1971 (8) TMI 37 - SC - Wealth-tax

Whether in determining the net value of the assets of the assessee-company u/s 7(2) of the Wealth-tax Act, the value of the company s fixed assets as shown in its balance-sheet as on the valuation dates should have been substituted by the written down value of those assets as per the company s income tax records - question is answered in favour of department

Summary

Issues:
1. Valuation of fixed assets for wealth tax assessment.
2. Competence of the High Court to remand a case brought to the Supreme Court under the Wealth-tax Act.

Detailed Analysis:

1. Valuation of Fixed Assets for Wealth Tax Assessment:
The case involved Civil Appeals regarding the assessment of the same assessee for the years 1957-58, 1958-59, and 1959-60. The primary issue was the valuation of the assessee's fixed assets for wealth tax assessment. The company had revalued its assets in 1956, creating a capital reserve against the increased value. The company claimed the assets should be valued based on the written down value as per income tax records, while the Wealth-tax Officer valued them based on the balance sheet values. The Appellate Assistant Commissioner held in favor of the company, but the Tribunal partially allowed the appeal, determining the value based on the balance sheet values but allowing an adjustment for wear and tear post-revaluation. The High Court was tasked with deciding whether the balance sheet values or the written down values should be used for assessment. The Supreme Court held that the balance sheet values could be considered prima facie evidence of asset value, but an adjustment for wear and tear post-revaluation should be made. Following precedent, the first question was answered in favor of the department, and the second question in favor of the assessee.

2. Competence of the High Court to Remand a Case:
The Supreme Court also addressed the issue of the High Court's competence to remand a case brought to the Supreme Court under the Wealth-tax Act. The High Court had questioned the competence of the Supreme Court to remand the case, which the Supreme Court found to be an overreach of jurisdiction. The Supreme Court emphasized that the High Court was bound by the orders of the Supreme Court and should not challenge their correctness. The Supreme Court criticized the High Court for attempting to sit in judgment over the decisions of the Supreme Court, highlighting the need for judicial propriety and respect for higher court decisions. The Supreme Court clarified that the High Court should not entertain arguments challenging the correctness of Supreme Court orders and should adhere to judicial tradition and propriety.

In conclusion, the Supreme Court resolved the issues related to the valuation of fixed assets for wealth tax assessment and the competence of the High Court in remanding cases, providing detailed analysis and clarifications based on legal principles and precedents.