1985 (4) TMI 116 - AT - Wealth-tax

Summary

Issues: Revaluation of closing stock for wealth-tax assessment based on market value exceeding book value by 20%, application of rule 2B of WT Rules, 1957, correctness of AAC's decision to delete additions made by WTO, interpretation of Supreme Court ruling in Juggilal Kamlapat Bankers case.

Analysis:
The judgment revolves around the revaluation of closing stock for wealth-tax assessments, where the WTO revalued the stock of a firm based on the market value exceeding the book value by 20%. The WTO applied rule 2B of WT Rules, 1957 to enhance the value of the closing stock to represent the market value. The AAC, however, found this method unwarranted, stating that the Revenue failed to provide evidence to prove that the market value of the closing stock was more than the book value by 20%. The AAC relied on a Tribunal decision and deleted the additions made by the WTO, leading to the Revenue's appeal.

The Departmental Representative argued, citing a Supreme Court decision, that if the market value exceeds the book value by 20%, rule 2B must be applied for revaluation, questioning the AAC's decision. The assessee, on the other hand, relied on Tribunal decisions to support the AAC's stance.

The Tribunal opined that while the Supreme Court's rule regarding market value exceeding book value by 20% is valid, the key consideration is whether the market value was accurately reflected in the books. The Tribunal emphasized that the Revenue must provide evidence to prove the market value exceeding the book value by 20%. Merely relying on the rate of gross profit is deemed insufficient to determine market value for rule 2B(2) application. Consequently, the Tribunal upheld the AAC's decision to delete the additions, aligning with previous Tribunal decisions.

Ultimately, the Tribunal dismissed the appeals, affirming the AAC's decision to delete the additions made by the WTO. The judgment underscores the importance of concrete evidence to support revaluation decisions and highlights the significance of accurately assessing market value for wealth-tax purposes.