TMI Blog1971 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... t Bengal Versus Birla Jute Manufacturing Company Limited Judge(s) : A. N. GROVER. and K. S. HEGDE. JUDGMENT The Judgment of the court was delivered by GROVER J.-- These appeals have been brought from a judgment of the Calcutta High Court by certificate in a wealth-tax reference. Civil Appeal No. 1834 of 1968 is of the assessee and the other appeal has been filed by the Commissioner of Wealth-tax, West Bengal. It is necessary to deal with the appeal of the Commissioner of Wealth-tax as the other appeal shall also stand disposed of once the question is answered in the Commissioner's appeal. The assessee is a public limited company. In the assessment year 1948-49 the assessee revalued its assets enhancing the existing book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l allowed the appeal a held that the department was not justified in valuing the assets at the enhanced figure for the purpose of computation of the net wealth of the assessee. The relevant question that was referred was as follows: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in excluding the sum of Rs. 1,45,00,000 from the net valuation of the assets as shown in the balance-sheet of the assessee as on March 31, 1957?" The High Court was of the view that the revenue had taken the stand before the Tribunal that the motive of the assessee in revaluing the assets at a higher figure was to declare the bonus share which, however, could not be so declared as the permission of the Central Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval both of the assessee and of the revenue authorities." It is quite clear, under section 7(2) of the Act, the Wealth-tax Officer may determine the net value of the assets of the business as a whole having regard to the balance-sheet of the business as on the valuation date. It must be remembered that under section 211 of the (Indian) Companies Act, 1956, every balance-sheet of a company must give a true and fair figure of the state of its affairs as at the end of the financial year. If the assessee has shown the net value of the assets at a certain figure in the balance-sheet the Wealth-tax Officer would be entitled to accept it on the footing that the assessee knew best what the valuation of the assets was. It was, however, open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany may not require any new money but it may reasonably wish to bring the nominal amount of its issued share capital more into line with the true excess of assets over liabilities. Unless it takes this step its annual profits will appear to be disproportionately high in relation to its nominal capital. By means of issuing bonus shares the reserve or share premium account or some part of the same. re capitalised or converted into share capital. The capitalisation of free, i.e., voluntary reserves, merely means that undistributed profits have been permanently ploughed back and converted into share capital which cannot be returned to the members by way of dividend. (vide Modern Company Law by L.C.B. Gower, page 110.) It is quite clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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