Case: M/s. Juggi Lal Kamlapat Vs. Wealth Tax Officer

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 may be prescribed. (3) Notwithstanding any thing contained in sub section (1), where the valuation of any asset is referred by the Wealth tax officer to the Valuation officer under section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date, or, in the case of an asset being a house referred to in sub section (4), the valuation date referred to in that sub section." Rules 2A and 2B run thus:"Determination of the net value of assets of business as a whole. 2A. Where the Wealth tax officer determines under clause (a) of sub section (2) of section 7 the net value of the assets of the business as a whole having regard to the balance sheet of such business, he shall make the adjustments specified in rules 2B, 2C, 2D, 2E, 2F and 2G." "Adjustments in the value of an asset disclosed in the balance sheet.2B. (1) The value of an asset disclosed in the Balance sheet shall be taken to be- (a) in the case of an asset on which depreciation is admissible, its written down value; (b) in the case of an asset on which no depreciation is admissible, its book value; (c) in the case of closing stock, its value adopted for the purposes of assessment under the Income tax Act, Act, 1961, for the previous year relevant to the corresponding assessment year. (2) Not withstanding any thing containing in sub- rule (1) where the market value of an asset exceeds its written down value or its book value or the value adopted for purposes of assessment under the Income tax Act, 1961, as the case may be, by more than 20 per cent, the value of that asset shall, for the purposes of rule 2A, be taken to be its market value." 7. On a fair reading of the aforesaid provisions it will appear clear that the primary method of determining the value of assets for the purposes of the Act is the one indicated in sec. 7 (1), inasmuch as it provides that the value of any assets, other than cash, for the purposes of this Act shall be estimated to be its market price on the valuation date. Then comes sub-sec. (2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value 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 may be prescribed. It is true that sub sec. (2) commences with a non obstante clause, but even so, the provision itself is an enabling one conferring discretion on the Wealth tax officer to determine the net value of the assets of the business as a whole having regard to its balance sheets as on the valuation date, instead of proceeding under sub sec. (1). In other words, it is optional for the Wealth tax officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined. Thirdly, even when he proceeds und er sub sec. (2) he has to determine the net value of the business as a whole having regard to the balance-sheet of such business as on the valuation date; the phrase "having regard to the balance sheet of such business" as judicially interpret ed means that the Wealth tax officer has to take into consideration or account the balance-sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein . Fourthly, the said sub- section also says that the Wealth tax officer has to "make such adjustments therein as may be prescribed" and in this behalf Rule 2A and 2B already quoted above indicate what adjustments the Wealth-tax officer has to make while determining the net value of the business as a whole. Particularly sub-rule (2) of Rule 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 per cent, the value o f that asset for the purposes of Rule 2A shall be taken to be its market value. In other words, it is clear that even where the Wealth-tax officer has resorted to sec. 7 (2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance-sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth-tax officer has to adopt the market value of such assets for the purposes of this Act. This is apart from the position that the resort to sec. 7 (2) itself is discretionary and optional, the provision being an enabling one.Since in the instant case the Wealth tax officer was of the view that the book values of specific house properties as indicated in the returns filed by appellant No. 2 were far below their market values, he was justified in making a reference to the Valuation officers under sec. 16A of the Act and the notices issued by the Valuation officers in pursuance of such reference were also valid.

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

Explanation:
0[ds]On a fair reading of the aforesaid provisions it will appear clear that the primary method of determining the value of assets for the purposes of the Act is the one indicated in sec. 7 (1), inasmuch as it provides that the value of any assets, other than cash, for the purposes of this Act shall be estimated to be its market price on the valuation date. Then comes sub-sec. (2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value 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 may be prescribed. It is true that sub sec. (2) commences with a non obstante clause, but even so, the provision itself is an enabling one conferring discretion on the Wealth tax officer to determine the net value of the assets of the business as a whole having regard to its balance sheets as on the valuation date, instead of proceeding under sub sec. (1). In other words, it is optional for the Wealth tax officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined. Thirdly, even when he proceeds und er sub sec. (2) he has to determine the net value of the business as a whole having regard to the balance-sheet of such business as on the valuation date; the phrase "having regard to the balance sheet of such business" as judicially interpret ed means that the Wealth tax officer has to take into consideration or account the balance-sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein . Fourthly, the said sub- section also says that the Wealth tax officer has to "make such adjustments therein as may be prescribed" and in this behalf Rule 2A and 2B already quoted above indicate what adjustments the Wealth-tax officer has to make while determining the net value of the business as a whole. Particularly sub-rule (2) of Rule 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 per cent, the value o f that asset for the purposes of Rule 2A shall be taken to be its market value. In other words, it is clear that even where the Wealth-tax officer has resorted to sec. 7 (2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance-sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth-tax officer has to adopt the market value of such assets for the purposes of this Act. This is apart from the position that the resort to sec. 7 (2) itself is discretionary and optional, the provision being an enabling one.Since in the instant case the Wealth tax officer was of the view that the book values of specific house properties as indicated in the returns filed by appellant No. 2 were far below their market values, he was justified in making a reference to the Valuation officers under sec. 16A of the Act and the notices issued by the Valuation officers in pursuance of such reference were also valid.