COMMISSIONER OF WEALTH TAX Vs. P SAKUNTALAMMA SMT

JUDGEMENT

(1.) THE question for consideration relates to the valuation for the purpose of wealth-tax of a mica mine, called Baladurga Gowrishankar Mica Mine, which is one of the assets of the assessee. THE assessee was granted a lease for mining mica for twenty years by the Government in 1953 to take effect from 1954. THE land which was the subject-matter of the lease was the patta land of the assessee. In a compromise decree in 1953, the mine was valued at Rs 3,09,931. THE question of valuing this mine for the years 1959-60 to 1964-65 arose in proceedings before the Wealth-tax Officer. Ultimately, when the proceedings culminated in an appeal before the Income-tax Appellate Tribunal, the Tribunal took the value given in the compromise decree by the assessee herself, as the value of the mine at the commencement of the lease. It then directed that the value for the relevant years should be ascertained by deducting Rs. 15,000 (representing 1/20th of the total value, twenty years being the term of the lease), for every year subsequent to 1954, thus arriving at the value for each of the years from 1959-60 to 1964-65. It is this method of valuation that is adopted by the Tribunal that is challenged by the Commissioner of Income-tax in this reference It is argued by Sri Rama Rao, learned counsel for the department, that the Tribunal should have either gone into the market value of the mine under Section 7(1) of the Wealth-tax Act, or should have adopted the value given in the balance-sheet for the relevant years by the assessee herself. It is stated that in all the balance-sheets for the years of assessment, the assessee continued to show the value of the mine as Rs. 3,09,931 which was the value shown in the compromise decree. He, therefore, argued that in the absence of any attempt to fix the market value of each asset, the Tribunal should have adopted the value as given in the balance-sheet. THE Tribunal erred in not following either of these courses, but taking the value as on 1954, the year of commencement of the lease and making deduction of Rs. 15,000 for each year. We are unable to agree with this contention. Section 7(2)(a), as it stood before amendment in 1964, on which reliance is placed, is in the following terms :

(2.) UNDER this section the Wealth-tax Officer is empowered to value the business as a whole instead of following the estimate as he is required to do under Section 7(1). While valuing the business as a whole this subsection directs that he should have regard to the balance-sheet of such business as on the valuation date and also make such adjustments therein as the circumstances may require. The wording of the section itself clearly indicates that the value given in the balance-sheet is not to be taken as conclusive. All that the Wealth-tax Officer is required to do is " to have regard to the value " and he is further expected " to make such adjustments therein as the circumstances may require ", In this case it is true that the value given in the balance-sheet was Rs. 3,09,931 which was the same as the value of the lease of mine at the commencement of the lease. The Tribunal, therefore, felt, rightly in our view, that this could not be taken as the value of the mine during the entire period of the lease even though several years may elapse and considerable quantity of mica may have been worked. They, therefore, adopted the principle of deducting proportionate value for each year. It cannot be said that this method is unreasonable. As has been pointed out in Dicksee's Auditing, it is a common method to spread the net cost of the asset in equal instalments over each successive accounting period throughout its useful life. We are unable to see any error of law in the method of valuation adopted by the Tribunal,

(3.) IN Commissioner of Wealth-tax v. Aluminium Corporation of INdia Ltd, . the Supreme Court again observed that the book value of the assets in the balance sheet and not the written down value should be taken as the primary basis of valuation under Section 7(2)(a) of the Act, Here again, the Supreme Court pointed out that if any adjustment is required the Wealth-tax Officer may make such adjustments in the valuation as given in the balance-sheet as the circumstances of the case require it to be done.