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TMI Blog1988 (4) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the Wealth-tax Act. The valuation date is 31st of March. He filed return of net wealth at Rs. 93 lakhs plus and the same was determined by the Wealth-tax Officer at Rs. One Crore plus after certain adjustments. One such adjustment was an addition in respect of the appreciation in the value of the shares contributed by the assessee to a newly floated partnership firm in the name of M/s Anant Trading Company. This partnership firm was formed by the assessee jointly with other four persons on 18th March, 1981. The first accounting year of the partnership firm is to end on 30th June, 1981, that is subsequent to the valuation date of the assessee. Soon after the formation of the partnership firm, but before the valuation date of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried to the Commissioner of Wealth-tax (Appeals), by the assessee, where also the assessee failed to convince the Commissioner (Appeals). According to the Commissioner (Appeals) in the normal course the assessee's case would fall within section 7(2)(a) read with rules 2A to 2G. But since there was no balance sheet of the firm during the year ending with valuation date, such provisions regarding global valuation method could not apply. The absence of balance sheet itself cannot affect the value of an asset. viz., the interest in the partnership firm. According to him, firstly value of the net wealth of the partnership as on the valuation date of the assessee has to be ascertained and for this purpose it is permissible to value each or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 times balance sheets shall have to be otherwise prepared. To obviate such hardship, Rule 2 was framed by the Legislature. In any case, the assessee had showed in the statement of wealth the amount lying to his credit in the partnership firm's books. He was then graceful enough to draw our attention to a Tribunal's decision in the case of V.J. Shah, HUF [WTA No. 216 (Bom.) of 1986, dated 22-1-1987] for the assessment year 1981-82. The said decision is against the assessee though the first appellate authority had decided the issue in favour of the assessee. According to him, the Tribunal rejected the contentions raised on behalf of the assessee without giving elaborate reasons. It was, thereafter submitted that there were other appeals in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to take the same view as was taken. However, because of the submission of the learned counsel for the assessee that the decision does not mention the elaborate contentions and does not give elaborate discussion, we ourselves applied our mind fully to the issue before us only to find that the view taken by the Bombay Bench 'B' of the Tribunal is required to be followed. The reasons are as follows : 6.1 Partnership firm is not an assessee under the Wealth-tax Act. But the interest of a partner in the partnership firm being an asset is required to be included in the net wealth of each of the partners. Each assessee under the Wealth-tax Act is required to prepare a statement of net wealth as defined in section 2(m) of the WT Act as on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n market on valuation date, i.e., 31st March, 1981 here. Therefore, if the assessee were to assign his interest in firm, the test has to be what a willing buyer will pay for his interest in firm. Hence, such interest is required to be valued as on 31-3-1981. 6.2 The value is to be determined on the basis of the rules, if any, made in this behalf. Now admittedly the rule is made in this behalf for valuation of interest in partnership or an Association of Persons as found in Rule 2 of the WT Rules, 1957. The anatomy of the language contained in sub-rule (1) of Rule 2 is as follows :--- (i) The value of the interest of a person in a firm shall be determined in the manner provided herein; (ii) The net wealth of the firm on the valuation d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the valuation of partner's interest. It is also not necessary to prepare the formal balance sheet of the firm as many times as the number of valuation dates of partners who are assessees under the Wealth-tax Act. What is required by the provisions contained in section 7 of the Act is to determine the real value of the asset comprised in the net wealth of the assessee. The point of time with reference to which Rule 2 is to be applied is determined by section 7(1) itself when it speaks of valuation as on valuation date. Once this is clear any reference in rule to valuation date has to be of same meaning as given in section 7. 6.3 It would be worthwhile to keep in mind the relevant provisions in respect of the previous year embodied i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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