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TMI Blog1976 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at the price which it would fetch if sold in the open market on the valuation date as provided in section 7, the capital gains tax payable on such valuation should be reduced from the total value in ascertaining the net wealth. This contention was rejected by the Wealth-tax Officer and he ascertained the aggregate value of the assets with reference to the price which they would fetch if sold in the open market on the valuation date as provided under section 7. On appeal, the Appellate Assistant Commissioner was also of the view that the question of deducting capital gains tax would arise only if it became payable and that it would become payable only when the property was sold and that, therefore, the valuation of the assets did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 other than-- (i) debts which under section 6 are not to be taken into account; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and (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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relying on certain passages of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax , he further submitted that even for purposes of finding out the net wealth for the purpose of the Wealth-tax Act, what is relevant is the amount which ultimately would remain with the assessee in case there was a sale. The passage relied on from the above decision at page 775 reads as follows: " Looking at the problem from the standpoint of a businessman or looking at the question from a common sense view, one will reasonably hold that the net wealth of an assessee during the accounting year is the income earned by him minus the tax payable by him in respect of that income. If a person earns Rs. 1,00,000 during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertainable data, that it was a perfected debt at any rate on the last date of the accounting year and not a contingent liability and that, therefore, it is a debt owing on the valuation date. The same view was expressed in the later decisions in Assam Oil Company Ltd. v. Commissioner of Wealth-tax and Standard Mills Co. Ltd. v. Commissioner of Wealth-tax. It may be mentioned that in these cases it was the provisions in the Income-tax Act that were relied on to determine, whether the income-tax became a liability on the valuation date. The principle was later extended in respect of wealth-tax payment also in H. H. Setu Parvati Bayi v. Commissioner of Wealth-tax. It may be seen from section 45 of the Income-tax Act that the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts under section 7. Further, only where there is an actual transfer there would be a liability in praesenti or a definite liability though the quantum of which may be determined in future. The Supreme Court in Ahmed G. H. Ariff v. Commissioner of Wealth-tax, construing the words " if sold in the open market " in section 7(1), held that it did not contemplate actual sale or the actual state of the market, but only enjoined that it should be assumed that there is an open market and, on that basis, the value has to be found out and it is a hypothetical case which is contemplated and the tax officer must assume that there is an open market in which the asset can be sold. Thus, the section does not create any fiction of a real sale so as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention advanced on behalf of the appellant would be reading in section 7(1) the words ' to the assessee ' after the words ' it would fetch ', although the legislature has not inserted those words in the statute. Such a course would not be permissible unless there is anything in the relevant provisions which may show that the intention of the legislature was that the value of an asset would be the price fetched after deducting the sale expenses." In construing a similar provision contained in section 7(5) of the Finance Act, 1894, Lord Denning M.R. in Duke of Buccleuch v. Inland Revenue Commissioner held at page 460 : " You are to estimate on his hypothetical sale the price which the properties ' would fetch '. That means the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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