject which was relied upon by the A. R. is the case of Lynall v. Inland Revenue Commissioner already quoted above. The facts of that case that one Mrs. Lynall held 67886 shares Lincll, a private limited company and Article of Association of which restricted right of shareholders to transfer their shares. There were in all five shareholders and the deceased had 28% of the share capital. The other four shareholders were her husband and her two sons besides the Manager who held 200 shares. All the shareholders were Directors. Since Mrs. Lynall and her husband were quite old, they were apprehensive of death and in order to forestall the death duty as to be paid after their death, some steps were taken. They proposed that the company should be made a public company. They took certain steps in that direction secretly and a survey was got conducted and survey reports were obtained as the best method of floatation. However before any decision could be taken by the Company Mrs. Lynall died on 21-5-1962. Originally the value per share was fixed of the Court at 3/1st but the Court of appeal increased the value to by 1st. The house of Lords on appeal restored the original order and fixed the value at 3 1st. The precise question in that case was as to whether the secret information contained in various reports as to the proposal for marking the company a public company, which were called Category, B documents was relevant consideration for determining the market value of the shares. All the three Courts agreed that the market value was to be determined by assuming the facts-
(j) That there was no restriction of any kind of the disposition of shares;
(ii) that the sale was not real but hypothetical;
(Hi) that the sale was in the open market and imaginary and took place at the time of death of the deceased; (/v) the Directors or the vendors of the shares would be deemed to have done what all reasonable Directors would do for the sale and they would disclose all the information available to them provided its disclosure would not possibly prejudice the interest of the company. It is to be assumed that the shareholder who is to sell the shares is an honest man and would give as much information as he could;
(v) the hypothetical seller as a willing seller and a hypothetical purchaser a willing purchaser.
87. However the difference of opinion arose only on one point as to what was the information which could possibly to available to a hypothetical purchaser. It was on that issue that the Court of appeal held that Category B information referred to above which was in fact a secret information, was relevant factor to be considered in arriving at the market value of the shares and it was on that issue that the House of Lords reversed the view of the Court of appeal and held that such information could not reasonably be said to be made available to a hypothetical purchaser by the Directors of the company. It was in that context and referring to this Category B information that the House of Lords at page 574 of the report held as under: "As such information was not published information and as it would not in fact have been elicited on enquiry it ought not to enter into the calculation of price and value."
88. On the same page the House of Lords further observed: "If however the Category B documents and the information contained in them were confidential to the board, as they were, the information could not be made generally available so that it became open market knowledge. On this some what limited issue I, therefore, prefer the figure of 3, 1st and I would restore the decision of the learned Judge."
89. It is therefore clear that this case does not support the contention of the appellant. The non- consideration of published information was: in the circular context referable to certain confidential information: The House of Lords nowhere stated that in order to arrive at market value of shares only published material is relevant consideration. On the contrary at page 572 the House of Lords observed as under: "in argument before your Lordships counsel agreed that if the decision in the Crossman case stood, the figure to be decided upon should be either 3, 1st or 4, 1st and that it should be the latter figure only on the basis that a hypothetical purchaser would be in possession of the information contained in the Category B documents as well as of information concerning the current financial position of the company."
90. This observation was made on the argument advanced by the Revenue that since of the last balance-sheet was drawn up on 31-7-1961 the trading had taken place and the profits had been earned by the company till the death of the deceased on 7-6-1962. Infixing the price to be paid by a hypothetical purchaser in the open market as on the date of death the hypothetical purchaser should be deemed to have information of the current financial position of the company and the profits earned by it. In this context Lord Reid observed that the value of the share could be greatly increased if information regarding the prospects of the company becoming a public company would be available to a hypothetical purchaser particularly the timings of the change, would have considerable effect upon the prices of the shares. It was therefore concluded in that judgment that such information contained in Category B document could not have been made available to prospective purchaser as it was the confidential information and therefore it could not be regard as open market knowledge. Excluding this information it was held: "On this some what limited issue I therefore prefer the figure of 3 1st and I would restore the decision of the learned Judge."
91. The order of the Court of appeal was reversed only on the limited issue that Category B document could be taken into consideration while determining the market value of the shares. It is pertinent to note that certain other information which were not published information were taken into account even by the House of Lords in this case for determining the market value of the shares. At page 574 it was observed by Lord Reid: "A purchaser in the open market would probably not be context merely with what would be published information in the sense of information which had been in print in some documents sent out by a company to its shareholders. He would form his own idea as to the company's respects having regard to trends and developments which are matters of public knowledge. Furthermore on known facts in regard to a private company and its directors and its management he would form his own reasonable deductions."
92. Lord Viscount Dilhorne in the same case had gone a little farmer and was more specific. As stated above, the balance-sheet in that case had been prepared as on 31-7-1961 and was passed on 7-6- 1962 after the death of the deceased and therefore, as the learned A. R. puts it, was not a published document. Lord Viscount Dilhorne however held it not confidential document at page 577 of the report which has already been reproduced above.
93. From the above discussion it is therefore obvious that Lynell's case is of no help to the assesSee.
94. The other case relied upon is that of Indian Jurisdiction-Controller of Estate Duty. Mysore v. H.
95. Krishna Murty, In that case the Mysore High Court upheld the order of the Appellate Tribunal with the direction that the value of the shares could have been determined only on the basis of published information and the information with the Directors of the Company which would have been given in answer to reasonable questions likely to be asked by any shareholder or intending purchaser. This case unfortunately also does not support the case of the assessee. The point involved in that case was entirely different. In that case one Mr. Willian Whitely died on September 11, 1967 and the last balance-sheet which was prepared and published was that of 31-12-1966. The C. E. D. had made calculation on the basis of balance-sheet prepared as on 31-12-1967 i.e, after the death of the deceased. It was in that context that the High Court had held that the relevant balance-sheet that of 31st December, 1966 namely the one which was prepared before the death of the deceased and the one prepared after the death of the deceased could not be taken into account. Another question involved in that case was regarding goodwill which also had been included in the total assets of the Company while calculating the values of the shares. The Hih Court further held that valuation should be made in accordance with the wealth Tax Rules and since under those rules goodwill was not to be included the value of the goodwill should not have been included in the total assets of the Company to work out the value of the shares of the deceased. This case therefore has no relevancy whatsoever and there is no ratio decidendi for application in the facts and circumstances of this case. In the present case the balance-sheet had been prepared for a number of years latest of which was as it stood on 30-6-1975. Mere fact that it was approved subsequent to the death of the deceased has no bearing as has already been held by the House of Lords in Lynell's case discussed above. Another case relied upon by the learned A.
96. M. is that of Dewan Labh Chand v. C. E. D. [53 ITR 538]. In that case dealing with the verified claim of a displaced person under the Displaced Persons (Claims) Act, 1950 it was held that right to compensation was not property within the meaning of Estate Duty Act. Iri this case the facts are entirely different. As the learned J. M. has rightly pointed out since the shares had been acquired by the Federal Government after the death of the deceased what had been passed on to the Accountable persons was the shares itself and riot the right to receive compensation. The learned D.C.E.D, had also determined the value of the shares on this basis. However in ascertaining the value of the assets of the company, the quantum of compensation as was determined almost immediately after the death of the deceased, had been taken into account. This case therefore has no relevancy to the facts and circumstances of the present case. Still another case relied upon by the A.R. was C.E.D. Patiala Vs SMT Motia Rani Malhotra reported as 98-ITR P.
42. In that case the question was as to whether the compensation received by the heirs of the deceased on account of the death of the deceased was property passing on the death of the deceased. It was held in the negative and obviously so. The compensation received by the heirs was not property of the deceased which could pass on the heirs though it was on account of the death of the deceased.
97. The next case cited by the A. R. at the Bar was Commissioner of Gift Tax West Bengal vs. Sardar Ajaib Singh reported [55 ITR P. 221] I do not know why this case has been cited which has no relevancy. In the first instance this was a case of gift tax and secondly the question in that case was the direction for the estimated tax liability not provided for the balance sheet and the answer to this question was in the negative upholding the order of the Tribunal. The next case cited was CIT West Bengal v. Swadeshi Mining & Mfg. Co. Limited reported as 116 ITR P. 259. That case was of capital gains and it was held that while valuing the shares the break-up method should be restored to excepttionally I do not know how this case is relevant when it has not been shown that provision of capital gains are parri materia with section 39 of the Estate Duty Act. In section 39, of the Estate Duty Act, as discussed above, it has been made incumbent on the estate duty authorities to first ascertain the value of the the shares with reference to the value of the assets of the company if it cannot be done only then the another method of market value can be adopted.
98. This case therefore has also no relevancy. The last case cited at the the Bar was that of Estate of Late G. Ramswa mi Naidu v. CED Madras reported as 76 ITR P. 559. in that case it was held that the contends of the wealth tax return and the order of the wealth tax authorities which had become final are relevant material on which reliance could be placed by the Tribunal to decide the issue under the Estate Duty Act. This case was cited by the learned A. R. in support of his contention that in this case the assessee's wealth tax assessments had been finalised for the years 1973-74 to 1975-76 on 27-5-1978 in which the WTO (incidentally he was the same person who made the assessm ent under the Estate Duty Act) adopted the value of the shares for purposes of wealth tax at face value. In other words the alternate argument of the A.R. was that at best valuation which would be made by the D.C.E.D, was at the face value of the shares and not the value relevant to the assets of the company. There are more than one reason for not accepting this argument of the A.
99. R. Firstly Section 39 of the Estate Duty Act casts a duty on the D.C.E.D, to ascertain the value of the shares by reference to the value of total assets. Therefore he has to make independent ascertainment irrespective of the value adopted by any other authority under any other law though the value which has been considered and finalised under some other law may be relevant consideration. No doubt the assessments under the wealth Tax Act should have been and might have been taken into consideration by the D.C.E.D. but cannot be said that the D.C.E.D. was bound to adopt the same value of the shares as has been adopted under the wealth tax Act. This view is supported by a recent decision of the Lahore High Court in Tax Ref. No. 30/1979 dated 11. 5. 1980.
100. Secondly in this case the latest assessment under the wealth tax Act was made for the year 1975- 76 which may not be true on the date of death. Thirdly under rule 8 of the wealth Tax Rules 1963 under clause (c) value of the shares of Joint Stock Companies which are not quoted on recognised stock exchange had to be taken at the face value or break up value as determined under the wealth-tax Rules which ever is higher. When the WTO has adopted the face value of the shares he is obviously wrong as the rules require the higher value to be adopted. Mere fact that the D.C.E.D, had fallen into an error in adopting the face value of the shares could not operate a bar to entirely a different authority i.e. the D.C.E.D, to come to a different conclusion as required by section 39 of the Estate Duty Act. The market value has to be determined and the matter has to be referred to the D.C.E.D. for further enquiry. Therefore my answer to the second issue is that market value of the shares could not be taken as NIL. On this issue as well agree with the learned JM.
101. The last question on which the learned Members have differed in their views is in regard to adjustment of liabilities of the deceased in respect of affairs of U.l.L. against payment on account of minimum guaranteed return made by G.C. of P. The accountable persons were held entitled to payment of Rs. 4,07,788/- on account of minimum guaranteed return under the HVOl Act which provided minimum guaranteed return at 2% above the bank rate. This amount related to the period from 2-9-1973 to 31-7-1976 which was included by the D.C.E.D. in the total assets of the deceased. Both the learned Members have agreed that this amount should be curtailed and be calculated for the period from 2-9-1973 to 4-5-1976 i. e. the date of death of the deceased and not upto 31-7-1976. Both the learned Members have also agreed that the adjustment already made to the tune of Rs. 11,957/-should be given credit. Both the learned Members have set aside the order of the D.C.E.D. on this point. However the leamed Members have differed on one point. The G. C. of P while making payment for the minimum guaranteed return adjusted liabilities of the deceased to the tune of Rs. 3,73,001/-and this amount was deducted out of the total entitlements of the accountable persons. According to the leamed. A.M. this amount should have been straight away accepted by the D. C.E.D. and he directed to D.C.E.D. to so and to redetermine the amount of minimum guaranteed return which could be included in the estate of the deceased. The learned J.M. on the other hand has held that the D C.E.D, should know the exact amount of allege liabilities and should not accept them without first satisfying himself as to whether these liabilities are genuine liabilities and could be adjusted. On this issue as well 1 agree with the learned J.M. for the reason that Section 45 of the Estate Duty Act requires the estate duty authorities to satisfy themselves in regard to the number of circumstances enumerated in that section. One of these factors is as to whether encumbrance or debts were incurred or created bonafide for for full consideration of money or moneys worth. The G.C. of Pakistan was not concerned in regard to factors mentioned by Section 45 of the Estate Duty Act. They would normally accept what the books of accounts have shown. The Estate Duty authorities on the other hand have to see and satisfy themselves as to whether the conditions under which allowance could be allowed had been fulfilled or not. Therefore it is necessary that the D.C.E.D. should apply his independent mind and find out whether the liabilities which have been adjusted by the G.C. of Pakistan are the kind of liabilities which are allowable and adjustable under the Estate Duty Act and the conditions required for this allowance have been satisfied. On the third issue therefore my answer is in the negative.
3. In view of the majority decision the conclusion would be as follows:
1. The value of the shares of the U.I.L.L. could be ascertained and has rightly been ascertained by the D.C.E.D, under Section 39 of the Estate Duty Act. His order on this issue is upheld.
2. Addition in cash is knocked off.
3. Addition in jewellery is maintained.
4. The order of the D.C.E.D. in respect of share in F...T...M...is set aside for fresh decision.
5. The order of the D.C.E.D. is also set aside on the following issues:
(i) In regard to the claim of liability in respect of Income-tax Rs. 3,914/- and wealth-tax Rs. 34,063/-.
(ii) In regard to the minimum guranteed return it is directed to:
(i) Restrict the Minimum Guaranteed Return only upto the date of the death of the deceased.
(ii) reduce the amount so arrived at by Rs. 11,957/- in respect of the liability already allowed as per admission of the learned Counsel for the appellant, and
(iii) In regard to the liabilities of Rs. 3,73,001/- adjusted by the G.C. of Pakistan the D.C.E.D. is directed to make a fresh enquiry so as to satisfy himself as to whether or not these liabilities warranted allowance in terms of Section 45 and to allow the accountable persons sufficient opportunity to adduce evidence in respect of the alleged debts of the deceased for which the G.C. of Pakistan has made adjustments out of the Minimum Guaranteed Return and also to call for the necessary details and requisite evidence, if any, from the G.C.P. by invoking, if the circumstances so demand, the powers vested in him under Section 54 of the Estate Duty Act for proper dispensation of justice.