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1965 (1) TMI 76 - CALCUTTA HIGH COURT

1965 (1) TMI 76 - CALCUTTA HIGH COURT - [1966] 60 ITR 447 - Wealth-Tax Matter No. 372 of 1961 - Dated:- 29-1-1965 - G. K. Mitter And S. A. Masud, JJ. For the Applicant : B. L. Pal and S. Mukherjee For the Respondent : A. C. Mitra and R. Khaitan JUDGMENT G. K. Mitter, J. In this reference under section 27(1) of the Wealth-tax Act, 1957, the question referred to the court is: "Whether, on the facts and in the circumstances of the case, for the purpose of determining the net value of the asset .....

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ing the net wealth of the assessee, the Wealth-tax Officer proceeded under section 7(2)(a) of the Wealth-tax Act and included in the computation the entire balance-sheet value of the assets without any adjustment. The assessee contended that so far as the fixed assets were concerned they should be assessed at their written down value and not on the basis of the value as shown in the balance-sheet. This contention of the assessee was rejected by the Wealth-tax Officer. The appeal to the Appellate .....

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tinct from the market value thereof. In a large business it is almost impossible to value each particular asset at the market price from year to year. The legislature appears to have, therefore, provided that in the case of a running business the Income-tax Officer may adopt the balance- sheet value. The legislature, however, empowered the Wealth-tax Officer to make necessary adjustments in the balance-sheet value, so that it might conform, as nearly as may be, to the value of the assets to the .....

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irects that depreciation may be allowed for in appropriate cases in computing the bulk valuation of business assets under section 7(2)...There is, therefore, no warrant for the view that in a computation under section 7(2) no adjustment whatever can be made for depreciation. In the income-tax assessments depreciation is calculated upon the original cost in a scientific and systematic manner with due regard to the nature of the asset. Therefore, the written down value as determined in the income- .....

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h-tax, reliance was placed on the observation of this court in Kesoram Cotton Mills Ltd. v. Commissioner of Wealth-tax [1963] 48 I.T.R. 31, and it was argued that the value of the assets as shown in the balance-sheet was to be accepted even if the computation of the net wealth was to be made under the provisions of section 7(2). The question which arises in this case is entirely different from the one involved in the Kesoram Cotton Mills case [1963] 48 I.T.R. 31. There the assessee had revalued .....

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ely different. Under section 2(m) "net wealth" for the purpose of wealth-tax means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those set forth in clauses (i .....

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who carries on a business maintaining accounts regularly. In the case of such an assessee it is open to the Wealth-tax Officer, instead of determining separately the value of each asset held by the assessee in such business, to "determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as the circumstances of the case may require." This means that instead of resortin .....

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the liabilities of the company including the share capital, the reserves and surplus, the loans and current liabilities and provisions, while on the right hand side it must show the assets including fixed assets, investments, and current assets, loans and advances, etc. So far as fixed assets are concerned, usually a schedule is annexed to the balance- sheet wherein are given specific values of different classes of assets such as, (i) land, (ii) building, (iii) plant and machinery, (iv) office .....

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ties given to others must also be properly shown. In this case the assessee claimed that since the full amount of depreciation which was admissible under the Indian Income-tax Act was not provided for in the balance-sheet, the same should be deducted from the value of the assets in order to arrive at the net wealth. The Wealth-tax Officer rejected this contention observing that deduction of depreciation allowable under the Income-tax Act did not determine the market value of the goods and, for t .....

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rted machinery has increased considerably during the last few years and that on the valuation date I do not think their value should be less than that provided for in the balance-sheet." In our opinion, the Wealth-tax Officer and the Appellate Assistant Commissioner fell into an error in rejecting the contention of the assessee. Section 7(2)(a) gives the Wealth-tax Officer power to adopt the balance- sheet value of the assets as the net value of the business as a whole, but this valuation i .....

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g regard to the general appreciation of land values in the neighborhood. Again, if the assessee has shown the value of the plant and machinery of the business at cost, which was purchased many years ago, there is no reason why he should be precluded from asking the Wealth-tax Officer to make proper allowance thereto in respect of the depreciation which must have been caused by lapse of time as also by wear and tear. The depreciation allowed for income-tax purposes on plant and machinery is somew .....

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and machinery appear to have been set up many years ago and no reason has been shown why the written down value should not be accepted, except that the assessee has not provided for depreciation admissible under the Income-tax Act in the balance-sheet. It may not be out of place to note why depreciation should properly be provided for in a balance-sheet. In Spicer and Pegler's Book-Keeping and Accounts, 15th edition, page 48, the learned authors say: "At the end of its effective life, .....

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