1971 (7) TMI 47 - HC - Wealth-tax

Whether Tribunal was right in holding that for the purpose of computing the assessee s net wealth under section 7(2) the written down value of the assets as per income-tax records should not be adopted - whether Tribunal in computing the net wealth of the company should have adopted the value of the fixed assets appearing in the balance-sheet after excluding therefrom a sum of Rs. 1, 88, 31, 309 being the amount added by way of revaluation of the assets - Whether Tribunal in computing the net wealth of the company was justified in law in valuing the block assets at Rs. 2, 63, 15, 524 as determined by the U.P. Government

Issues Involved:
1. Adoption of written down value of assets as per income-tax records for computing net wealth.
2. Consideration of balance-sheet figures after excluding revaluation amounts.
3. Justification of valuing assets based on U.P. Government's valuation.

Issue-wise Detailed Analysis:

1. Adoption of Written Down Value of Assets as per Income-tax Records:
The Tribunal was tasked with determining whether the written down value of the assets, as per income-tax records, should be adopted for computing the assessee's net wealth under section 7(2) of the Wealth-tax Act, 1957. The assessee argued that the balance-sheet figures were inflated to secure a loan from the U.P. Government and thus should not be relied upon. The Tribunal, however, found no material evidence supporting the claim that the written down value represented the correct value. The Supreme Court decisions in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax and Commissioner of Wealth-tax v. Tungabhadra Industries Ltd. were cited, emphasizing that the onus of proof lies on the assessee to demonstrate that the written down value is the true value. The Tribunal was justified in rejecting the assessee's contention due to the lack of supporting materials. Consequently, Question No. (1) was answered in the affirmative, against the assessee.

2. Consideration of Balance-sheet Figures After Excluding Revaluation Amounts:
The Tribunal had to decide if the value of the fixed assets in the balance-sheet should be adopted after excluding the revaluation amount. The assessee contended that the balance-sheet figures were inflated and should be adjusted accordingly. However, the Tribunal found no evidence to support the claim that the figures were inflated by the specific amount alleged by the assessee. The Tribunal's rejection of the balance-sheet figures was based on a finding of fact that the figures were indeed inflated, and there was no material to support the claim for adjustment. Thus, Question No. (2) was answered in the negative, against the assessee.

3. Justification of Valuing Assets Based on U.P. Government's Valuation:
The principal contention was whether the Tribunal was justified in relying on the valuation report prepared by an independent agency appointed by the U.P. Government. The assessee argued that the Tribunal should have directed an independent valuation of each asset as laid down under section 7(1) of the Act. The Tribunal, however, found no indication that the valuation by the U.P. Government did not reflect the correct market value of each asset. The Tribunal's acceptance of the U.P. Government's valuation was deemed appropriate, given that it was conducted by an independent agency for securing a substantial loan and thus likely represented a reliable and accurate valuation. The Tribunal's reliance on this valuation was supported by the need for a correct valuation for the creditor's security. Therefore, Question No. (3) was answered in the affirmative, against the assessee.

Conclusion:
The Tribunal's decisions were upheld across all issues. The Tribunal's rejection of the written down value and balance-sheet figures was justified due to the lack of supporting evidence from the assessee. The reliance on the U.P. Government's valuation was deemed appropriate and reliable. The assessee was ordered to pay the costs of the reference.

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