P.B.Mukharji, Actg. C.J. -
(1.) This wealth-tax reference proceeding is one more example showing the tussle between the balance-sheet value and the written down value.
(2.) The statement of the case shows the following facts: The assessee is a public limited company doing business in the manufacture of aluminium goods. The assessment year is 1957-58. The material valuation date is 31st March, 1957. The fixed assets of the assessee-company are land, buildings, plant and machinery. They were valued at Rs. 2,19,982, Rs. 36,13,906 and Rs. 93,78,868, respectively, as on the 31st March, 1955, which was two years before the valuation date. This valuation did not take into account depreciation for the year ending 31st March, 1955, in respect of the buildings, plant and machinery. If that depreciation is taken into account the value of the respective assets was Rs. 34,93,999 and Rs. 88,07,047. One year later, i.e., on the 31st March, 1956, the same assets were valued at respectively Rs. 4,99,540, Rs. 1,08,40,840 and Rs. 1,89,23,449. That valuation also was without taking into consideration the depreciation for the year ending 31st March, 1956, in respect of buildings, plant and machinery. If that depreciation is taken into account then the value of those assets was Rs. 1,06,58,717 and Rs. 1,84,21,064. The increase in the value of these assets alter making allowance for small additions made in the assets was due to the revaluation of the assets made by the company before the 31st March, 1956. The increase in the value on account of revaluation was to the tune of Rs. 2,83,871, Rs. 72,31,204 and Rs. 98,67,481 in the case of land, buildings and machinery, respectively.
(3.) The directors of the company in their annual report for the year ending 31st March, 1956, noted that these assets had been revalued so as to indicate a true picture of their value and that the revaluation had given due consideration to the depreciation which the buildings, plant and machinery had already been subjected to. A corresponding capital reserve on account of Rs. 1,73,82,556 was created against the increase in the value of the assets. In the balance-sheet as on the 31st March, 1957, that is, on the valuation date, the value of these assets was, respectively, Rs. 5,10,657, Rs. 1,04,74,800 and Rs. 1,78,32,641. The difference in the value of the assets between these two dates, one on the 31st March, 1957, and the other on the 31st March, 1956, was only due to the additions to the assets and some depreciation provided for the year in question. This increase in the value of the assets effected before the 31st March, 1956, was carried over to 31st March, 1957, that is, the valuation date, and the capital reserve aforesaid continued to remain unaltered. The balance-sheets of the company as on the 31st March, 1955, 3Ist March, 1956, and 31st March, 1957, are made part of the statement of the case.;