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TMI Blog1971 (8) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... f this court in Commissioner of Wealth-tax v. Ramaraju Surgical Cotton Mills Ltd. the High Court answered the second question against the revenue. That decision has become final. At present we are only concerned with the first question of law referred to the High Court for its opinion. That question reads : " Whether, on the facts and in the circumstances of the case, the sum of pound 8,54,948 was deductible in determining the net value of the assets of the assessee's business under section 7(2)(a) of the Wealth-tax Act ? " The assessee is a sterling company incorporated in U.K. It carries on business of supplying electric energy in the City of Calcutta. During the year 1959-60, the corresponding valuation date being March 31, 1959, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Wealth-tax. The Appellate Assistant Commissioner allowed the appeal holding that as the Wealth-tax Officer has proceeded to assess the assessee under section 7(2), he must accept the balance-sheet as a whole. Hence it was impermissible for him not to allow the deduction shown in the balance-sheet. Ile, accordingly, deleted the amount added back by the Wealth-tax Officer. As against that order, the department went up in appeal to the Income-tax Appellate Tribunal. The Tribunal held that although the entire undertaking of the company including portions of mains and service connections put up at the expense of consumers was the property of the company, it would not be correct to include the value of such portions in the net wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer it would fetch if sold in the open market on the valuation date. (2) Notwithstanding anything contained in sub-section (1),-- (a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, 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 maybe prescribed; (b) where the assessee carrying on the business is a company not resident in India and a computation in accordance with clause (a) cannot be made by reason of the absence of any separate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance-sheet of the company. He is not bound to accept any deduction shown in the balance-sheet if he comes to the conclusion that the said deduction was impermissible. Section 7(2) does not say that the Wealth-tax Officer should accept the balance-sheet as a whole or reject it as a whole. He is merely authorised to accept the value of the assets of the business as shown in the balance-sheet. In the present case, the Wealth-tax Officer has accepted the value of the assets of the business as shown in the balance-sheet. But he has not accepted the fact that the service lines are not owned by the assessee. We shall now proceed to consider whether the service lines which were constructed at the expense of consumers are the assets of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment to acquire the undertaking itself or to direct the licensee to sell the undertaking to one or the other of the authorities or persons designated therein. When a sale in pursuance of such a direction is effected, valuation of the undertaking is made in accordance with section 7A. Section 7A reads : " 7A. (1) Where an undertaking of a licensee, not being a local authority, is sold under sub-section (1) of section 5, the purchase price of the undertaking shall be the market value of the undertaking at the time of purchase or where the undertaking has been delivered before the purchase under sub-section (3) of that section, at the time of the delivery of the undertaking and if there is any difference or dispute regarding such purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sub-sections (1) and (2): Provided that there shall be added to such value such percentage, if any, not exceeding twenty per centum of that value as may be specified in the licence on account of the compulsory purchase." It is true that in view of section 7A(2) of the Electricity Act, in computing the market value of the undertaking sold under sub-section (1) of section 5 of that Act, the value of service lines which had been constructed at the expense of the consumers will not be taken into consideration. The reason for this provision is obvious. It will be the duty of the new licensee to not only maintain and repair those lines but also to replace them when they become unserviceable. But section 7A of the Electricity Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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