NATARAJAH J K K Vs. WEALTH TAX OFFICER

JUDGEMENT

(1.) THESE writ petitions are conveniently dealt with by a common order, for, they all raise an identical question concerning the application to the writ petitioners of certain provision of the W.T. Act, 1957.

(2.) AS many as seven individuals have filed these writ petitions. Each of them is a partner in as many as four partnership firms. The firms are engaged in the production of yarn with the aid of machinery. The petitioners are wealth-tax assessees. Then writ petitions concern their assessments to wealth-tax for the assessment years 1965-66 to 1974-75. Under the scheme of the W.T. Act, the tax is levied on an individual's net wealth. "Net Wealth" means the value of the surplus of the assets over the debts of the assessee. All assets will have to come into the computation, excepting those that are expressly exempted by the statue. Under the statutory definition of assets, a partner's partnership interest, as such, would also come into the reckoning as an asset, considered in itself. Under the scheme of the W.T. Act, the market value of each and every one of the assets of an assessee will have to be determined in order to arrive at the aggregate value of all his assets. The partnership interest as such, being an asset in itself held by a partner, must also be reckoned in terms of market value. How to determine the market value of a share in a partnership is governed by the W.T. Rules, 1957. Rule 2 of the Rules lays down what is familiarly known to accountants as "the break-up value method" for ascertaining the market value of the interest of a partner in a partnership. Under this method, you focus your attention, first, to the assets of the partnership. You take the partnership assets and determine their market value. You then turn to the firm's debts, and aggregate their amounts. Deducting the firm's debts from the aggregate value of the firm's assets will give you the net worth of the firm's undertaking as such. To the figure of net worth of the partnership so determined, you then apply the individual partner's fractional share ratio. Thus, you would arrive at the market value of his partnership interest, as an asset in itself. These steps in the process of computation would show the important part which the valuation of the partnership assets plays in the computation of the market value of the partner's share.

(3.) THE records of the valuation proceeding in these cases show that the Valuation Officer had not adhered to the mandates of these statutory provisions. THE Valuation Officer (machinery and plant) who had to taken up the firms' spinning plants for valuation gave opportunity of some kind to the petitioners, but his proceedings do not disclose that all the objections of the petitioners had been adequately considered. THE other valuation orders concerning items of immovable property do not fare better. THE record shows that unit II Valuation Officer of immovable properties passed orders valuing items of immovable property within his charge without issuing notice to the petitioner and without giving them a hearing. THE Unit I Officer, who is a party to the writ petitions, gave notice in respect of one item of immovable property, but his order determined the valuation not only for that item, but for many other items for which the petitioners had no notice.