Case: Commissioner Of Wealth Tax Vs. Hindustan Motors Limited

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 prim a 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. 8. 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 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 v. 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 7(2) (a) of the Act. The observation of this Court in the above case has to be under stood only in that context. 9. 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 b y producing relevant reliable materials 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 v. 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. 10.

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

Explanation:
1[ds]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 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 v. 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 7(2) (a) of the Act. The observation of this Court in the above case has to be under stood only in that contextWe 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 b y producing relevant reliable materials 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 v. 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.