COMMISSIONER OF WEALTH TAX Vs. RAGHUVANSHI MILLS LIMITED

JUDGEMENT

(1.) AT the instance of the revenue this reference has been made for determination of the questions for the wealth -tax assessments of 1957 -58 and 1958 -59, for which the relevant valuation dates are March 31, 1957, and March 31, 1958. The assessee is a limited company carrying on business of manufacture and sale of textile goods. The first question relates to the valuation of the fixed block of assets. For both these years the Wealth -tax Officer adopted the balance -sheet values of these assets rejecting the assessee's contention that the value should have been taken according to the depreciation to be provided in accordance with the Indian Income -tax Act. The balance -sheet figures of the fixed assets were higher than the written down values of the assets in accordance with the provisions of the Indian Income -tax Act. That was because the assessee had provided for depreciation at rates lower than those allowed under rule 8 of the Income -tax Act. In an appeal by the assessee for the assessment year 1957 -58 the Appellate Assistant Commissioner accepted the contention of the assessee while for the assessment year 1958 -59, the Appellate Assistant Commissioner rejected such contention. Thus, both the department and the assessee had to prefer appeals for the respective years and the department's appeal was rejected by the Tribunal and the assessee's appeal was accepted. The Tribunal took the view that in both these assessment years wealth -tax assessments had been made in accordance with the global method of valuation prescribed in section 7(2)(a) of the Wealth -tax Act, 1957 (hereinafter referred to as 'the Act'). The Tribunal followed the principle laid down by this High Court in the case of Commissioner of Wealth -tax v. Indian Standard Metal Co., Ltd. It was contended on behalf of the department before the Tribunal that, apart from the figures given in income -tax records, the assessee had produced no other evidence to establish that the market value of the fixed assets would be more correctly represented by the income -tax depreciation record than the balance -sheet figures. The department also relied upon a statement in the directors report for the year 1956 -57, where the assets of the company were shown to have been insured against fire and riot risks for a sum of Rs. 1,45,00,000 even though the total value of the assets shown in the balance -sheet as on March 31,1957, was only Rs. 89,09,186. The Tribunal felt that there was no reason to hold that the assessee -company's machinery did not depreciate according to the rates laid down in the Income -tax Act. The Tribunal observed :

(2.) AS regards the insurance of the assets for the amount of Rs. 1,45,00,000 the Tribunal, inter alia, stated that no material was brought forward to establish that the assets were so heavily insured because the depreciable assets had gone up in value. On the contrary, a reference was made to the statement made in the directors report that such huge arrears of depreciation have yet to be provided and this was regards as a clear indication by the Tribunal that the company itself did not deliberately value the assets over the normal written down value. Thus, the contention of the assessee was accepted by the Tribunal. On these facts the question referred in :

(3.) THE assessee -company is a textile mill and the machinery employed in the mill was nearly more than 15 to 20 years old. Its condition was such that in recent years large additions had to be made to make the mill workable. Section 7 of the Act provides for determination of the value of the assets for the purposes of the Act. The relevant part thereof is as under :