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TMI Blog1980 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... hat basis. Aggrieved by that order of the WTO, the assessee appealed to the AAC, who, while accepting the assessee's complaint regarding the WTO's order in relation to the value of the agricultural land, rejected the assessee's contention pertaining to the inclusion of the accrued interest of Rs. 25,768. Against that portion of the order of the AAC, the assessee preferred a further appeal to the Income-tax Appellate Tribunal, Hyderabad Bench, which had reversed the decision of the lower Tribunal regarding the inclusion of the accrued interest in the net wealth of the assessee, with the result that the sum of Rs. 25,768 forming the interest accrued but not received by the assessee on the outstanding loans was directed to be deleted from the net wealth of the assessee. The revenue applied for and obtained a reference to this court under s. 27(1) of the W.T. Act of 1957 (hereinafter called " the Act "). Accordingly, the following question had been referred for the opinion of this court by an order of the Appellate Tribunal dated September 6, 1976. " Whether, on the facts and in the circumstances of the case and on a correct interpretation of rules 2B and 2C of the Wealth-tax Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case not under r. 2B of the Rules but under r. 2C. In order to appreciate the rival contentions urged, it becomes necessary to refer to the broad features of the Act. Section 3 of the Act, which is the charging section, imposes liability to pay wealth-tax every financial year on every individual, HUF or company with respect to the " net wealth of that person on the valuation date. Section 2(m) defines " net wealth " to mean " the amount by which the aggregate value computed in accordance with the provisions of this 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 this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date ". Under s. 2(q) " valuation date ", in relation to any year for which an assessment is to be made, means the last day of the previous year as defined in s. 3 of the I.T. Act, if an assessment has to be made under that Act for that year. Section 7 of the Act provides the mode of ascertaining the value of the assets for the purposes of the Act. Section 7(1) reads as follows : " 7. (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the assessee in such business. A perusal of the language of s. 7(1) as contrasted with the language of s. 7(2) of the Act shows that the Act provides primarily for the method of individual valuation of each asset.. Section 7(2) of the Act provides only an alternative method of estimating the value. But this is discretionary with the WTO and he can choose to adopt that method subject to two conditions, one of which is that the assessee should be having only business assets requiring valuation and the other is that the assessee should have been maintaining a balance-sheet. In our opinion, s. 7(2) of the Act is not intended to apply to a case like the present one where the wealth-tax assessment is dependent not merely on the business assets but also on the holding of the wholly unconnected agricultural assets in which the assessee is not carrying on any business. The words " the net value of the assets of the business as a whole " clearly rule out the applicability of s. 7(2) to such a case. In other words, s. 7(2) would have no application to a case where the wealth is composed of business as well as non-business assets, both of which come under the Act. For the applicabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account. It follows that the assessee had failed to disclose some of his assets. To such a situation the applicable rule even on the assumption that s. 7(2) would apply would be r. 2C and not r. 2B of the Rules. Rule 2C which deals with the adjustments of the value of assets not disclosed in the balance-sheet directs the value of undisclosed assets to be taken into account. But the argument of the assessee is that the interest is not an individual asset. We cannot agree with this argument which goes contrary not only to commonsense but also to the definition of the word " asset " given in s. 2(e) of the Act. Accrued interest is " property as defined in s. 2(e) and it is, therefore, liable to be valued as an " asset for the purpose of computation of the net wealth. The argument that the petitioner is maintaining his accounts on cash basis is in our opinion not relevant for the purpose of deciding the assessee's wealth-tax. The question whether the petitioner had received the accrued interest or not would be hardly material for the purpose of determining whether that accrued interest is an asset and whether it forms part of the assessee's net wealth. The analogy of income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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