1962 (10) TMI 83 - HC - Income Tax

Summary

Issues Involved:

1. Taxation liability deduction in net wealth assessment.
2. Accrued liability for gratuity payable to laborers and workers.
3. Adjustments in the balance-sheet for depreciable assets' value.
4. Liability for proposed dividends in net wealth assessment.

Detailed Analysis:

1. Taxation Liability Deduction:

The primary issue was whether the taxation liability of Rs. 3,61,645 should be deducted in ascertaining the net wealth of the assessee as on the valuation date. The court referred to its previous decision in Wealth-tax Reference No. 1 of 1961 in the case of Commissioner of Wealth-tax v. Raipur Manufacturing Co. Ltd. [1964] 52 ITR 482 and answered this question in the affirmative, thereby allowing the deduction of the taxation liability.

2. Accrued Liability for Gratuity:

The court examined the liability for gratuity under various agreements and awards. The assessee claimed a deduction of Rs. 4,78,852-14-0 for gratuity based on agreements and awards. The court noted that the liability for gratuity arises from an agreement dated 22nd June 1949, between the Ahmedabad Mill Owners' Association and the Textile Labour Association. The court discussed the terms of the agreement and noted that gratuity is payable under specific conditions such as death, voluntary retirement, or termination of service by the company. The court found that the liability for gratuity under awards dated 21st April 1958 and 16th September 1957 could not be considered as they were not enforceable on the valuation date. The court concluded that the amounts of Rs. 57,217-8-0 and Rs. 10,167-8-0 less 10% thereof are not liable to be deducted in determining the net wealth of the assessee.

3. Adjustments in Balance-Sheet for Depreciable Assets:

The issue was whether adjustments should be made in the balance-sheet by substituting the written down value computed under the Indian Income-tax Act for the value of the block assets as shown in the balance-sheet. The court referred to its decision in Wealth-tax Reference No. 1 of 1960 and held that there is no invariable rule that the written down value computed under the Income-tax Act should be taken as the value of the block assets in the balance-sheet. The court found no circumstances requiring adjustments in the value of the block assets as shown in the balance-sheet and answered this question in the negative.

4. Liability for Proposed Dividends:

The question of whether the liability for proposed dividends of Rs. 2,00,625 should be taken into account in ascertaining the net wealth of the assessee was not pressed before the court. Therefore, the court did not address this issue.

Conclusion:

1. The taxation liability of Rs. 3,61,645 should be taken into account in ascertaining the net wealth of the assessee as on the valuation date.
2. The accrued liability for gratuity based on the agreement dated 22nd June 1949 is not liable to be deducted in determining the net wealth of the assessee.
3. Adjustments should not be made in the balance-sheet by substituting the written down value computed under the Income-tax Act for the value of the block assets as shown in the balance-sheet.
4. The question regarding the liability for proposed dividends was not pressed and thus not answered.

Costs:

The respondent was ordered to pay Rs. 364 by way of costs to the Commissioner of Wealth-tax.