TMI Blog1964 (10) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... stand how the questions arise, it is necessary to state briefly a few facts. The assessee is a limited company carrying on business of manufacturing textile goods and it is common ground between the parties that the accounts of the business are maintained regularly by the assessee. The assessee was assessed to wealth-tax for the assessment year 1957-58, the relevant valuation date being 31st March, 1957 and the assessment was made by the Wealth-tax Officer under section 7(2)(a) of the Wealth-tax Act. The method adopted was what is commonly known as the global method of valuation and what the Wealth-tax Officer did was to 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, namely, 31st March, 1957. One of the items in dispute relates to the valuation of the fixed assets and it is, therefore, necessary to know how the fixed assets were shown in the balance-sheet and what was the claim in regard to valuation made on behalf of the assessee. On the fixed assets the revenue allowed normal depreciation, initial depreciation and extra-shift allowance in computing the assessable income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e event of certain contingencies and the amount claimed could not, therefore, be regarded as a debt owing by the assessee on the valuation date. The assessee thereupon carried the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also took the view that the depreciated value of the fixed assets as shown in the balance-sheet of the assessee was the right value to be taken into account for the purpose of computation of the total wealth of the assessee and, so far as the claim for deduction in respect of the amount by way of gratuity was concerned, the Appellate Assistant Commissioner held that until such time as the amount payable to an employee by way of gratuity was determined and an intimation was sent to that person, no debt would come into being and it could not, therefore, be said that on the valuation date any debt with regard to gratuity was owing by the assessee to the employees. The Appellate Assistant Commissioner accordingly rejected both the contentions of the assessee. The matter was carried further by way of appeal to the Tribunal. The Tribunal held that the value of the fixed assets of the business should be taken to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, it stands concluded by the decision given by this court in Commissioner of Wealth-tax v. Raipur Manufacturing Co. Ltd. [1964] 52 ITR 482 The point which arose for decision in that case was identical with the one which forms the subject-matter of the first question. The assessee in that case had shown the value of its fixed assets in the balance-sheet at a figure which was higher than the written down value of these assets according to the income-tax records and the assessee, therefore, claimed in its assessment to wealth-tax that the value of the assets as shown in the balance-sheet should be adjusted with reference to the written down value of the assets as per income-tax records and the written down value of the assets as per income-tax records should be taken into account in computing the net wealth of the assessee. A Division Bench of this court consisting of K.T. Desai C.J., as he then was, and myself took the view that, when a Wealth-tax Officer makes an assessment under section 7(2)(a), he has to determine the net value of the assets of the business as a whole having regard to the balance-sheet of the business, but, in doing so, he has power to make such adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the valuation of ₹ 23,21,726 appearing on the assets side of the balance-sheet should be taken as the valuation for the purpose of computing the net wealth of the assessee or whether it should be substituted by the written down value of the assets computed for the purpose of income-tax assessment of the assessee and it is this contest which is embodied in the question referred to us by the Tribunal. It was not contended before the Tribunal that even if the balance-sheet be taken as the basis and no adjustment be made in the figures appearing in the balance-sheet, the value of the fixed assets appearing from the balance-sheet read as a whole was not ₹ 23,21,726 but was less than that figure by ₹ 1,91,805. Our answer to the first question must, therefore, be in the negative. That takes us to the second question and that relates to the amount claimed by the assessee in respect of gratuity payable by the assessee to the clerks and technicians in the employment of the assessee. The amount claimed in respect of gratuity payable to the workers under the award dated 16th September, 1957, having been disallowed by the Tribunal, no question arises in regard to it. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f gratuity existed on the valuation date under the two agreements dated 22nd June, 1949, and 2nd July, 1952, and that such liability should be taken into account as a liability of the business on the valuation date. The Tribunal laid down this principle and directed the assessment of the assessee to be modified in accordance with this principle. Now there can be no doubt that the principle laid down by the Tribunal was not a correct principle. There was in fact no accrued liability under the two agreements on the valuation date and the liability which existed on the valuation date under the two agreements was a contingent liability as pointed out by us in our judgment in Commissioner of Wealth-tax v. Ajit Mills Ltd. [1965] 55 ITR 556 , where one of the agreements which came up for consideration was the same agreement, namely, the agreement dated 22nd June, 1949. The amount which was deductible was, therefore, the estimated value of the contingent liability under the two agreements as on the valuation date. The assessee claimed that the estimated value was ₹ 77,820 but this estimated value was not accepted by the Tribunal as is clear from the fact that the Tribunal directed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
