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TMI Blog1968 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation date ? " In this reference, cases of two different assessees have been consolidated and referred to the High Court because there is a common question between the cases of the two assessees. The assessee, Kikabhai Bhagubhai, is a dealer in shares and, so far as he is concerned, the assessment year is 1963-64, the relevant valuation date being November 8, 1961. So far as the assessee, Ramprasad Manilal Bhagat, is concerned, the assessment years are 1961-62 and 1963-64, the relevant valuation dates being October 20, 1960, and November 8, 1961, respectively. Ramprasad is also a dealer in shares. Each of these two assessees kept regular books of account for his respective share business and for other activities. So far as Kikabhai was concerned, as on the valuation date i.e., November 8, 1961, the value of the shares in stock shown in the balance-sheet is Rs. 3,10,279 on the basis of the cost price of the shares. In the case of Ramprasad, the value of the shares in stock as on the valuation date was Rs. 1,72,334 as of October 20, 1960; and Rs. 1,52,513 as of November 8, 1961. Each of these two assessees claimed before the Wealth-tax Officer that the shares in stock shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h-tax Officer may instead of determining separately the value of each asset held 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..." Section 7(2)(b) provides for the contingency where the business is of a company not resident in India and a computation in accordance with clause (a) cannot be made by reason of the absence of any separate balance sheet drawn up for the affairs of such business in India. It is not necessary for the purposes of this reference to consider the provisions of section 7(2)(b). It is clear from the words of section 7(1) that ordinarily every asset other than cash has to be estimated for the purpose of the Act on the basis of the market 'value as estimated by the Wealth-tax Officer because the words, " the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market " merely indicate the market value as estimated by the Wealth-tax Officer. It is obligatory on the Wealth-tax Officer under section 7(1) to estimate the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Wealth-tax, at page 792 of the report, it was pointed out by Shah J., delivering the minority judgment of the Supreme Court: " By the first sub-section (of section 7) the Wealth-tax Officer is authorised to estimate, for the purpose of determining the value of any asset, the price which it would fetch, if sold in the open market on the valuation date. But this rule in the case of a running business may often be inconvenient and may not yield a true estimate of the net value of the total assets of the business. The Legislature has therefore provided in sub-section (2)(a) that where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may 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 make such adjustments therein as the circumstances of the case may require. But the power conferred upon the tax officer by section 7(2) is to arrive at a valuation of the assets, and not to arrive at the net wealth of the assessee. Section 7(2) merely provides machinery in certain special cases for valuation of assets, and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of the Wealth-tax Act. In Commissioner of Wealth-tax v. Indian Standard Metal Company Ltd. at page 839 of the report, the Bombay High Court pointed out: " Under section 7 of the Wealth-tax Act, however, the Wealth-tax Officer is entitled to follow either of the two methods mentioned therein for the calculation of the value of the assets in the case of an assessee carrying on business. He may under sub-section (1) of the said section proceed to determine the market value. He may, on the other hand, under sub-section (2) of the said section, proceed on the global valuation basis of valuing the assets of the business as a whole." The same view was also taken by the Bombay High Court in Commissioner of Wealth-tax v. Standard Mills Co. Ltd., at page 292; and there it was pointed out: " The primary mode as will be seen from sub-section (1) of section 7 is to make an estimate as to the price at which the asset would be sold and that would be the value of the asset. Sub-section (2), however, gives an option to the Wealth-tax Officer not to follow this method of valuing each asset by estimating its market price in case where the assessee is carrying on a business and the Wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case may require. This means that instead of resorting to the cumbrous process of valuing each and every asset of the business separately, he can adopt the sum total of the values given in the balance-sheet, making such adjustments as may be called for. The balance-sheet will not disclose all the different assets separately, but will show their value taken together in several distinct categories." In Commissioner of Wealth-tax v. Birla Jute Manufacturing Co. Ltd. , the Calcutta High Court held as in the earlier decisions that sub-section (2) of section 7 confers a discretion on the Wealth-tax Officer to proceed on the balance-sheet. In Commissioner of Wealth-tax v. Mysore Commercial Union Ltd. it was pointed out by the Mysore High Court: "........ one method of valuation is to ascertain the market value of the assets other than cash. Section 7(2) provides for an alternative method ...... The Wealth-tax Officer is not compelled to adopt that basis. It is left to his discretion to adopt that basis or not. He may, if he so chooses, proceed to value the business assets on the basis of the market value as provided under section 7(1). The basis provided under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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