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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 ..... in the books according to the rates as in the Income-tax Act but at rates less than that. The Wealth-tax Officer repelled the claim with the following observation: " I am of opinion that the assessee is not entitled to make this type of adjustment. Under section 7(2)(a) of the Wealth-tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant---and these accounts were audited by chartered accountants and passed by the shareholders---that the assets were worth more than the value shown by the income-tax assessment records. If this was so, then all of a sudden in March, 1959, the assets cannot be considered as being 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as the circumstances of the case may require." Now, section 7(2)(a) gives to the Wealth-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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at their written down value and not on the basis of the value as shown in the balance-sheet. The contention of the assessee was rejected both by the Wealth-tax Officer and the Appellate Assistant Commissioner. On further appeal, the Tribunal found that the assessee was valuing the fixed assets at cost in 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation, the depreciation as computed for the purpose of income-tax assessment must always be followed. That computation merely affords a rough and ready method of reckoning loss in value and need not be resorted to except under compelling circumstances. Now, in this case it is not the contention of the assessee 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 tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resents the market value of the assets as estimated by the assessee itself, and unless circumstances justify, the assessee cannot claim further depreciation as it is seeking to claim in this case. No doubt, it will be open to it to show that the depreciation deducted for the purpose of arriving at the net valuation 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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