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TMI Blog1970 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth for the assessment year 1957-58 ? (2) If the answer to question No. 1 is in the affirmative, whether the value to be included in the net wealth is the value as fixed in 1948 or such value as reduced by depreciation in the intervening years? (3) Whether in computing the net wealth, the assessee-company is entitled to deduction of provision made for tax liability relating to periods ending on or before the valuation date, although the relevant assessments had not been completed and the demand notices served till that date ? " The assesssee is a limited company and owns a textile mill. Its fixed assets were revalued in 1948 and, consequently, the value of the assets was enhanced by a sum of Rs. 1,68,65,270, the increased valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in the valuation of the assets as disclosed in the balance-sheet so that only the valuation before enhancement was taken for computing the total wealth. The Tribunal rejected this contention of the assessee and held that the full enhanced value of the assets should be adopted. But it proceeded to give the benefit of depreciation to the assessee on the full enhanced value by allowing depreciation for the years following the year of revaluation. The allowance on account of depreciation, the Tribunal held, was an adjustment which the Wealth-tax Officer should make in the balance-sheet values, relying on the power to make adjustments conferred under section 7(2). The first two questions referred here deal with the controversy whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance-sheet in the absence of a convincing explanation by the assessee that the figure was inflated for acceptable reasons. Here also, in the case before us, the balance-sheet showed the value of the assets on the enhanced figure and no attempt has been made to show that it was an inflated figure. Upon the principle which found favour with the Supreme Court, we hold that the Wealth-tax Officer, when ascertaining the net wealth for the assessment year 1957-58, was entitled to take into consideration the enhanced value of the assets on the basis of the revaluation made. We answer the first question in the affirmative. As regards the third question, the law is now well-settled that a " debt owed ", for the purposes of section 2(m) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation date other than,--. . . (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953, the Expenditure-tax Act, 1957, or the Gift-tax Act, 1958,- (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him, or (b) which although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date. " In the first place it is not clear from the statement of the case whether in point of fact the provision for taxes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that if the Wealth-tax Officer is entitled to take into consideration the enhanced value of the assets for the purpose of computing the wealth-tax, there is no good reason why an allowance should not be made for depreciation on the enhanced value during the years following. The depreciated value provides a fair estimate of the true value of the asset. There can be no dispute that ordinarily, an asset, through wear and tear occasioned by efflux of time, diminishes in value. In the absence of factors enhancing the value of the asset, the normal rule is that the true value of the asset is the value after allowing for depreciation. The object of section 7 of the Wealth-tax Act is to ascertain the true value of the asset for the purpose of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have held in favour of the Wealth-tax Officer doing so. Some of these cases are Commissioner of Wealth-tax v. Tungabhadra Industries Ltd., Commissioner of Wealth-tax v. Andhra Sugars Ltd., Commissioner of Wealth-tax v. Bally Jute Co. Ltd., Loyal Textile Mills Ltd. v. Commissioner of Wealth-tax, Commissioner of Wealth-tax v. Swadeshi Cotton and Flour Mills Ltd. and Commissioner of Wealth-tax v. Ganga Nagar Sugar Mills Ltd. Accordingly, we hold that the value of the assets which should be considered for the purpose of computing the net wealth of the assessee is the value as fixed in 1948, reduced by the depreciation in the years following. This computation should take into account the reduction in the enhanced value occasioned by the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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