HEGDE - (1.) THESE appeals arise form the decision of the High Court of Calcutta in a reference under S. 27 (1) of the Wealth Tax Act, 1957 (to be hereinafter referred to as the Act). In that decision, the High Court was requested to give its opinion on two questions of law referred to it by the Income-tax Appellate Tribunal, 'B' Bench, Calcutta, Following the decision of this Court in Commr. of Wealth-tax v. Ramaraju Surgical Cotton Mills Ltd. 63 ITR 478 =(AIR 1967 SC 509), the High Court answered the second question against the Revenue. That decision has become final. At present we are only concerned with the first question of law referred to the High Court for its opinion. That question reads: "Whether on the facts and in the circumstances of the case, the sum of lb. 8,54,948 was deductible in determining the net value of the assets of the assessee's business under section 7 (2) (a) of the Wealth -tax Act?"
(2.) THE assessee is a Sterling Company incorporated in U.K. It carries on business of supplying electric energy in the city of Calcutta. During the year 1959-60, the corresponding valuation date being 31/03/1959, the assessee showed in its balance-sheet a deduction of 1b. 8,54,948 from the value of its total assets on the ground that the sum in question represents the contribution made by the consumers for putting up service connections. THE relevant portion of the balance-sheet reads thus: THE CALCUTTA ELECTRIC SUPPLY CORPORATION LIMITED ACCOUNT OF CAPITAL EXPENDITURE AND OF DEPRECIATION For the year ended 31/03/1958. Extended to 31/03/1957 JUDGEMENT_222_3_1972Html1.htm The Wealth-tax Officer proceeded to assess the net wealth of the assessee under section 7 (2) of the Act. But he refused to grant the deduction claimed though he accepted the valuation of the assets as shown in the balance-sheet. Thereafter the assessee went up in appeal to the Appellate Assistant Commissioner of Wealth-tax. The Appellate Assistant Commissioner allowed the appeal holding that as the Wealth Tax Officer has proceeded to assess the assessee under S. 7 (2), he must accept the balance-sheet as a whole. Hence it was impermissible for him not to allow the deduction shown in the balance sheet. He accordingly deleted the amount added back by the Wealth Tax Officer. As against that order, the Department went up in appeal to the Income-tax Appellate Tribunal. The Tribunal held that although the entire undertaking of the company including portions of Mains and Service Connections put up at the expense of consumers was the property of the company, it would not be correct to include the value of such portions in the net wealth of the company computed under S. 7 (2). The Tribunal further held that the marketability of the Electric Undertaking had certain special features which had to be taken into consideration in assessing its valuation. One such special feature the Tribunal noted was that the company could not sell the undertaking except in accordance with the provisions of S. 5 of the Indian Electricity Act, 1910, and the market value of the undertaking in the event of sale had to be determined in accordance with the provisions in S. 7A of the Act. While computing the value of the undertaking under S. 7A of that Act, the value of service lines and other capital works or any part thereof which has been constructed at the expense of the consumers has to be ignored. In the result the Tribunal agreed with the conclusions reached by the Appellate Assistant Commissioner. As mentioned earlier at the instance of the Department, the Tribunal submitted two questions of law. We have already set out the question with which we are concerned in these appeals.
(3.) THE High Court answered the question referred to it for its opinion against the assessee. Section 7 of the Act deals with the mode of determination of the value of the assets. It. reads thus: "7. Value of assets how to be determined. (1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. (2) Notwithstanding anything contained in sub-section (1), (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 may be prescribed; (b) where the assessee carrying on the business, is a company not resident in India and a computation in accordance with clause (a) cannot be made by reason of the absence of any separate balance-sheet drawn up for the affairs of such business in India, the Wealth-tax Officer may take the net value of the assets of the business to India to be that proportion of the net value of the assets of the business as a whole wherever carried or determined as aforesaid as the income arising from the business in India during the year ending with the valuation date bears to the aggregate income from the business wherever arising during that year." ;