1983 (8) TMI 124 - AT - Wealth-tax

Summary

Issues Involved:
1. Reopening of assessment under section 17.
2. Valuation of the trade mark 'Triveni' as an asset.
3. Inclusion of the trade mark value in the net wealth of the assessee.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 17:
The assessee challenged the reopening of the assessment for the year 1974-75, arguing it was without jurisdiction. However, the Tribunal upheld the validity of the reopening. It was noted that the trade mark was not exhibited in the firm's balance sheets, and the WTO could have had reason to believe there was an omission or failure by the assessee to disclose all material facts. The Tribunal concluded that the adequacy of the reasons for reopening cannot be questioned, thereby validating the WTO's action.

2. Valuation of the Trade Mark 'Triveni' as an Asset:
The WTO included the value of the trade mark 'Triveni' in the net wealth of the assessee, valuing it at Rs. 1,66,544 for 1974-75 and Rs. 2,91,764 for 1977-78. The assessee contended that the trade mark had no market value and was similar to goodwill, which is not typically valued unless purchased. The Tribunal examined the nature of the trade mark, noting it is a property under the Trade Marks Act, 1958, and can be assigned independently of the goodwill. The Tribunal referred to Rule 2C(d) of the Wealth-tax Rules, 1957, which provides for the valuation of assets not disclosed in the balance sheet. However, the Tribunal disagreed with the WTO's approach, concluding that the trade mark, being a component of goodwill, should not be separately valued unless a price was paid for it.

3. Inclusion of the Trade Mark Value in the Net Wealth of the Assessee:
The Tribunal held that the trade mark 'Triveni' should not be included in the net wealth of the assessee for both assessment years. It was determined that the trade mark, being part of the firm's property, was not required to be exhibited in the balance sheet unless a price was paid for it. The Tribunal emphasized that no adjustments for the value of the trade mark were permissible under Rule 2C(b) since it is a component of goodwill. Consequently, the Tribunal excluded the values computed by the WTO from the assessments, amounting to Rs. 1,66,544 for 1974-75 and Rs. 2,91,764 for 1977-78.

Conclusion:
The Tribunal allowed the appeals, ruling that the WTO's inclusion of the trade mark value in the net wealth of the assessee was not justified. The trade mark 'Triveni' was deemed a component of goodwill and, therefore, not subject to separate valuation unless a price had been paid for it. The reopening of the assessment under section 17 was upheld, but the inclusion of the trade mark value in the net wealth was disallowed.