COMMISSIONER OF WEALTH TAX Vs. ANDHRA SUGARS LIMITED

JUDGEMENT

(1.) The Income-tax Appellate Tribunal under the Wealth-tax Act has referred the following question of law for our consideration under section 27(1) of the Wealth-tax Act, 1957, hereinafter referred to as the Act :

(2.) The facts as set out in the statement of the case are as follows : The assessee is a public limited company and for the year of assessment it returned a total wealth of Rs. 24,16,488 and claimed a deduction of Rs. 18,14,564 towards the difference between the depreciation allowed under the Income-tax Act and the depreciation deduction by the assessee from the value of its assets according to the method of accounting followed by it. The Wealth-tax Officer did not admit the claim of the assessee to deduct the aforesaid amount towards depreciation but what he adopted is what is known as the global valuation method under section 7(2) (a) of the Act by determining the net value of assets of the company as shown in the balance-sheet. The assessees contention was that apart from the depreciation which has been deducted in computing the net asset for the purpose of the balance-sheet, it is entitle to a further deduction which is the balance of the amount remaining after the deduction of the depreciation from the total amount of the depreciation allowed by the income-tax authorities for the purpose of the written down value. This contention was rejected. The assessee appealed and the Appellate Assistant Commissioner also agreed with the Wealth-tax Officer. The Appellate Tribunal, however, thought that under section 7(2) (a) of the Act, in the case of a business for which accounts are maintained by the assessee regularly, the Wealth-tax Officer has been given the discretion, instead of determining separately the value of each asset held by the assessee in such business, to compute 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 make such adjustments therein as the circumstances of the case may warrant. It view of this, the Tribunal directed that, in computing the net value of the assets for wealth-tax purposes, the Wealth-tax Officer should deduct the aggregate sum of normal depreciation inclusive of the aggregate sum of allowances for extra shift that had been allowed up to the chargeable accounting period from the book vale of the assets. It is with respect to this direction that the reference has been made.

(3.) It would appear from a reading of sub-section (1) and sub-section 2(a) that the Wealth-tax Officer has a discretion either to value each of the assets of the company or take the net value of the assets as a whole having regards to the balance-sheet of such business subject of to such adjustments as he may consider necessary. If he follows the first of the methods, viz., by valuing each of the assets, he will have to determine the market value of that asset on the valuation date. If he follows the second of the methods, he will have to take the net value of the assets given in the balance-sheet and make such adjustment as the circumstance of the case may require. In doing so, the Wealth-tax Officer has to take into consideration the contentions and objections, if any, of the assessee in respect of the proposed adjustment. It may be observed that there is nothing made on the basis of allowances and deductions given under the Income-tax Act or under any other Act. The main object of section 7, as it appears to us, is to evaluate the assets as on the valuation date and that evaluation should be on the basis of the market value.