9911796707
TMI Blog1989 (12) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... is being a stock in trade, it should be valued at cost price. The assessee has not prepared any balance sheet except working out assets and liabilities on estimated basis for the year. In any view of the matter it has to be valued as per Rule 28 of the WT Rules. Since the assessee has himself shown the value at Rs. 30,50,000 the same is adopted." In the assessment orders for each of the remaining years there is no further discussion but the same value has been repeated, such figure appearing specifically in all the years upto and inclusive of the assessment year 1979-80 and standing included in the total figure of Rs. 40,15,000 for the assessment year 1980-81. 2. At this stage, it would be relevant to state that the wealth-tax returns were filed on 22-2-1982. i.e., about one year after the search took place in the assessee's premises on 17-1-1981. The assessments for each of the years were completed on 27-3-1986. Along with the returns the assessee had filed a statement showing the rights in the ship " Transhuron " stating as under : " Rights in Ship - Transhuron : Though the assessee acquired the ship by way of a confirmation of sale in 1979 by the a dministrator of Lakdiv Isl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed found in the seized file No.7 of 17-1-1981. At this stage, we consider it necessary to set the records straight. In the very same file referred to by the CIT(A), there is the photostat copy of the document of sale dated 19-7-1976. The sale consideration paid by the assessee to the Government of the US was only 10 Dollars and not 10,000 Dollars. The figure of 10,000 Dollars is a typographical mistake appearing in typing out copy of the sale document in the same set of file. Even in the typewritten copy we may make it clear the figure in words is clearly given as " Ten Dollars ". The ship was, therefore, purchased from the US Government for only 10 Dollars and not 10,000 Dollars as assumed by the WTO in the assessment year 1981-82 and adverted to by the CIT(A) in his order. The equivalent of 10 Dollars would be only Rs. 110 and not Rs. 1,10,000 as assumed by the CIT(A). 5. Leaving matters there for the present, the CIT(A) referred to a letter written by the assessee to the Bank of Tamil Nadu stating that the gross value of the ship would be about Rs. 2.97 crores and after deducting estimated expenses of Rs. 50,50,000, the net value would be Rs. 2.47 crores. Similar letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and since certain amount of confusion regarding the facts has crept into the orders of the authorities below, we consider that it would be appropriate to chronologically set out certain events. The ship in question belonged to the Government of United States. It ran aground on 26-9-1974 off Kiltan Island. The administration of this island fell within the jurisdiction of the Administrator of the Union Territory of Lakshadweep. According to the provisions of sections 390 to 404 of the Merchant Shipping Act, 1958, the Administrator of Lakshadweep became the receiver of the wreck. The assessee had negotiated with the US Government for purchase of the ship and there was a letter addressed by the assessee in April, 1975 to the Asstt. Secretary (for Maritime Affairs), Secretary of Commerce, USA wherein the assessee had stated : " Hence our offer is Rs. 31,01,000 (Rupees Thirty one lakhs and one thousand only). Please confirm by cable and also by letter before 16th April, 1975 to avoid loss and to pass good title to us." What transpired thereafter till 19-7-1976 when the actual sale deed between the Government of US and the assessee was executed, is not clear. However, there is the documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse to the request of the Administrator of Lakshadweep Union Territory for valuation of the wreck " Transhuron " in " As is where is " condition, as on date, in its original place of grounding, we have inspected the vessel on 15-2-1978 as per the instructions of the Madras Court at the request of the New India Steel Industries, Madras, in the presence of representatives of the Administrator and the firm. We now report as follows : The wreck was boarded at 0930 hours on 17-2-1978 and the condition of the hull where possible was generally examined. An inventory of the items on board was also taken. Location : The ship is stranded on a coral reef about 1 kilometer from the northern end of Kiltan Island. Approach to the wreck is possible only by boats. General conditions : At the time of examination the wreck was firmly grounded. 18 out of the 27 cargo tanks were bilged and open to the sea apparently due to the grounding. The starboard side of the vessel in way of centre to wing tanks, 3, 4 and 5 was found breached and holed ; the hole being about 40 feet in length and 10 feet maximum height above the water line. The extent of the hole below the water line could not be gauged. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or." Based on this report, the Administrator released the wreck to the assessee prescribing certain conditions, namely, that the assessee would pay any customs duty etc. The said order of the Administrator also mentions that some goods had already been sold and an amount of about Rs. 85,000 had been realised out of which Rs. 45,000 had been paid towards customs duty and an amount of Rs. 39,885 remained in a savings bank account No. 1743 with the Administrator. 8. The matter then went up to the customs authorities who passed an order dated 22-7-1978 levying customs duty of Rs. 1,24,140 arrived at as under : Salvageable scraps (steel) 1600 tonnes Market value of 1600 tonnes scrap, Rs. 16,00,000-00 Cutting and salvage expenses @ Rs. 750 per tonne Rs. 12,00,000-00 Difference between operational cost and value recovered. Rs 4,00,000-00 Assessed value of the ship. Rs. 2,75,860-00 Customs duty @ 45%. Rs. 1,24,140-00 This was the customs duty levied on the assessed value of the ship at Rs. 2,75,860. For the sake of clarification (though it is not spelt out in the orders of any of the authorities referred to), we may mention that the figure of 1600 tonnes has apparently been arrive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n advance of Rs. 10 lakhs as early as end of 1979. They had also mentioned that they had offered to sell the ship on an outright basis for Rs. 1,80,000 though the break up value of the ship worked out to Rs. 3,40,00,000. In the latter letter of 18th December, 1980, the assessee sought to salvage the ship after breaking up the same in partnership with the Kerala concern. There is no material available as to what was the reaction of the Kerala concern to both these letters. 10. The contention of the learned counsel for the assessee before us is that the so-called balance-sheet prepared on 31-3-1980 did not reflect any real state of affairs but had been cast solely for purposes of certain projections etc. According to the learned counsel, none of the liabilities were claimed as deductions and hence there was no sanctity to take a figure of Rs. 30,50,000 as the value of the ship in question merely because such figure appeared in the said balance-sheet. It was also stressed that the assessment years under consideration start from 1976-77 and a figure given in March, 1980 in some statement drawn up could have no relevance in determining the value on earlier valuation dates in any event. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commerce of the US Government was for a consideration of only 10 Dollars, i.e., about Rs. 100. There could be a reason for this. The sale deed was executed in July, 1976. The ship had sunk in 1974. The Surveyor's report in 1978 shows that the fury of the elements had considerably damaged the structure of the ship as well as the affected steel plates etc. The sale deed having been executed by and on behalf of the Govt. of a foreign country on one side and the assessee on the other, has to be taken as the final evidence of the price paid after completion of negotiations with reference to circumstances prevailing at the time of sale. The date 19-7-1976 is the nearest date to the valuation date 31-3-1976 and the actual sale by the US Government to the assessee was for an amount of 10 Dollars, i.e., about Rs. 100. 13. The wreck was again evaluated in pursuance of the directions of the Government by the statutory Receiver, namely, the Administrator of Lakshadweep by referring the matter to an Arbitrator mutually agreed upon, i.e., M/s. Kamath & D'Abreo, Consulting Engineers, and in their report dated 22nd March, 1978, which we have already set out in extenso, they had come to the conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value fixed by a statutory authority was Rs. 2,75,860 which was by the Customs on 22-7-1978. The ship itself was eventually released only subsequent to the last of the valuation dates on 5-10-1981. 14. For wealth-tax purposes, what has to be determined is the market value. In other words, what a willing buyer would pay for this wreck which from 1974 till 1981 was lying in the sea and no part of which was salvaged, by any of the valuation dates. Certainly a sale price at which the wreck was sold by the Government of US to the assessee would weigh with a willing buyer. This was a nominal figure of Rs. 100 on 19-7-1976. Even if subsequent events are taken into consideration, the value adopted by the statutory authorities would have great weight with a price which a willing buyer would pay. As a matter of fact, the Customs authorities have worked out the average selling price of the steel recoverable in India and have estimated the cutting and salvaging expenses. Therefore, for the salvage value of the material also a determination by a statutory authority is available. Against the figure of Rs. 2,75,860, which is the highest figure determined by the statutory authority, there have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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