Alladi Kuppuswami, J. -
(1.) THE question for consideration relates to the valuation for the purpose of wealth-tax of a mica mine, called Baladurga Gowrishankar Mica Mine, which is one of the assets of the assessee. THE assessee was granted a lease for mining mica for twenty years by the Government in 1953 to take effect from 1954. THE land which was the subject-matter of the lease was the patta land of the assessee. In a compromise decree in 1953, the mine was valued at Rs 3,09,931. THE question of valuing this mine for the years 1959-60 to 1964-65 arose in proceedings before the Wealth-tax Officer. Ultimately, when the proceedings culminated in an appeal before the Income-tax Appellate Tribunal, the Tribunal took the value given in the compromise decree by the assessee herself, as the value of the mine at the commencement of the lease. It then directed that the value for the relevant years should be ascertained by deducting Rs. 15,000 (representing 1/20th of the total value, twenty years being the term of the lease), for every year subsequent to 1954, thus arriving at the value for each of the years from 1959-60 to 1964-65. It is this method of valuation that is adopted by the Tribunal that is challenged by the Commissioner of Income-tax in this reference It is argued by Sri Rama Rao, learned counsel for the department, that the Tribunal should have either gone into the market value of the mine under Section 7(1) of the Wealth-tax Act, or should have adopted the value given in the balance-sheet for the relevant years by the assessee herself. It is stated that in all the balance-sheets for the years of assessment, the assessee continued to show the value of the mine as Rs. 3,09,931 which was the value shown in the compromise decree. He, therefore, argued that in the absence of any attempt to fix the market value of each asset, the Tribunal should have adopted the value as given in the balance-sheet. THE Tribunal erred in not following either of these courses, but taking the value as on 1954, the year of commencement of the lease and making deduction of Rs. 15,000 for each year. We are unable to agree with this contention. Section 7(2)(a), as it stood before amendment in 1964, on which reliance is placed, is in the following terms :
" 7. (2) (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."
(2.) UNDER this section the Wealth-tax Officer is empowered to value the business as a whole instead of following the estimate as he is required to do under Section 7(1). While valuing the business as a whole this subsection directs that he should have regard to the balance-sheet of such business as on the valuation date and also make such adjustments therein as the circumstances may require. The wording of the section itself clearly indicates that the value given in the balance-sheet is not to be taken as conclusive. All that the Wealth-tax Officer is required to do is " to have regard to the value " and he is further expected " to make such adjustments therein as the circumstances may require ", In this case it is true that the value given in the balance-sheet was Rs. 3,09,931 which was the same as the value of the lease of mine at the commencement of the lease. The Tribunal, therefore, felt, rightly in our view, that this could not be taken as the value of the mine during the entire period of the lease even though several years may elapse and considerable quantity of mica may have been worked. They, therefore, adopted the principle of deducting proportionate value for each year. It cannot be said that this method is unreasonable. As has been pointed out in Dicksee's Auditing, it is a common method to spread the net cost of the asset in equal instalments over each successive accounting period throughout its useful life. We are unable to see any error of law in the method of valuation adopted by the Tribunal,
Sri Rama Rao, learned counsel for the department, drew our attention to a decision of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax, , where the Supreme Court pointed out that as no one could know better the value of the assets than the assessee himself, the Wealth-tax Officer is justified in accepting the value of the assets at the figure shown by the assessee in the balance-sheet. It is open to the assessee to convince the authorities that that figure was inflated for acceptable reasons.
Sri Rama Rao contended that in this case no attempt was made by the assessee at all to show as to whether the figure of Rs. 3,09,931 mentioned in all the balance-sheets was an inflated figure and if so, whether it was clone for any acceptable reasons. It is true that prima facie the statement made by the assessee in the balance-sheet may be taken as correct by the Wealth-tax Officer, but under the very terms, under Section 7(2)(a), the Wealth-tax Officer is expected not only to have regard to the figure mentioned in the balance-sheet, but also to make adjustments in arriving at the true value. In this case, the Tribunal, on appeal, made such adjustments by deducting the proportionate amount of Rs. 15,000 from the amount shown in the balance-sheet, which really represented the value of the mine at the beginning of the lease. The Supreme Court itself pointed out in the same decision that it was open to the Wealth-tax Officer to reject the figure given by the appellant and to adopt another figure, if he was satisfied that the figure given by the appellant was wrong.
(3.) IN Commissioner of Wealth-tax v. Aluminium Corporation of INdia Ltd, . the Supreme Court again observed that the book value of the assets in the balance sheet and not the written down value should be taken as the primary basis of valuation under Section 7(2)(a) of the Act, Here again, the Supreme Court pointed out that if any adjustment is required the Wealth-tax Officer may make such adjustments in the valuation as given in the balance-sheet as the circumstances of the case require it to be done.
In Aluminium Corporation of India Ltd. v. Commissioner of Wealth-tax, the Calcutta High Court had occasion to deal with the interpretation of Section 7(2)(a) of the Wealth-tax Act. They pointed out that all that Section 7(2)(a) says is that instead of determining separately the value of each asset, the officer may determine the net value of the business as a whole having regard to the balance-sheet of such business. They observed that this is not the same as determining the value on the basis of the balance-sheet, or to say that the balance-sheet is conclusive one way or another. The words "having regard to the balance-sheet" show that it may give some indication and some guide to the Wealth-tax Officer in determining the net value of the business as a whole, but in determining even the net value of the business as a whole, the Wealth-tax Officer is not bound by the assets stated in the balance-sheet, nor is the assessee bound. Earlier, they pointed out that it is the market value which is the object to achieve under Section 7 of the Wealth-tax Act. The items shown in the balance-sheet are not necessarily based on the market value although they may in some way be connected with the market value. That is why, in our view, the section provides for necessary adjustments being made by the Wealth-tax Officer.;