Case: Calcutta Electric Supply Corporation Vs. Commissioner Of Wealth Tax, West Bengal

circumstance. The only thing relevant for the purpose of the Act is that the assessee should be the owner of the assets in question on the relevant valuation date. The Act does not concern itself with the mode in which those assets were acquired. It is immaterial for the purpose of the Act whether the assessee acquired those assets from his own money or with the assistance of others. The balance-sheet shows those service connections as the assets of the assessee. It was not said that they were the assets of the consumers on the relevant valuation date. The admission in the balance-sheet (profit and loss accounts) is not rebutted by any other evidence. Hence the Wealth-tax Officer was justified in holding that they were assessees assets. The Tribunal was impressed by the fact that if and when the undertaking is sold, the assessee will not get any price for the service connections in view of S. 7A (2) of the Indian Electricity Act, 1910. Sec. 7A provides for the determination of the purchase price on revocation of licence under S. 4. Whenever a licence of a licencee under the Indian Electricity Act is revoked under S. 4, it is open to the State Government to acquire the undertaking itself or to direct the licensee to sell the undertaking to one or the other of the authorities or person designated therein. When a sale in pursuance of such a direction is effected, valuation of the undertaking is made in accordance with Section 7A. Section 7A reads:"7A . (1) Where an undertaking of a licensee, not being a local authority, is sold under sub-section (1) of section 5, the purchase price of the undertaking shall be the market value of the undertaking at the time of purchase or where the undertaking has been delivered before the purch.ase under sub-s- (3) of that section, at the time of the delivery of the undertaking and if there is any difference or dispute regarding such purchase price, the same shall be determined by arbitration.(2) The market value of an undertaking for the purpose of sub-section (1) shall be deemed to be the value of all lands, buildings, works, materials and plant of the licensee suitable to, and used by him, for the purpose of the undertaking, other than (i) a generating station declared by the licensee not to form part of the undertaking for the purpose of purchase and (ii) service-lines or other capital works or any part thereof which have been constructed at the expense of consumers, due regard being had to the nature and condition for the time being of such lands, buildings, works, materials and plant and the state of repair thereof and to the circumstance that they are in such position as to be ready for immediate working and to the suitability of the same for the purpose of the undertaking, but without any addition in respect of compulsory purchase or of goodwill or of any profits which may be or might have been made from the undertaking or of any similar consideration.(3) Where an undertaking of a licensee, being a local authority, is sold under sub-section (1) of Section 5, the purchase price of the undertaking shall be such as the State Government, having regard to the market value of the undertaking at the date of delivery of the undertaking, may determine.(4) Where an undertaking of a licensee is purchased under section 6, the purchase price shall be the value thereof as determined in accordance with the provisions of sub-sections (1) and (2):Provided that there shall be added to such value such percentage, if any not exceeding twenty per centum of that value as may be specified in the license on account of compulsory purchase."9. It is true that in view of S.7A (2) of the Electricity Act, is computing the market value of the undertaking sold under sub-s. (1) of S. 5 of that Act, the value of service lines which had been constructed at the expense of the consumer will not be taken into consideration. The reason for this provision is obvious. It will be the duty of the new licensee to not only maintain and repair those lines but also to replace them when they become unserviceable. But S. 7 of the Electricity Act only deals with sales under S. 5 (1) of the Act. But if a sale is effected under S.8, the licensee shall have the option to dispose of all land, building, works, material and plants belonging to the undertaking in such manner as he may think fit. In such sales, it is open to him to value the service connections put up at the expense of the consumers and add the same in computing the sale price. It is clear from Ss. 5 to 8 of the Electricity Act that the licensee is the owner of the service connections put up at the expense of the consumer. If that is not so, there was no purpose in mentioning in Section 7A that while determining the market value of the undertaking, the value of the service connections shall not be taken into consideration. Further S. 8 would not have permitted the licensee to pocket the value of those service connections. The fact that the value of one or more of the assets of an undertaking will not be taken into consideration in computing the value of an undertaking when sold under compulsion of, law because of some statutory provision does not by itself show that it is not a valuable asset. Section 7 of the Act does not take note of hypothetical possibilities in the matter of valuation of the assets. It merely concerns itself as to what is the true market value of the assets in question on the valuation date. So far as the market value of the asset with which we are concerned in this case there is no difficulty. We have the assessees own admission in its balance sheet.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]7. As seen earlier, the Wealth-tax Officer had determined the value of the assets under S. 7 (2). There is no dispute that the assessee is maintaining regular accounts for the business it is carrying on. Therefore it was open to the Wealth-tax Officer, instead of determining separately the value of each asset held by the assessee as a part of its business, to determine the net value of the assets of the business as a whole as on the valuation date having regard to the balance-sheet of such business. This section nowhere says that the Wealth-tax Officer while proceeding under S. 7 (2) is bound to accept every entry in the balance-sheet. What the section permits the Wealth-tax Officer is that instead of separately valuing each asset forming part of the business, he may determine the net value of the business as a whole having regard to the balance-sheet of such business as on the valuation date. In other words S. 7 (2) authorises the Wealth-tax Officer to accept the valuation of the assets of a business as shown in the balance sheet of the company. He is not bound to accept any deduction shown in the balance sheet if he comes to the conclusion that the said deduction was impermissible. Section 7 (2) does not say that the Wealth-tax Officer should accept the balance-sheet as a whole or reject it as a whole. He is merely authorised to accept the value of the assets of the business as shown in the balance-sheet. In the present case, the Wealth-tax Officer has accepted the value of the assets of the business as shown in the balance-sheet. But he has not accepted the fact that the service lines are not owned by the assessee.8. We shall now proceed to consider whether the service lines which were constructed at the, expense of consumers are the assets of the company. In the balance-sheet they are shown as the assets of the company. There was no material before the authorities under the Act to hold that they were not the assets of the company. The fact that those assets were acquired by the company by utilizing the contributions made by the consumers is a wholly irrelevant circumstance. The only thing relevant for the purpose of the Act is that the assessee should be the owner of the assets in question on the relevant valuation date. The Act does not concern itself with the mode in which those assets were acquired. It is immaterial for the purpose of the Act whether the assessee acquired those assets from his own money or with the assistance of others. The balance-sheet shows those service connections as the assets of the assessee. It was not said that they were the assets of the consumers on the relevant valuation date. The admission in the balance-sheet (profit and loss accounts) is not rebutted by any other evidence. Hence the Wealth-tax Officer was justified in holding that they were assessees assets. The Tribunal was impressed by the fact that if and when the undertaking is sold, the assessee will not get any price for the service connections in view of S. 7A (2) ofthe Indian Electricity Act, 1910. Sec. 7A provides for the determination of the purchase price on revocation of licence under S. 4. Whenever a licence of a licencee under the Indian Electricity Act is revoked under S. 4, it is open to the State Government to acquire the undertaking itself or to direct the licensee to sell the undertaking to one or the other of the authorities or person designated therein. When a sale in pursuance of such a direction is effected, valuation of the undertaking is made in accordance with Section 7A.It is true that in view of S.7A (2) of the Electricity Act, is computing the market value of the undertaking sold under sub-s. (1) of S. 5 of that Act, the value of service lines which had been constructed at the expense of the consumer will not be taken into consideration. The reason for this provision is obvious. It will be the duty of the new licensee to not only maintain and repair those lines but also to replace them when they become unserviceable. But S. 7 of the Electricity Act only deals with sales under S. 5 (1) of the Act. But if a sale is effected under S.8, the licensee shall have the option to dispose of all land, building, works, material and plants belonging to the undertaking in such manner as he may think fit. In such sales, it is open to him to value the service connections put up at the expense of the consumers and add the same in computing the sale price. It is clear from Ss. 5 to 8 of the Electricity Act that the licensee is the owner of the service connections put up at the expense of the consumer. If that is not so, there was no purpose in mentioning in Section 7A that while determining the market value of the undertaking, the value of the service connections shall not be taken into consideration. Further S. 8 would not have permitted the licensee to pocket the value of those service connections. The fact that the value of one or more of the assets of an undertaking will not be taken into consideration in computing the value of an undertaking when sold under compulsion of, law because of some statutory provision does not by itself show that it is not a valuable asset. Section 7 of the Act does not take note of hypothetical possibilities in the matter of valuation of the assets. It merely concerns itself as to what is the true market value of the assets in question on the valuation date. So far as the market value of the asset with which we are concerned in this case there is no difficulty. We have the assessees own admission in its balance sheet.