TMI Blog1979 (2) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... aken over with effect from the said date and under s. 16 of the Life Insurance Corporation Act the assessee was paid a compensation of Rs. 5,95,764. In the assessment of the assessee in the relevant year the ITO took the value of the capital of the assessee relating to life business as computed in terms of s. 7(2) of the Life Insurance Corporation Act, 1956, to be Rs. 2,79,683 and deducting the said amount from the compensation paid held that the balance Rs. 3,16,981 was taxable as capital gains in the hands of the assessee under s. 12B of the Indian I.T. Act, 1922. It was contended on behalf of the assessee that in the balance-sheet of the life insurance business of the assessee prepared as at the 31st December, 1955, the value of the land and buildings of the assessee were not correctly shown. The proper value of the same as at the 31st December, 1955, was Rs. 8,13,819. The said land and buildings had been valued in 1949 by chartered architects which resulted in an appreciation of Rs. 11,87,069 which was shown in the subsequent balance-sheets of the assessee. The Controller of Insurance, however, did not accept such appreciated value and in 1952 the said land and buildings wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the land and buildings as enhanced in 1949 had been accepted and at the least the valuation of 1949, should be taken as the market value of the properties on the 1st January, 1954. The Tribunal held that as under s. 7 of the Life Insurance Corporation Act all assets and liabilities appertaining to life insurance business transferred and vested in the Life Insurance Corporation, and as compensation was payable in respect of such assets and liabilities, therefore, for computation of capital gains such assets had to be valued. The Tribunal found that the assessee had adduced evidence to show that the figures in the final balance-sheet did not reflect the correct value of its assets. The Tribunal also noted that neither the revaluation made in 1949, nor the authenticity or correctness of the report of the chartered architects were disputed. Taking note of the post-war trend of consistent rise in the prices of real property the Tribunal concluded that the value of the land and buildings as determined in, 1949, could reasonably be taken to be their value also on the 1st January, 1954. The contention of the revenue that the market value of the business as on the 1st January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This would also be the value of the said assets on the 1st January, 1954, according to the accepted principles of accountancy and there was no question of further revaluation of the said assets on the basis of a report of the architects in 1949. He submitted that the Tribunal erred in ignoring or overlooking the following facts : (a) The valuation made by the architects had been rejected by the Superintendent of Insurance. (b) The assessee had accepted such rejection and revised its accounts. (c) The accounts of the assessee as on the 31st December, 1953, recorded a particular valuation of the said assets. Mr. Sen contended that the Tribunal by discarding the valuation as on the 31st December, 1953, and substituting a valuation made in 1949 as the fair market value had acted without any material and on conjecture and surmise. On the second question, Mr. Sen submitted that the said question needed reframing as it did not bring out the real controversy between the parties. He submitted that the answer to the second question did not really depend upon the answer to the first question. He submitted that the basis of valuation of land and building as laid down in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the valuation made by the chartered architects in 1949, which was not disputed by anybody. It is also a matter of record that such revised valuation was accepted in the income-tax assessments subsequent to 1949. The Tribunal has also taken into account the general rise in price of the immovable properties after the second world war. This is a well-known fact and, in any event, there is no challenge to the same. It also appears to us that in the actuarial valuation in 1952, the value of such land and the buildings was scaled down only for the purpose of determining the average surplus on which income-tax would be payable. We may refer to s. 10 of the Indian I.T. Act, 1922, and the Schedule thereto in this connection which read as follows : Indian Income-tax Act, 1922 " 10. (1) The tax shall be payable by an assessee under the head ' Profits and gains of business, profession or vocation ' in respect of the profits or gains of any business, profession or vocation carried on by him ...... (7) Notwithstanding anything to the contrary contained in section 8, 9, 10, 12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surer. Paragraph 1.--Twenty times the annual average of the share of the surplus allocated to shareholders as disclosed in the abstracts aforesaid in respect of the relevant actuarial investigations multiplied by a figure which represents the proportion that the average business in force during the calendar years 1950 to 1955 bears to the average business in force during the calendar years comprised in the period between the date as at which the actuarial investigation immediately preceding the earliest of the relevant actuarial investigations was made and the date as at which the last of such investigations was made. Paragraph 2.--Half the amount payable under paragraph 1 plus the paid-up capital or assets equivalent thereto, or, in the case of a composite insurer, that part of the paid-up capital or assets equivalent thereto which has or have been transferred to and vested in the Corporation under this Act less the amount, if any, of expenses or losses or both capitalised by the insurer for the purposes of Form A in the First Schedule to the Insurance Act ...... .." Part B of the said Schedule provides as follows : " The compensation to be given by the Corporation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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