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TMI Blog1986 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... roversy in both these years is regarding the valuation of the assessee's rights as distributor of films on the said valuation dates. The WTO had made addition of Rs. 50.86 lakhs in the assessment year 1977-78 and Rs. 56,04,513 in the assessment year 1978-79 on account of variation under rule 2B(2) of the Wealth-tax Rules, 1957 ('the Rules') in respect of the said distributorship rights. Under the said rule, the WTO can make addition where the market value or an asset shown in the balance sheet exceeds its written down value or book value by more than 20 per cent. In the assessment year 1977-78, the assessee's balance sheet had disclosed under the head 'Picture accounts' value of Rs. 3,10,679 in respect of six pictures. Similarly, in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounting year. In this context, the WTO observed that the film 'Johny Mere Naam', released on 20-11-1970 (relevant to the assessment year 1972-73), which cost Rs. 20 lakhs, would be valued at nil in the assessment year 1972-73 if rule 9B was applied but the factual position was that the collection from the said film even in the assessment year 1977-78 (accounting year ending 30-6-1976) were of Rs. 1,67,252 and, therefore, it would be wrong to claim that the said film did not have any value on the valuation date of 30-6-1976. The WTO thereafter valued the films of different categories as indicated hereafter : (a) 20 films taken on minimum guarantee basis for a period of 9-12 years--- The WTO estimated the return at 20 per cent and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the recoveries in the next three years were of Rs. 21,18,600. As the rights in the said pictures were to remain with the assessee for the next decade or more, the WTO further added Rs. 10 lakhs to the aforesaid recoveries to arrive at the estimated recoveries at Rs. 31.86 lakhs out of which he allowed 20 per cent discount for arriving at the present market value at Rs. 25,48,800. As the closing stock value was shown at Rs. 7,58,787, the WTO added Rs. 17,90,013, which resulted in addition of Rs. 56,04,513 in the valuation of pictures. 6. He further made addition of Rs. 20,000 in respect of the assessee's 25 per cent share in Sai Syam Pictures. 7. It is in this background that the assessee appealed to the Commissioner (Appeals), who, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruled A. T. Mirji's case and has approved Dipti Kumar Basu's case. Thus, with the overruling of A. T. Mirji's case the foundation of the decision in N.M. Shah's case is gone and, therefore, the said decision in N.M. Shah's case is no longer good law. In N.M. Shah's case the Bench in paragraph 26 had noted that in Dipti Kumar Basu's case, it was held that the WTO was authorised to make adjustments in the balance sheet under section 7(2)(a) of the Wealth-tax Act, 1957 and the fact that the book debt was not entered in the books was itself a circumstance justifying its inclusion and that such inclusion did not convert the cash system into mercantile system of accounting. The Bench, however, had not followed the said decision and had preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ownership basis. The Commissioner (Appeals) was, therefore, in error in deleting the additions of Rs. 50.86 lakhs for the assessment year 1977-78 and Rs. 56,04,513 in the assessment year 1978-79. The fact that in the income-tax assessment for computing the assessee's income deduction of 100 per cent of the cost of the distributorship right was allowed as a deduction if the film had run for more than 90 days in the account year does not prove that the assessee had no valuable right in the films on the valuation date. Value of some hit films may even be going up after successful running for 90 days and it would be closing our eyes to the realities if we hold that the value of such films was nil just because a particular deduction had been a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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