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TMI Blog1969 (7) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the shares of Messrs. Sri Hanuman Sugar Mills Ltd., the amount of Rs. 1,75,000, being proposed dividend, should be deducted ? " We shall not tarry of a discussion of the second question which appears to us to be covered by the decision of a Division Bench of this court in Gift-tax Officer, Calcutta v. Kastur Chand Jain. Following that decision, the answer, therefore, to the second question is in the negative, in favour of the revenue. It is the first question which requires some consideration before the answer is given. The facts given rise to this question are simple and should be stated first. The assessee is an individual. She held 7,000 ordinary shares of the Hind Mills Ltd. of the face value of Rs. 10 each. These shares are admittedly not quoted on the stock exchange. The main point raised in the statement of the case in question No. 1 concerns the computation of the break-up value of these shares. The Tribunal accepted the assessee's contention that, in so far as the assets on which depreciation has been allowed for income-tax purposes, the written down value thereof should be adopted in place of their balance-sheet values. It is found as a fact that the company d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is the price which in the opinion of the Wealth-tax Officer the asset would fetch if sold in the open market on the valuation date. The principle on which depreciation is allowed under the Income-tax Act, however, is different under section 10(2)(vi). That section of the Income-tax Act deals with business and the tax payable by an assessee, inter alia, under the head " Profits and gains of business ". Section 10(2) says that such profits and gains shall be computed after making the allowances named therein. The allowances, therefore, are impressed by the object and purpose of finding out the profit or gain. That is not the purpose or object under the Wealth-tax Act, which has to find out the price that the asset would fetch if sold in the open market on the valuation date. The depreciation mentioned in section 10(2)(vi) of the Income-tax Act is in respect of depreciation of the physical assets like buildings, machinery, plant or furniture, properties which are from their very nature depreciable with wear and tear according to use. The importance of the question raised by Mr. B. Pal on behalf of the revenue can be put in the form of this interrogation : " Is the market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bubble has already been pricked. The recent decision of the Gujarat High Court, which has been mentioned and quoted in the decisions already cited by me, indicates the new winds. In that decision, Commissioner of Wealth-tax v. Raipur Mfg. Co. Ltd., K. T. Desai C.J. very clearly and strongly observed as follows : " Under section 7(2) of the Wealth-tax Act, when the net value of assets of a business as a whole has to be determined, regard should be had to the balance-sheet of such business. In numerous balance-sheets it is found that several assets are shown at cost. The price at which the same are shown could not possibly be in such circumstances the price which such asset would fetch if sold in the open market on the valuation date. No doubt there is a power given to the Income-tax Officer to make such adjustments as the circumstances of the case may require. It is urged that this power has to be exercised in order that the price of assets, as shown in the balance-sheet, may equate with the written down value of such assets as appearing in the records of the income-tax department. There is no warrant for such a conclusion. The written down value may be far from the real value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the opinion, as at present advised, it is not so. The other decision is Commissioner of Wealth-tax v. Indian Standard Metal Co. Ltd., where it is laid down that it cannot be an invariable rule of law that simply because depreciation has been allowed under the Income tax Act, the same must be allowed in determining the net value of the assets for the purposes of wealth-tax. Whether such depreciation should be deducted or not must depend on the facts and circumstances of each case. In that case it was held that the assessee was entitled to claim deduction of the amount of accumulated depreciation allowance in its fixed assets, not written off in the books but allowed by the department in the income-tax assessment for the purpose of computing the net wealth under section 7 of the Wealth-tax Act. Again in Commissioner of Income-tax v. Bipin Chandra Maganlal & Co. Ltd., Shah J. observed : " In computing the profits and gains of a company under section 10 of the Act (Income-tax Act) for the purpose of assessing the taxable income, the difference between the written down value of the machinery in the year of account and the price at which it was sold (the price not being in ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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