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TMI Blog1965 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th of September, 1958. The facts as set out in the statement of the case are as follows : The assessee is a public limited company and for the year of assessment it returned a total wealth of Rs. 24,16,488 and claimed a deduction of Rs. 18,14,564 towards the difference between the depreciation allowed under the Income-tax Act and the depreciation deducted by the assessee from the value of its assets according to the method of accounting followed by it. The Wealth-tax Officer did not admit the claim of the assessee to deduct the aforesaid amount towards depreciation but what he adopted is what is known as the global valuation method under section 7(2)(a) of the Act by determining the net value of assets of the company as shown in the balance-sheet. The assessee's contention was that apart from the depreciation which has been deducted in computing the net assets for the purpose of the balance-sheet, it is entitled to a further deduction which is the balance of the amount remaining after the deduction of the depreciation from the total amount of the depreciation allowed by the income-tax authorities for the purpose of the written down value. This contention was rejected. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the circumstances of the case may require..... " It would appear from a reading of sub-section (1) and sub-section 2(a) that the Wealth-tax Officer has a discretion either to value each of the assets of the company or take the net value of the assets as a whole having regard to the balance-sheet of such business subject to such adjustments as he may consider necessary. If he follows the first of the methods, viz., by valuing each of the assets, he will have to determine the market value of that asset on the valuation date. If he follows the second of the methods, he will have to take the net value of the assets given in the balance-sheet and make such adjustments as the circumstances of the case may require. In doing so, the Wealth-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Finance Acts. They do not represent the market value of the asset at the end of each year. It may be that if this notional depreciation is allowed for over a number of years, the asset may have absolutely no value for income-tax purposes or its value may be zero. None the less that will not represent the real state of affairs. The asset has a value and it is a business asset. For the purposes of the wealth-tax, what has to be determined is what is the real value of that asset. In other words, what price it would fetch, if sold in the market. That would be the value of the asset on the valuation date. It could not be the intention of the legislature to vest a discretion in the Wealth-tax Officer to choose the market value or the value less the income-tax depreciation which may be either the market value or less than the market value ; but that would be the result if the interpretation sought to be placed is accepted. For these reasons, we cannot accept the contention that the written down value of the asset under the Income-tax Act at the end of any particular year in every case is the real value of that asset for the purpose of the Wealth-tax Act. In fact, this is the view un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time, other conditions remaining equal. Where the conditions change, it would not be possible to say that the written down value represents the price of that asset in the open market. There are numerous assets prices of which have either increased or decreased and it cannot invariably be the rule that the written down value should be the value which the Wealth-tax Officer is under obligation to take in determining the value of an asset." Again at page 521, the Bench observed in relation to section 7(2) : " It is urged that this power has to be exercised in order that the price of assets as shown in the balance-sheet may equate with the written down value of such assets as appearing in the records of the income-tax department. There is no warrant for such a conclusion. The written down value may be far from the real value of the asset on the valuation date. There cannot be any hard and fast rule in this matter and the Wealth-tax Officer is under no obligation to consider the written down value as the proper value of an asset. What the legislature has provided is that when individual assets have to be valued, the Wealth-tax Officer is under an obligation to estimate the price a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth-tax Officer adopts the global valuation, he has to take the balance-sheet as the basis and make such adjustments as may be necessary. This does not however, mean that apart from the values given in the balance-sheet, the power given to him to make the necessary adjustments must, as a matter of course, compel him to adopt the written down value or the depreciation allowed under the Income-tax Act. The written down value, of an asset on the valuation date is one thing and the total depreciation allowed in a number of years for the purpose of arriving at the written down value under the Income-tax Act is another. In this case, the balance-sheet itself would show that a depreciation allowance of nearly Rs. 15 1/2 lakhs has been allowed before arriving at the net valuation of the assets. It is apparent, therefore, that after the deduction, the net value of the assets represents the market value of the assets as estimated by the assessee itself, and unless circumstances justify, the assessee cannot claim further depreciation as it is seeking to claim in this case. No doubt, it will be open to it to show that the depreciation deducted for the purpose of arriving at the net valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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