1979 (9) TMI 39 - HC - Wealth-tax

Summary

Issues Involved:
1. Determination of the value of fixed assets for wealth-tax purposes.
2. The relevance of written down value versus book value.
3. The role of depreciation in asset valuation.
4. The burden of proof on the assessee to show the true value of assets.

Issue-Wise Detailed Analysis:

1. Determination of the Value of Fixed Assets for Wealth-Tax Purposes:
The core issue was whether the value of the fixed assets should be taken as the depreciated book value shown in the balance-sheet or the written down value as per income-tax assessments. The court emphasized that under Section 7(2)(a) of the Wealth-tax Act, 1957, the Wealth-tax Officer (WTO) may determine the net value of the assets of the business as a whole, having regard to the balance-sheet and making necessary adjustments. The court concluded that the value given in the balance-sheet should be taken as the base, subject to adjustments based on acceptable evidence.

2. The Relevance of Written Down Value Versus Book Value:
The assessee argued that the written down value (WDV) as per income-tax assessments should be considered instead of the book value. However, the court held that the WDV is a notional figure and does not necessarily reflect the market value. The court noted that the book value, as shown in the balance-sheet, should be considered the primary basis for valuation unless the assessee provides reliable evidence to show that the WDV represents the true value.

3. The Role of Depreciation in Asset Valuation:
The court examined the role of depreciation in determining the value of fixed assets. It was noted that the assessee had set off significant amounts of depreciation in the balance-sheets for the years 1957-58 and 1958-59. The court referred to various precedents, including decisions from the Supreme Court, which emphasized that the mere fact that depreciation was not fully adjusted due to lack of profits does not automatically entitle the assessee to claim the WDV as the real value. The court reiterated that the onus is on the assessee to prove that the value in the balance-sheet does not represent the true value.

4. The Burden of Proof on the Assessee to Show the True Value of Assets:
The court emphasized that the burden of proof lies on the assessee to show that the value mentioned in the balance-sheet is inflated or incorrect. The assessee must produce cogent material to demonstrate the extent to which the value in the balance-sheet exceeds the real value. The court cited several Supreme Court decisions, including CWT v. Tungabhadra Industries Ltd. and CWT v. Hindusthan Motors Ltd., which held that the balance-sheet value should be taken as prima facie evidence of the asset's value unless the assessee provides substantial evidence to the contrary.

Conclusion:
The court concluded that the written down value of the fixed assets as per income-tax returns cannot be considered the real value under Section 7(2)(a) of the Wealth-tax Act, 1957, merely because a note in the balance-sheet states that some arrears of depreciation could not be adjusted. The reference was answered accordingly, affirming that the value shown in the balance-sheet should be the primary basis for asset valuation unless the assessee produces evidence to show otherwise.