TMI Blog1969 (1) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal shows that the assessee is a limited company carrying on the business of manufacture of sugar. For its business, accounts are maintained by the assessee regularly. In accordance with the provisions of section 7(2) of the Act, the Wealth-tax Officer determined the net value of the wealth as a whole, having regard to the balance-sheet of the business as on the valuation date. It was claimed by the assessee that adjustment be made in respect of depreciation on the fixed assets. It was pointed out that all along up to the year ending on June 30, 1956, the assets of the business were shown in the balance-sheet as at cost. For the balance-sheet drawn on June 30, 1956, the value of the assets was shown at cost, less depreciation written off for the year ending June 30, 1956. A note to the effect that " the depreciation on the fixed assets up to the previous year ended 30th June, 1955, comes to Rs. 16,73,955 against which a sum of Rs. 1,25,000 only has been provided as a reserve in the previous year due to losses " was appended to the balance-sheet. It was claimed that adjustment in respect of the depreciation as due on the assets for the preceding years should be made while determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all--under section 7(1), another method has been provided under section 7(2) in the case of an assessee carrying on business and maintaining accounts regularly. Under it, 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. All the revenue authorities in the case adopted this second method in the case of the assessee. It was contended by the assessee all along that its balance-sheet showed the value of the assets at cost and did not take notice of the depreciation. The Wealth-tax Officer took the view that the assessee had not written off any depreciation in his books of account and that the general statement of counsel for the assessee that machinery had depreciated could not be accepted, that, in these circumstances, the claim of the assessee was not correct and the book value should be taken as the market value. The Appellate Assistant Commissioner of Wealth-tax dismissed the appeals of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been appended earlier that depreciation had not been taken into account. The Tribunal took the view that for this reason adjustment must be made in the balance-sheet in computing the value of the assets of the assessee. In the circumstances of the case, the Tribunal took the view that depreciation is to be calculated as provided under the Indian Income-tax Act for the various years and granted relief to the assessee. It is clear from the provisions of section 7 that while valuing the assets of the assessee, any of the two alternative methods provided in sections 7(1) and 7(2) may be adopted by the revenue authorities. It is contended by Mr. Sumerchand Bhandari, appearing on behalf of the department, that while adopting the method provided in section 7(2) it must be kept in mind that the value of the assets as determined by this method is as near as possible to the value of the assets if sold in the open market. It is further contended that as the assessee must be taken to have known full well what was the value of his assets on the date of valuation, the valuation shown in his balance-sheet must have been accepted and, as the assessee did not make any adjustment on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal for computing the depreciation in this manner, but the Tribunal has taken the view that, in the circumstances of the case, the proper valuation of the assets was by making the adjustment in respect of depreciation due on the assets according to the provisions of the Indian Income-tax Act. We cannot say that, as a matter of law, this exercise of discretion was wrong or erroneous. We do not mean to say that, in every case, depreciation of assets as shown in the balance-sheet of a company is necessarily liable to be adjusted with reference to the written-down value of such assets according to the provisions of the Income-tax Act. This is the view taken by the Gujarat High Court in Commissioner of Wealth-tax v. Raipur Manufacturing Company Limited. This case has been referred and followed by the same High Court in Commissioner of Wealth-tax v. New Rajpur Mills Ltd. These cases lay down the correct law, but this does not mean that in the circumstances of a particular case, if the Tribunal is satisfied, it should not allow depreciation according to the provisions of the Indian Income-tax Act. Mr. Bhandari has referred to Commissioner of Wealth-tax v. Andhra Sugars Ltd. and has urg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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