1968 (10) TMI 5 - HC - Wealth-tax

Computing the net wealth - initial and additional depreciation granted under sections 10(2)(vi)(a), (b), (c) and 10(2)(via) should not be allowed

Summary

Issues:
Whether initial and additional depreciation granted under specific sections of the Income-tax Act should be allowed for computing the net wealth of the assessee.

Analysis:
The judgment pertains to a consolidated reference under section 27(1) of the Wealth-tax Act, 1957, involving the assessee, a manufacturing company. The central issue was whether the initial and additional depreciation granted under sections 10(2)(vi)(a), (b), (c), and 10(2)(via) of the Income-tax Act should be considered for calculating the net wealth of the assessee. The company had not deducted depreciation in its balance sheets, leading to a dispute with the Wealth-tax Officer, who rejected the claim for depreciation adjustment in asset valuation for wealth-tax assessment purposes.

The Appellate Assistant Commissioner allowed readjustment of asset valuation by considering depreciation under the Income-tax Act but excluded initial and additional depreciation for determining the net asset value. This decision was upheld by the Appellate Tribunal, emphasizing that the additional depreciation was meant to incentivize industries and not for wear and tear of assets. The High Court concurred with this view, citing the purpose of depreciation for income-tax as different from the initial and additional depreciation under consideration.

The court referred to a previous case involving a similar issue and concluded that normal depreciation allowable for income-tax purposes should be considered for wealth-tax assessment, excluding initial and extra-normal depreciation. The judgment highlighted the distinction between depreciation for wear and tear versus the additional depreciation intended to stimulate industrial growth. Therefore, the court held that the initial and additional depreciation should be excluded when determining the net value of the assessee's assets for wealth-tax assessment purposes.

In light of the above analysis, the court answered the question in the negative, directing the assessee to bear the costs of the reference. The judgment emphasized the legal interpretation regarding the treatment of different types of depreciation in asset valuation for wealth-tax assessment, aligning with the principles established in previous rulings and the provisions of the Income-tax Act.