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1976 Supreme(SC) 85
SUPREME COURT OF INDIA
H.R. KHANNA AND P.K. GOSWAMI, JJ.
Commissioner of Wealth Tax, Calcutta, Appellant
Versus
M/s. Hindustan Motors Ltd, Respondent.
Civil Appeals Nos. 894-896 of 1971,
D/- 10-3-1976.
Advocates appeared
M/s. R. V. Sachthey and S. P. Nayar Advocates, for Appellant; Mrs. 143 Leila Seth, Mrs. Neelima Thakur, Advocates and Mr. Parveen Kumar, Advocate for Mr. B. P. Maheshwari, Advocate, for Respondent.
B.P.MAHESHVARI, LEILA SETH, NILIMA THAKUR, PARVIN KUMAR, R.N.SACH, S.P.NAIR
Headnote:
Wealth-tax Act – Section 29(1),27(1),7(2),7(2)(a) - Indian Income-tax Act, 1922 – Section 10(2)(vi) - Reduce book value of assets – Depreciation - Assessee claimed before Wealth-tax Officer that in computing wealth on basis of balance-sheet the Income-tax Officer should reduce the book value of assets by the difference between written down value that would be determined for purpose of Income-tax Act and the actual book figures disclosed by balance-sheet - Difference between the book value and written down value amounted to certain sum for the three years under reference - Only contention common to the three appeals related to valuation of the fixed assets of the assessee - Wealth-tax Officer proceeded under Sec. 7 (2) (a) and computed value of the assets at the figure shown in the balance-sheet on the material valuation dates - Assessee however, contended that regard being had to depreciable assets the written down value determined for purpose of income-tax assessment should be taken to be the value of the assets for purpose of inclusion in the net wealth and not the value shown in respective balance-sheets - It was not disputed that adequate depreciation could not be provided for in balance-sheets in regard to the depreciable fixed assets on account of paucity of profits and hence depreciation as provided for in books was very much lower than depreciation allowable under the provisions of the Indian Income-tax Act - Wealth-tax Officer rejected the contention of assessee and estimated the net value of the assets as shown in the balance-sheets for respective years - Appellate Assistant Commissioner confirmed the orders of the Wealth-tax Officer in appeals filed by assessee- Whether the depreciation has to be taken into account in ascertaining true value of the assets – Held, court may in this connection refer to clause (b) of proviso to clause (vi) of sub-section (2) of Section 10 of the Indian Income-tax Act, 1922, where a provision is made for carrying forward of depreciation allowance for following year or years where full effect cannot be given to the allowance in a particular year owing to there being no profits or gains chargeable for that year or owing to profits and gains chargeable being less than the allowance - If an assessee chooses to carry forward the depreciation allowance and shows the value of the assets at a particular figure in balance-sheet, he cannot by merely asserting that there was no profit or very little profit compel the tax authorities of discard value mentioned in the balance-sheet and to accept the written down value - Depreciation must have nexus with the real value of the assets itself and the burden is upon the assessee to safety the Wealth-tax Officer by producing relevant reliable materials for determination of the actual and true value of the assets - It may be that in a given year written down value may be the real value of the assets but that cannot be inexorable rule in determining the value of the assets under Section 7 of the Act - In the result the judgment of the High Court is a set aside and question is answered in the negative, against the assessee and in favour of the revenue - Appeals are allowed.
Judgment
GOSWAMI, J :- These appeals are by certificate of the Calcutta High Court under Section 29 (1) of the Wealth-tax Act (briefly the Act).
2. The assessment years of the respondent-company (hereinafter to be described as the assessee) involved in the composite reference to the High Court under Section 27 (1) to the Act are 1957-58, 1958-59 and 1959-60, for which the corresponding valuation dates are 31st March, 1957, 31st March, 1958, and 31st March, 1959.
3. The only common question of law which was referred to the High Court appertaining to all the three assessment years is in the following terms :
"Whether, on the facts and in the circumstancs of the case, and in view of the provisions of Sec. 7 (2) of the Wealth-tax Act, an adjustment could be made in ascertaining the net value of the depreciable assets of the assessee-company by substituting the written down value of the assets computed under the Indian Income-tax Act for the value as shown in the balance-sheet?"
4. The facts appearing from the statement of the case as well as the various order annexed therewith are briefly as follows :
The assessee claimed before the Wealth-tax Officer that in computing the wealth on the basis of the balance-sheet the Income-tax Officer should reduce the book value of the assets by the difference between the written down value that would be determined for the purpose of the Income-tax Act and the actual book figures disclosed by the balance-sheet. The difference between the book value and the written down value amounted to Rs. 95,69,070, Rupees 67,78,304 and Rs. 36,15,678, respectively for the three years under reference. The only contention common to the three appeals related to the valuation of the fixed assets of the assessee. The Wealth-tax Officer proceeded under Sec. 7 (2) (a) and computed the value of the assets at the figure shown in the balance-sheet on the material valuation dates. The assessee however, contended that regard being had to the depreciable assets the written down value determined for the purpose of income-tax assessment should be taken to be the value of the assets for the purpose of inclusion in the net wealth and not the value shown in the respective balance-sheets. It was not disputed that adequate depreciation could not be provided for in the balance-sheets in regard to the depreciable fixed assets on account of paucity of profits and hence the depreciation as provided for in the books was very much lower than the depreciation allowable under the provisions of the Indian Income-tax Act. The Wealth-tax Officer rejected the contention of the assessee and estimated the net value of the assets as shown in the balance-sheets for the respective years. The Appellate Assistant Commissioner confirmed the orders of the Wealth-tax Officer in the appeals filed by the assessee.
5. The Appellate Tribunal, however, took a contrary view and held that :
".....in all such cases where proper depreciation has not been allowed for in the balance-sheet for any reason whatsoever, it is proper to accept the written down value of the assets as worked out for the purposes of the income-tax assessments."
The Tribunal, therefore, directed the Wealth-tax Officer to adopt the written down value of the assets as the value thereof for inclusion in the net wealth for all the years under reference.
6. At the instance of the Commissioner of Wealth-tax the question set out earlier was referred to the High Court under Sec. 27 (1) of the Act. The High Court by the impugned judgment of January 29, 1965 following another decision delivered on the same day in Commissioner of Wealth-tax v. Tungabhadra Industries Ltd., (1966) 60 ITR 447 (Cal) answered the question in the affirmative and in favour of the assessee. Hence the present appeals by certificate.
7. The decision in the Tungabhadra Industries Ltd., (1966) 60 ITR 447 (Cal)), which was followed by the High Court, was reversed by this Court in Commr. of Wealth-tax v. Tungabhadra Industries Ltd., ((1970)
