ADDITIONAL WEALTH-TAX OFFICER Vs. M RAMASWAMY

JUDGEMENT

(1.) The appeal by the department relates to the wealth-tax assessment for the year 1975-76 of the assessee, Shri M. Ramaswamy. The objections raised by the department pertain to the determination of the value of certain shares held by the assessee in different companies. The company in which the assessee held shares, which were valued according to the method stated in rule 1D of the Wealth-tax Rules, 1957, are Rukmani Mills Ltd., Pudukottai Co. (P.) Ltd. and Pudukottai Corpn. Ltd. The AAC found that there were certain amounts in the balance sheet shown as provision for bad debts which were deducted from the amounts shown under the head Unsecured loans as assets in the relevant balance sheets of the companies. He held that such provision for bad debts should be excluded or deducted in determining the net worth of the shares and not included as was done by the WTO. Aggrieved by his order, the department is in appeal.

(2.) Before we proceed to deal with the dispute, it is necessary to point out that there is a mistake in the statement of facts by the AAC, in regard to the provision for bad debts. It is only in the case of the company Rukmani Mills Ltd. that from the amount of unsecured loans under the head Loans and advances of Rs. 26,77,829.42 that an amount of Rs. 11,33,190.09 as provision for bad debts has been deducted and the net balance shown at Rs. 15,44,639.33. In the balance sheet of Pudukottai co. (P.) Ltd. the amount of Rs. 2,26,411.17 referred to by him in his order is not a provision for bad and doubtful debt from loans or other advances, but represents the provision in respect of shares held by the company as investments which are doubtful of realisation. Under the head Loan and advances certain amount is shown to be considered as doubtful and the entire amount is deducted as provision made. Similarly, there is an amount shown as doubtful in respect of dues from customers on account of bills and the entire amount is shown as provision. But the only item that appears to have been dispute before the AAC is the amount deducted as provision for shares or investments doubtful of realisation as stated above. With regard to Pudukottai Corpn. Ltd. the amount of Rs. 2,96,683.28 considered by the AAC is not a provision in respect of loans or advances or other amounts due, but a provision in respect of investments doubtful of realisation. In this company also, certain amounts are shown as unsecured loans or amounts due from customers doubtful of realisation and excluded from the assets. The dispute, however, before the AAC appears to have been only with regard to the amount shown as doubtful of realisation in respect of shares or investments. With this clarification on facts, we shall now proceed to consider the objections of the department and the contentions of the assessee.

(3.) In the grounds, the first objection stated is that the AAC erred in directing exclusion of provision for bad debts in computing the break-up value of shares in companies failing to note that the amount in question had already been taken into consideration by the WTO. This ground is not clear to us and is evidently misconceived because while in respect of Rukmani Mills Ltd.s shares the provision for bad debts have been directed to be deducted. In the other two companies cases, we have already stated, what is directed to be excluded are the provisions in respect of shares or investments doubtful of realisation. In ground No. 3, the objection raised is that the AAC erred in directing that the provision for bad debt should be excluded in computing the break-up value of the shares under rule 1D. This also is not quite clear to us on the fact of the earlier objection mentioned above where it is stated that the WTO has already taken into consideration the provision for bad debt.