1972 (6) TMI 12 - HC - Wealth-tax

Valuation for the purpose of wealth-tax of a mica mine - assessee gave on lease mica mines for 20 years - Wealth-tax Officer should consider the figures in balance-sheet and also adjustments should be made in arriving at the true value - Tribunal s valuation by deducting 1/20th of the value given for every year after 1954 was proper

Summary

Issues: Valuation of a mica mine for wealth-tax purposes

Analysis:
The judgment of the court in this case revolves around the valuation of a mica mine, specifically the Baladurga Gowrishankar Mica Mine, for wealth-tax purposes. The assessee had been granted a lease for mining mica for twenty years by the Government, with the lease taking effect in 1954. The mine's initial value was determined in a compromise decree in 1953 at Rs 3,09,931. The issue of valuing the mine for the years 1959-60 to 1964-65 arose during proceedings before the Wealth-tax Officer, leading to an appeal before the Income-tax Appellate Tribunal.

The Tribunal adopted a valuation method that involved taking the initial value from the compromise decree and deducting Rs. 15,000 for each subsequent year, considering the twenty-year lease term. The Commissioner of Income-tax challenged this method, arguing that the Tribunal should have assessed the market value of the mine or used the value from the assessee's balance-sheet for the relevant years. However, the court disagreed with this contention.

The court referred to Section 7(2)(a) of the Wealth-tax Act, which allows the Wealth-tax Officer to value the business as a whole based on the balance-sheet, making necessary adjustments. The court emphasized that the value in the balance-sheet is not conclusive, and adjustments can be made as circumstances require. The Tribunal's method of deducting proportionate value each year was deemed reasonable, following accounting principles of spreading the asset cost over its useful life.

Additionally, the court cited precedents, including a Supreme Court decision, emphasizing that the Wealth-tax Officer can reject the value in the balance-sheet if deemed incorrect and make adjustments for accurate valuation. The court highlighted that the balance-sheet value is not binding, and adjustments may be necessary to reflect the true market value. The judgment concluded that the Tribunal had not erred in its valuation method, deeming it valid and proper in the circumstances.

Therefore, the court upheld the method adopted for valuing the assessee's interest in the mica mine, finding no error of law. The decision favored the respondent, and the department was directed to pay the costs of the reference, including the advocate's fee.