1967 (7) TMI 27 - HC - Wealth-tax

Assessee valuing closing stock at cost. WTO valuing it at market price - valuation of WTO is justified - WTO had a discretion in the matter and he was fully at liberty to have followed the procedure given under s. 7(1)

Summary

Issues:
1. Constitutionality of wealth tax assessment on a Hindu undivided family.
2. Valuation of closing stock of shares for wealth tax assessment.

Constitutionality of Wealth Tax Assessment:
The case involved a Hindu undivided family assessed for wealth tax for the years 1957-58 to 1961-62, challenging the assessment on the grounds that a Hindu undivided family could not be subjected to wealth tax. The Wealth-tax Officer, the Assistant Commissioner (Judicial), and the Tribunal all ruled against the assessee. The High Court, relying on the decision in Banarsi Dass v. Wealth-tax Officer, upheld the assessment, stating that the assessment of wealth tax on the Hindu undivided family was constitutional.

Valuation of Closing Stock of Shares:
For the assessment year 1961-62, the assessee valued the closing stock of shares at cost, while the Wealth-tax Officer valued it at market value. The assessee argued that the valuation should have been based on global valuation as per the balance-sheet. The court noted that the Wealth-tax Officer had the discretion to value assets under section 7(1) or section 7(2)(a) of the Wealth-tax Act. The court emphasized that section 7(2)(a) provided an alternative method of valuation, not the sole method. Therefore, the Wealth-tax Officer was not bound to follow section 7(2)(a) and could use section 7(1). Citing precedents, the court ruled in favor of the department, upholding the market value valuation. The court also awarded costs to the Commissioner of Wealth-tax, directing the assessee to pay Rs. 400 as costs.

In conclusion, the High Court upheld the constitutionality of the wealth tax assessment on the Hindu undivided family and ruled in favor of the department regarding the valuation of the closing stock of shares for wealth tax assessment. The court emphasized the discretionary power of the Wealth-tax Officer in choosing the valuation method and awarded costs to the Commissioner of Wealth-tax.