ivil Appeal Nos 894 896 of 1971
From the Judgment and order dated the 29th January 1965 of the Calcutta High Court in Wealth Tax Matter No 2152
580 RN Sechthey and section P Nayar for the Appellant
Leila Seth Neelima Thakur Praveen Kumar and B P Maheshwari for the Respondent
The Judgment of the Court was delivered by GOSWAMI J
These appeals are by certificate of the Calcutta High Court under section 291 of the Wealth tax Act briefly the Act
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 271 of 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
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 circumstances of the case and in view of the provisions of section 72 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  
The facts appearing from the statement of the case as well as the various orders annexed therewith are briefly as follows The assessee claimed before the Wealth tax officer that in computing the wealth on the basis of 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 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 9569070  Rs 6778304 and Rs 3615678 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 section 72 a and computed the value of the assets at the figures shown in the balance sheets 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
581 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 purpose 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
At the instance of the Commissioner of Wealth tax the question set out earlier was referred to the High Court under section 271 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 Calcutta vs Tungabhadra Industries limited answered the question in the affirmative and in favour of the assessee
Hence the present appeals by certificate
The decision in the Tungabhadra Industries Limited supra which was followed by the High Court was reversed by this Court in the Commissioner of Wealth tax West Bengal II vs Tungabhadra Industries Ltd on August 8 1969
This Court following an earlier decision of this Court in Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth tax Central Calcutta accepted the contention of the Revenue
Section 7 of the Act at the material time stood as follows 1 The value of any asset other than cash for the purposes of this Act shall be estimated to be the price which in the opinion of the Wealth tax officer it would fech if sold in the open market on the valuation date
2 Notwithstanding anything contained in sub section 1 a where the assessee is carrying on a business for which accounts are maintained by him regularly the Wealth tax officer may instead of determining separately the value of each asset held by the assessee in such business determine 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 making such adjustments therein as the circumstances of the case may require  It is therefore clear that when the assessee is carrying on a business for which accounts are maintained by him regularly it is open to the Wealth tax officer to determine the net value of the assets of the business as a whole with reference to the balance sheet of such business as on valuation date and to make such adjustments therein as the circumstances 582 of the case may require
The object of the Wealth tax officer in determining the value of the assets under section 7 is to arrive at the true value of the assets of the business
If what has been shown in the balance sheet is not the true value of the assets disclosed it is open to the assessee to satisfy the Wealth tax officer by producing relevant materials that the value given of the fixed assets in the balance sheet is not the true value and therefore a reduced value of the assets should be taken into account
The onus in that case would be entirely upon the assessee to satisfy the Wealth tax officer that what is shown in the balance sheet is not the actual and true value of the assets on the valuation date
The decision will depend upon the facts and circumstances disclosed in each case
This Court in the Tungabhadra Industries case supra dealing with the same question observed as follows It is also open to the assessee to establish by acceptable reasons that the written down value of any particular asset represents the proper value of the asset on the relevant valuation date
In the absence of any material produced by the assessee to demonstrate that the written down value is the real value the Wealth tax officer would be justified in a normal case in taking the value given by the assessee itself to its fixed assets in its balance sheet for the relevant year as the real value of the assets for the purposes of the Wealth tax
It is a question of fact in each case as to whether the depreciation has to be taken into account in ascertaining the true value of the assets
The onus of proof is on the assessee who must produce reliable material to show that the written down value of the assets and not the balance sheet value is the true value
If therefore the assessee merely claims that the written down value of the assets should be adopted but fails to produce any materials to show that the written down value is the true value the Wealth tax officer is justified in rejecting the claim and adopting the values shown by the assessee himself in his balance sheet as the true value of his assets
We should have thought that the question raised in these appeals is squarely covered by the above decision
Even so Mrs Leila Seth submits that in the instant case it is admitted that adequate depreciation could not be provided for in the balance sheet in regard to the depreciable fixed assets on account of paucity of profits and hence the depreciation as provided in the balance sheet was much lower than the depreciation allowable
According to the learned counsel this fact is sufficient to displace the balance sheet as a prima facie evidence and substitute in its place the written down value and onus shifts on the Revenue to establish that paucity of profits is wrong
It is true as described in the Statement of the case that it was not disputed that adequate depreciation could not be provided for in the balance sheet on account of paucity of profits
But we are unable to hold that merely a statement to that effect is sufficient to discharge the onus which rests upon the assessee to establish that the value of the 583 assets shown in the balance sheet is not the real value of the assets as on the valuation date
If the contention of the learned counsel is accepted it will be tantamount to laying down a rule that in determination of the value of assets the written down value allowable under the Income tax Act shall always be the value of the assets
In that event there would be no necessity for any exercise by the Wealth tax officer
That is however not the intention of section 7 which clearly shows that the Wealth tax officer may make such adjustments in the value of the assets shown in the balance sheet in accordance with the requirements of the circumstances disclosed by the assessee
Those circumstances which will be disclosed by the assessee must relate to the determination of the real value of the assets irrespective of what is shown in the balance sheet if the assessee seeks a lower figure than appearing in the same
Thus onus is not discharged by merely stating that since profits in a given year are less or nil little or no provision was made for depreciation of the assets in the balance sheet
The assessee must also show further to what extent the depreciation has resulted in lowering the value of the assets compared to that mentioned in the balance sheet and whether the written down value computed under the Indian Income tax Act in fact represents the lower value
It is open as observed by this Court in the case of Tungabhadra Industries supra to establish after producing relevant material that the value of the fixed assets in the balance sheet is artificially inflated
Further in case the assessee wants the written down value to be accepted it is open to him to establish as mentioned in that case by acceptable reason that the written down value represents the proper value of the assets at the relevant date
The learned counsel also drew our attention to a decision of this Court in the Commissioner of Wealth tax West Bengal vs Aluminium Corporation of India Ltd 1 where at page 172 there is an observation that the value of the assets shown in the balance sheet is not conclusive
The value of the assets shown in the balance sheet is not conclusive in the sense that it can be demonstrated to be more or less than what is shown therein
That is the core of determination under section 72 a of the Act
The observation of this Court in the above case has to be understood only in that context
We may in this connection refer to clause b of the proviso to clause vi of sub section 2 of section 10 of the Income tax Act 1922 where a provision is made for carrying forward of depreciation allowance for the 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 the 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 the balance sheet he cannot by merely asserting that there was no profit or very little profit compel the tax authorities to discard the value mentioned in the balance sheet and to accept the written down value
The depreciation must have nexus with real value of the assets itself and the burden is upon the assessee to satisfy the Wealth tax officer by producing relevant reliable materials 584 for determination of the actual and true value of the assets
It may be that in a given year the written down value may be the real value of the assets but that cannot be the inexorable rule in determining the value of the assets under section 7 of the Act
Mrs Seth drew our attention to a decision of the Calcutta High Court in the Commissioner of Wealth tax Central Calcutta vs Mohan Lal Nopany
This was a case of break up value of certain shares of a company
There was material in that case to indicate that the balance sheet did not represent the correct value of the shares
The observation in that case must be taken to be confined to its own facts
To the extent observations are made in that contrary to the view we have taken in the matter we cannot agree with them
In the result the judgment of the High Court is set aside and the question is answered in the negative against the assessee and in favour of the Revenue
The appeals are allowed with one set of costs
PHP Appeals allowed


Summary:
The respondent assessee maintains accounts regularly
In the accounts maintained by him adequate depreciation could not be provided in the balance sheet in regard to the depreciable fixed assets on account of paucity of profits and hence the depreciation as provided in the balance sheet was very much lower than the depreciation allowable under the Income Tax Act
The assessee claimed before the Wealth Tax officer that in computing the wealth on the basis of the balance sheet he should reduce the book value of the assets by the difference between the written down value that would be determined for the purpose of Income Tax Act and the actual book figures disclosed by the balance sheet
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
The Appellate Tribunal however took a contrary view and held that where proper depreciation has not been allowed in the balance sheet it is proper to accept the written down value of the assets as worked out for the purpose of income tax assessments
On a reference made to the High Court the High Court answered the question in favour of the assessee
Allowing an appeal by certificate under section 29 1 of the Wealth Tax Act
 HELD Under Section 71 of the Wealth Tax Act the value of any asset is the market value
Section 72 provides that notwithstanding anything in section 71 where the assessee carries on business for which accounts are maintained by him regularly the Wealth Tax officer may instead of determining separately the value of each asset held by the assessee in such business determine 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 making such adjustments therein as the circumstances of the case might require
The object of the Wealth Tax officer under section 7 is to arrive at the true value of the assets of the business
If what is shown in the balance sheet is not the true value of the assets disclosed it is open to the assessee to satisfy the Wealth Tax Officer
by producing relevant materials that the value given of the fixed assets in the balance sheets is not the true value and therefore a reduced value of the assets should be taken into account
In case the assessee wants the written down value to be accepted it is open to him to establish by acceptable reason that the written down value represent the proper value of the assets at the relevant date
The onus in that case would be entirely on the assessee
Merely a statement that on account of paucity of profits adequate depreciation would not be provided for in the balance sheet is not sufficient to discharge the onus which rests upon the assessee
The judgment of the High Court is set aside and the question answered against the assessee
581E H 582A B H 583A 584C