COMMISSIONER OF GIFT TAX Vs. PARSHVA PROPERTIES LIMITED

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Patna Bench, Patna, has stated the following questions under Section 27(1) of the Wealth-tax Act) 1957, for the opinion of this court:

(2.) THE assessee is a limited company and carries on its business in the name of Messrs. Parshva Properties Limited. THE assessee was engaged in the extraction of limestone, share dealings and held immovable properties. THE assessee submitted return of its net wealth together with the balance-sheet for the purpose of assessment of wealth-tax under Section 14(2) of the Wealth-tax Act, 1957 (hereinafter referred to as the Act), for the assessment years 1957-58 (Tax Case No. 44 of 1966), 1958-59 (Tax Case No. 45 of 1966) and 1959-60 (Tax Case No. 46 of 1966) and the corresponding valuation dates were January 31, 1957, 1958 and 1959, respectively. Under Section 211 of the Companies Act, every company is required to give a true and fair view of the state of affairs in the balance-sheet of the company at the end of the financial year. Rule 3(b) of the Wealth-tax Rules enjoins on the assessee which carries on business to furnish, along with the return of net wealth, a copy of the balance-sheet or a true balance as on the valuation date or on the date of closing of accounts together with a copy of the auditor's report, if any.

(3.) THE assessee in all the three cases filed returns of the net wealth of the company along with the balance-sheet as provided in Rule 3(b) of the Wealth-tax Rules, 1957. THE Wealth-tax Officer found that the assessee was possessed of fixed assets. No evidence of the value of each item of the assets was produced before him. In these circumstances, in his opinion, it was not possible for him to proceed under Section 7(1) of the Act and hence he adopted the other alternative method of valuation by adopting the global value of the net wealth under Section 7(2)(a) of the Act. He also allowed some deductions. THE assessee contended that with regard to the value of the house properties valuation should be made by taking 20 times of the annual municipal valuation which represented the rental which the properties fetched in a particular year, but the officer found it unacceptable in the circumstances of the case, because the properties in the office area might fetch more and in a residential area the rental might be low, but the value of the properties in the residential area might be very high. THE house in question is situated in the best residential locality in Calcutta and is fitted with certain latest luxurious amenities which are not available in an ordinary house. In his opinion, in a previous income-tax case of the assessee, municipal valuation in this case was considered to have no relation either to the annual costs of the house or to its value at a particular date. Hence, he thought that the value of the properties as given in the balance-sheet was an ascertained fact and, therefore, he determined the net wealth on the valuation of the properties as given in the assessee's balance-sheet. THE Income-tax Appellate Tribunal, however, took a different view. In the opinion of the Tribunal under both Sub-section (1) and Sub-section (2)(a) of Section 7 the market value of the properties is to be determined. According to it, the assessee was engaged in extraction of limestone or share-dealings business and hence the house properties could not be the assets of the business and, therefore, the house properties could not be valued under Section 7(2)(a) of the Act. Hence the assets had to be valued under Sub-section (1) of Section 7 of the Act. THEreafter, it proceeded to determine valuation of the house properties as determined in the previous income-tax case of the assessee after making adjustments in respect of the municipal tax, collection charges and other things. With regard to the lands which were not appurtenant to the house they were valued on the basis of proportionate valuation of the lands given in the balance-sheet. That is, in determining the valuation of the land, the Tribunal based its decision partly on the valuation of the house as determined previously and partly on the valuation as given in the balance-sheet. With regard to the other fixed assets the Tribunal determined the valuation on the basis of valuation as given in the balance-sheet.