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TMI Blog1990 (9) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds relating the to in all the appeals are, therefore, dismissed. 4. This leaves us to consider the valuations of movable and immovable properties belonging to the rest of the two concerns viz. M/s Vaid Lal Ice Factory, Ahmedabad and M/s Vadi Lal Dairy Frozen Food Industries, which we proceed to decide as under. (A) VALUATION OF IMMOVABLE PROPERTIES (LANDS & BUILDINGS) 5. When the parties were called upon to advance arguments regarding valuation of the lands and buildings belonging to the two concerns, as mentioned above, it was submitted on behalf of the assessees that in its latest decision in the case of Krishandass Govinddas Parikh vs. WTO (1990) 37 TTJ (Ahd) 546 Ahmedabad Bench of the Tribunal has taken the view that valuation of immovable properties in cases pending assessment at the time of the insertion of the new valuation rules as brought on the Statute Book by the Direct Tax Laws (Amendment) Act, 1989 Sch. III, w.e.f. 1st April, 1989 is required to be made in accordance with those Rules. In that context, Mr. K.K. Bolia, the Sr. D.R., could simply submit that in valuing the immovable properties involved in these appeals all the relevant Rules including r. 8 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd copies of vouchers of original purchases of machineries. The firm did not, as stated by the VO, supply any of these details. It was only at the time of local inspection by the VO on 30th May, 1984 that copy of the partnership deed and the statement showing machinery depreciation were supplied to the VO. The said statement did not even, according to the VO, specifically indicate the written down value in complete shape. 8. On his inspection the VO noted that the ice plant was provided with 7 Nos. Of compressors of different capacities for production of ice cubes, 7 Nos. Of water pumps, 4 Nos. Of agitators, cooler tanks, 4 Nos. of suitable ammonia condensers, 1 lathe machine, 2 drilling machines, gas cylinders purchased in 1980. Electric motors were being employed in the process of manufacturing ice. The VO further noted that electric power wiring had not been done in a systematic manner and the same had also been tampered with. 9. In estimating the fair market value of various machineries the VO adopted straight line method of depreciation. He enquired of the cost of replacement of machineries as on the valuation dates from reputed firms and allowed 25 per cent reduction in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o continuous deep freezers where quality ice-cream is obtained. Ammonia is employed as a medium for heat exchange in the ice-cream manufacturing process and self-contained freezers "freon" is employed as head exchanging medium. 12. The firm has got most of the machineries required for carrying out the above process and is also equipped with self sufficient cold storage facility. It also has a VPB Batch pasteuriser of 1000 litres capacity and a Jenogand homogeniser complete whit accessories fitted with built-in-motors for a capacity of 1000 litres per hour with multi-sized homogeniser device for pasteurising and homegenising functions. Storage and processing tanks are mainly made of stainless steel and two number plate heat exchangers are of Alfa level make. The different sized cold storage chambers are having 10" thick thermocol for ceilings and walls and flooring with wooden gatties, bitumen, etc. The firm has its own transport vehicles some of which are provided with refrigeration facilities. 13. At the time of his inspection the VO noted that in the refrigeration side two Frick India Make 4 x 4 heavy duty industrial type double cylinder reciprocating medium compressors along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freezer has been necessitated more than 10 times because of various problems coming up. (b) The legs and inner shells of milk vat (1000 litre capacity) were found to be damaged during inspection. (c) The other gram fill and Cap Automatic Filler for cone ice cream production machine was found to be giving satisfactory service. The cost of the machinery at the time of purchase was Rs. 13 lakhs. However, the condition of the gear box of the machinery was found to be very poor and all the gears were worn out an they required immediate replacement. The replacement of the gear box necessitated an expenditure of Rs. 2 lakhs. The gear box was to be imported for this machinery. The labour charges were also estimated to be high. (d) ELGI air compressor model SG 100 with 10 h.p. motor was offering good service during inspection. But the assessee claimed that piston rings of these compressors have been replaced. The whole piston set has been replaced once and there has been heavy damage in crank shaft, connecting rod, balls, etc. (e) Mostly the 6 No. Brine tanks have also outlived their life. These tanks are made of 10 mm thick M.S. sheets which are always full of brine. The tanks wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 15 3.6 An allowance of 10 per cent to off-set the reduction in the fair market value because of the fact of corrosion has also been made in this report. 3.7. The firm has been owned by various partners on various dates and, hence, an allowance of 15 per cent has also been given in this report." To sum up, the following position emerges of the estimation of valuation of plant and machinery belonging to this concern: Valuation Date Valuation returned (WDV) Provisional valuation by VO Final valuation by VO . Rs. Rs. Rs. 10/78 26,05,786 33,63,800 31,00,000 10/79 28,51,543 36,68,600 34,17,000 11/80 28,40,022 42,06,000 44,33,000 12/81 29,53,573 47,46,800 49,15,000 12/82 44,64,669 71,56,100 66,08,000 12/83 59,09,964 1,02,18,700 88,38,000 The WTO adopted the finally estimated valuations and in appeals the CIT(A) confirmed the same. 16. We heard Mr. J.P. Shah, Advocate for the assessees and S/Shri K.K. Bolia, Sr. D.R., S.S. Jasrotia, D.V.O. and R.S. Luthra, V.O. (Plant & Machinery). We have also considered the various arguments advanced by them and have gone through the material on record to which our attention was invited to. 17. At the very ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such business" in s. 7(2) means that the WTO has to take into consideration or account, the balance sheet of such business for valuation and not that balance sheet is conclusive or binding or decisive of the value of the asset appearing therein. 20. It is thus, well settled that the written down value or book value a per balance sheet of an asset of a business is not a good indicator of the fair market value of that asset and is not conclusive or binding or decisive in that behalf, no doubt the WTO has take that into consideration or account for valuation purposes. 21. In the instant cases book value of the plant and machinery belonging to M/s Vadi Lal Ice Factory were not specifically submitted to the WTO/VO. The book value of the plant and machinery belonging to M/s Vadi Lal Dairy Frozen Food Industries, as viewed by the WTO, did not represent the fair market value of the concerned assets on the relevant valuation dates. The WTO was, therefore, fully justified in referring the valuation of the concerned assets of the two concerns for the valuation of the VO (Plant & Machinery). And the VO, in our opinion, was fair enough to have proceeded to value the various assets of the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the rest of the two firms. We find no force in this submission. 25. In their submissions, as placed at page 124 of the paper book, the assessee have themselves mentioned that the plant and machinery of the said concern were quite out-dated, old and obsolete. The method by which and the particulars of the persons to whom they were sold are not known. It is also not on record that the condition of the plant and machinery of that unit was the same or similar to those belonging to the concerns presently under our consideration. We are thus of the opinion that the sale instance of the plant and machinery of M/s Vadi Lal Ice & Cold Storage affords no guide to estimate the valuation of the remaining two concerns. 26. Mr. Shah next urged that the Ahmedabad water being quite salty it causes more corrosive effect, particularly in the insulation pipe lines which are very old. It was submitted that the Valuation Officer was not fair enough to allow 10 per cent only for corrosive effect in determining the valuation of the two concerns and that if those are to be dismantled and sold separately they would fetch scrap value only. 27. We find that while finally estimating the valuation of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. It cannot be denied that rapid technological advances are being made every day in almost every field of knowledge particularly those directly or indirectly related to the articles of human use or consumption. Consumerism in such articles is also achieving new dimensions had heights of human imagination. To keep pace with the change in the taste and likings of the swelling numbers of consumers of eatables new methods of manufacturing and preserving the fast perishable articles of human consumption are being evolved and invited with the newly acquired scientific technology. That would necessarily lead to obsolescence of old machines and, therefore, a deduction 10 per cent would, we think, be quite reasonable in the cases of the plant and machineries belonging to the two concerns under consideration. 30. The VO has given a uniform deduction of 10 per cent on account of limited marketability and joint ownership. It may be pointed out that while dealing with objection No. 6 of the assessees over the estimation of valuation of immovable properties of the firms the VO has pointed out that the co-owners in these firms were close relations, being either sons or brothers and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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