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TMI Blog1965 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the assessee should be adopted as the value thereof, instead of their balance-sheet value? The facts taken from the statement of the case are as follows: The relevant assessment years are 1957-58, 1958-59 and 1959-60 and the valuation dates for these applications are September 30, 1956, September 30, 1957, and September 30, 1958. In assessing the net wealth of the assessee, the Wealth-tax Officer proceeded under section 7(2)(a) of the Wealth-tax Act and included in the computation the entire balance-sheet value of the assets without any adjustment. The assessee contended that so far as the fixed assets were concerned they should be assessed at their written down value and not on the basis of the value as shown in the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In fact, the Central Board of Revenue in its circular No. 3 W.T. of 1957, dated September 28, 1957, directs that depreciation may be allowed for in appropriate cases in computing the bulk valuation of business assets under section 7(2)...There is, therefore, no warrant for the view that in a computation under section 7(2) no adjustment whatever can be made for depreciation. In the income-tax assessments depreciation is calculated upon the original cost in a scientific and systematic manner with due regard to the nature of the asset. Therefore, the written down value as determined in the income-tax assessment may be taken as the fair index of the net value of the business assets in most cases...In this particular case, it appears, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those set forth in clauses (i), (ii) and (iii). The valuation of the assets is to be done under section 7. Two courses are open to the authorities under this section. The Wealth-tax Officer may, if he chooses, value any asset, other than cash, estimating the price which in his opinion it would fetch if sold in the open market on the valuation date. In other words, it means that the market value of each asset may be taken into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of assets such as, (i) land, (ii) building, (iii) plant and machinery, (iv) office equipment and furniture, (v) motor vehicles, etc., and any other thing which may properly fall within this classification. The current assets will show the stocks held by the assessee, including stores and spare parts, raw materials and components, finished goods and work-in-progress. Any debts owed to the assessee must also be shown under the heading current assets, loans and advances. All moneys belonging to the company whether lying in banks or in its office or factories or securities given to others must also be properly shown. In this case the assessee claimed that since the full amount of depreciation which was admissible under the Indian Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee holds large blocks of lands purchased many years ago in urban areas, the balance-sheet value thereof shown at cost will certainly not reflect their real value. I see no reason why in such a case the Wealth-tax Officer should be precluded from making such additions to the value of the land as he thinks proper, having regard to the general appreciation of land values in the neighborhood. Again, if the assessee has shown the value of the plant and machinery of the business at cost, which was purchased many years ago, there is no reason why he should be precluded from asking the Wealth-tax Officer to make proper allowance thereto in respect of the depreciation which must have been caused by lapse of time as also by wear and tear. The depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing profits, and should therefore be charged against those profits as they are earned..........If depreciation is not provided for, the books will not contain a true record of revenue or capital. If the asset were hired instead of purchased, the hiring fee would be charged against the profits; having been purchased, the asset is, in effect, then hired by capital to revenue, and the true profit cannot be ascertained until an analogus charge for the use of the asset has been made. Moreover, unless provision is made for depreciation, the balance-sheet will not present a true and fair view of the state of affairs, since the assets will be shown at an amount which is in excess of the true amount of the unexpired expenditure incurred on their acq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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