KOTHARI TEXTILES LIMITED Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) IN these four tax references a common question arises, that is, as to the proper interpretation of the expression "net wealth" as defined in the Wealth Tax Act.

(2.) IN T. C. No. 210 of 1959 relating to the assessment year 1957-58, the assessee Company made a return of its wealth on the basis of its balance sheet made upto the 3oth June, 1956. It is admitted that that date is the valuation date for the purpose of wealth tax assessment. The assessee deducted from the total wealth two sums as below:

(3.) THE charge is upon the net wealth of the company on the corresponding valuation date. It is unnecessary to examine the definition of the expression "valuation date" as it is conceded that the dates that we have referred to earlier are the valuation dates of the several companies who are the assessees. THE dispute is only in regard to the definition of "net wealth". THE expression "net wealth" is defined in Section 2(m) of the Act 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 what is required to be included in his net wealth as on that date, under this Act, is in excess of the aggregate value of the debts owed by the assessee on the valuation date ........." Shortly stated, the net wealth is the total value of all the assets required to be included less the value of all the debts owed by the assessee on the valuation date. Section 7 Sub-section (1) makes provision for the valuation of any asset other than cash. THE generality of this provision is modified by Sub-section (2) in the case of an assessee carrying on a business for which regular accounts are maintained. In such a case, the Wealth Tax Officer is enabled to determine the net value of the assets of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as the circumstances of the case may require. It is seen therefore, that in the case of a company, the proper and perhaps the most feasible method of valuing the assets of the company would be to proceed under Sub-section (2) of Section 1. But the Wealth Tax Officer is given sufficient discretion herein, while adopting the balance sheet as the basis for making the valuation, to make "such adjustments therein as the circumstances of the case may require".