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TMI Blog1967 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the choice between valuing separately each asset of the assessee or determining the value of the assets of the business as a whole is with the Wealth-tax Officer. To avoid difficulties involved in the valuing of each and every item of asset of the assessee separately it is decided to adopt as a general rule the global method of valuation of the asset as per balance-sheet while this method is adopted. The assessee cannot have the benefit both ways. In the circumstances the deduction claimed is not allowed." The assessee appealed before the Appellate Assistant Commissioner for all the three years and contended that the Wealth-tax Officer should have taken the value of the depreciable assets, on the valuation date, at the rate computed for income-tax purposes and not at the balance-sheet value, because there should be some uniform basis under the Wealth-tax and Income-tax Acts. The Appellate Assistant Commissioner repelled the contention and confirmed the order of assessment for the years 1957-58 and 1958-59 with the following observation : " There is no provision at all in the Wealth-tax Act that W. D. V. of depreciable assets should be taken for purposes of computing the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a value lower than the value shown in the balance-sheet. It was also learnt that the present managing agents, namely, Birla Brothers Ltd., purchased the shares of the appellant company on the basis of the balance-sheet in March, 1948. Therefore, this also goes to show that the value of the assets was as shown in the balance-sheet and not as shown in the W. D. V. of income-tax records." The assessee took a further appeal before the Appellate Tribunal, which allowed the appeals, on the following line of reasoning : " The appellant in this case was not adequately providing for normal wear and tear of the depreciable assets in its accounts. The depreciation provided for by the assessee in its books was much lower than what was allowable as normal depreciation under the Income-tax Act, with the result that the difference amounted to Rs. 12,19,851 for the first year, Rs. 11,79,255 for the second year and Rs. 9,22,724 for the third year. In our opinion, the Appellate Assistant Commissioner was wrong in holding that the net value of the assets of the business as a whole had to be taken exactly as shown in the balance-sheets and no adjustments whatever could be made in respect thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer power to adopt the balance-sheet value of assets as the net value of the business as a whole, but such valuation is not sacrosanct. He is at liberty to make adjustments thereto, if he is of the opinion that the balance-sheet value does not represent the real or the correct value. Also, an assessee, who has shown the value of his depreciable assets at cost, paid many years ago, is not precluded from asking the Wealth-tax Officer to make proper allowance thereto in respect of depreciation caused by lapse of time and wear and tear. Although this is so, it is no proposition of law that depreciation must be allowed, under the Wealth-tax Act, at the rates allowable under the Income-tax Act, which are somewhat empiric in nature, particularly in respect of plant and machinery. Under section 2(m) of the Wealth-tax Act, " net wealth " means the amount by which the aggregate value computed in accordance with the provisions of the 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 all the debts owed by the assessee on the valuation date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance-sheet and was not providing for depreciation thereof in the balance-sheet. The Tribunal, therefore, held that there was no warrant for the view that in computation, under section 7(2) of the Act, no adjustment can be made for depreciation. In the aforesaid view, the Tribunal allowed the appeal. On a reference to this court on the question whether the Tribunal was right in directing that the written down value of the fixed assets of the assessee should be adopted as the value thereof, instead of the balance-sheet value, a Bench consisting of G. K. Mitter J. and my learned brother, Masud J., answered the question in the affirmative. Their Lordships observed : " In our opinion, in normal circumstances and specially when the machinery is old, the written down value gives a fair indication of its real value. In the case before us, the plant and machinery appear to have been set up many years ago and no reason has been shown why the written down value should not be accepted, except that the assessee has not provided for depreciation admissible under the Income-tax Act in the balance-sheet... In Spicer and Pegler's Book-keeping and Accounts, 15th edition, page 48, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that its fixed assets are very old and have suffered considerable depreciation. The case of the assessee is that the depreciation provided in its books was lower than what was allowable as normal depreciation under the Income-tax Act. In taking the extreme view that where the global method of valuation of assets was adopted, as per balance-sheet, no deduction by way of adjustment should be allowed, the Wealth-tax Officer was wrong. The Appellate Assistant Commissioner was also wrong in assuming that the value of the assets was more than the value shown in the income-tax records. The Tribunal was, therefore, right in directing the Wealth-tax Officer to exercise his discretion and allow depreciation. The Tribunal was not, however, right in directing the Wealth-tax Officer to allow depreciation as computed for the purposes of income-tax assessment. In the view that I take, I find some support from a judgment of the Andhra Pradesh High Court (per Jaganmohan Reddy J.) in Commissioner of Wealth-tax v. Andhra Sugars Ltd. from which I quote a relevant extract : " In Commissioner of Wealth-tax v. Tungabhadra Industries Ltd., the Calcutta High Court, after referring to Kesoram Cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the valuation date in the balance-sheet is not correct or that some further depreciation ought to have been allowed by reason of any mistake committed or by reason of any omission or otherwise. In this case, the assessee says that it has not deducted the depreciation attributable to double-shift. If it can establish this, certainly it will be entitled to have the asset revalued for the purpose of computing the net value of that asset on that ground. It is open to the Wealth-tax Officer, where such material is placed before him, to consider the same and give such relief as the assessee is entitled. But, apart from that, as matter of law or of right, it cannot claim deduction of an amount equal to the difference between the depreciation already provided by the company itself in its books an the aggregate sum of normal depreciation and extra shift allowance that he is entitled to under the Income-tax Act and which had been allowed up to the chargeable accounting period under the said Act." I cannot close this judgment, without reference to Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax in which Subba Rao J. (as the Chief Justice then was) had to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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