Third Schedule l Valuation of Assets
Circular No. 548 was issued by the Central Board of Direct Taxes on 27 October 1989. Its subject is Third Schedule l Valuation of Assets.
Lets a shareholder value unquoted equity shares on the previous year's balance-sheet where the current one is not out in time. Rules 11 and 12 of the Third Schedule to the Wealth-tax Act, 1957 value unquoted equity shares on the company's balance-sheet, and the Explanation to rule 11 defines that as the balance-sheet drawn up on the relevant valuation date, failing which the one drawn up immediately before it, failing both the one immediately after. Where the balance-sheet as on the valuation date is not published before the shareholder's due date for filing the wealth-tax return and so is not available to him, the Board permits him to value on the balance-sheet drawn up as on the date immediately preceding the valuation date. Where a return has been filed on that basis, the Wealth-tax Officer must assess on that same earlier balance-sheet, even if the balance-sheet as on the valuation date has become available by the time of assessment.
Representations were received that in many cases the balance-sheet as on the valuation date is not published before the shareholder's filing date, and a strict reading, that such a balance-sheet had been drawn up and so the earlier one could not be used, would cause hardship.
THIRD SCHEDULE l VALUATION OF ASSETS
1433. Explanation to rule 11 of Third Schedule to the Wealth-tax Act, 1957 - Valuation of assets - Instructions regarding balance-sheet drawn up as on the relevant valuation date but not available to the shareholders on the due date of filing wealth-tax returns
1. Rules 11 and 12 of the Third Schedule to the Wealth-tax Act lay down the manner of computing the value of unquoted equity shares on the basis of the balance-sheet of a company. The Explanation to rule 11 provides that for purposes of this rule, "balance-sheet" in relation to any company will be the balance-sheet of such company as drawn up on the relevant valuation date and where there is no such balance-sheet, the balance-sheet drawn up as on a date immediately preceding the relevant valuation date, and, in the absence of both, the balance-sheet drawn up as on the date immediately after the relevant valuation date. Sub-rule (4) of rule 12 of the said Schedule provides that for purposes of this rule, balance-sheet has the same meaning as in rule 11.
2. Representations have been received that, in a number of cases, balance-sheet drawn up as on the relevant valuation date is not published before the due date of filing wealth-tax return by shareholders and hence not available to them on such date. A view may be taken that since in such cases, it cannot be said that the balance-sheet is not drawn up on the relevant valuation date, it will not be permissible to work out the value under rules 11 and 12 on the basis of the balance-sheet drawn up as on a date immediately preceding the relevant valuation date. This may result in hardship to the taxpayers.
3. The Board have decided that where the balance-sheet of a company drawn up as on the relevant valuation date is not published before the due date of filing wealth-tax return by the shareholders and hence not available to them on the said date, they may work out the value of unquoted equity shares under aforesaid rules 11 and 12 on the basis of the balance-sheet drawn up as on a date immediately preceding the relevant valuation date.
4. In cases where the returns have been filed adopting the value of unquoted equity shares in accordance with para 3 above, the Wealth-tax Officers while making assessment will work out the value on the basis of the balance-sheet drawn up as on a date immediately preceding the relevant valuation date notwithstanding the fact that the balance-sheet drawn up as on the relevant valuation date is available at the time of making assessment.
Circular: No. 548, dated 27-10-1989.
In a wealth-tax assessment of a shareholder where the officer proposes to substitute a higher share value taken from the balance-sheet as on the valuation date.
Rules it names. Rule 11, 12 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.