T.P. Mukerjee, J. - (1.) THIS is a reference made by the Appellate Tribunal at the instance of the assessee under Section 27(1) of the Wealth-tax Act on the following question : "Whether, in the fact and circumstances of the case, the movable assets have been correctly valued at Rs. 4,70,574 ?"
(2.) THE material facts are these : THE assessee is a Hindu undivided family carrying on money-lending and other businesses. For the relevant assessment year 1959-60, the assessee closed its accounts on Asharh Sudi 9, Samvat 2015, which is the valuation date. THE Wealth-tax Officer made an assessment of the net wealth of the assessee as on the aforesaid valuation date estimating the value thereof at Rs. 5,33,067. THE Wealth-tax Officer adopted the value of the total assets of the business as disclosed in the balance-sheet, as on the aforesaid valuation date, at Rs. 6,70,617. THE Wealth-tax Officer allowed certain deductions and computed the value of the movable assets at Rs. 4,70,574. THE amount included a sum of Rs. 2,94,556 which represented the amount invested by the assessee family in its money-lending business. THE Wealth-tax Officer, it appears, estimated the value of the investments at par and included the whole amount in the value of the movable assets computed by him at Rs. 4,70,574. THE assessee preferred an appeal to the Appellate Assistant Commissioner of Wealth-tax in which several grounds were taken. One of the grounds was that the Wealth-tax Officer was not justified in determining the value of the investments in business at the figure mentioned in the balance-sheet. THE Appellate Assistant Commissioner, however, rejected this ground and dismissed the appeal. The assessee then came to the Tribunal in second appeal. The only contention which was urged before the Appellate Tribunal appears to have been that the Wealth-tax Officer was wrong in evaluating the total investments in the money-lending business at Rs. 2,94,556 which was the value shown in the balance-sheet of the business. On behalf of the assessee it was pleaded that the investments made in the business of money-lending could not be sold in the open market at their face value and it was argued that the Wealth-tax Officer should estimate the value of such assets at the price which, in his opinion, they would fetch if sold in the open market The attention of the Tribunal was invited to the provisions of Section 7(1) of the Wealth-tax Act in this context. The Tribunal analysed the provisions of sections 7(1) and 7(2) of the Act and held that the two sections referred to different categories of assets. Section 7(2) applies, in the opinion of the Tribunal, to the class of assets mentioned therein, while for all other assets, the provisions of Section 7(1) would apply. The Tribunal observed that where an assessee carries on a business for which accounts are maintained regularly, the assets of the business shall be determined with reference to the balance-sheet figures. The relevant observation of the Tribunal may be reproduced below : "Where the assessee carries on a business for which accounts are maintained regularly, Section 7(2) says that the Wealth-tax Officer may determine the net value of all the business having regard to the balance-sheet of the said business. Even though the word used here is 'may', the class of assessees mentioned in Section 7(2) is a separate category of assessees and it must be held that the statute intends that for such types of assessee the value of assets shall be determined with reference to the balance-sheet figures. For all other cases the market value will be taken. This interpretation of the provisions of Section 7(1) and Section 7(2) are laid down in the section itself and the Wealth-tax Officer is not vested with any absolute or arbitrary discretion." Observing as above, the Tribunal found that the assessee was carrying on a business for which it was maintaining its accounts regularly. The Tribunal also noticed that the value of the assets invested in the money-lending business was shown in the balance-sheet at Rs. 2,94,556. The Tribunal, therefore, held that the departmental authorities were justified in taking this amount for the purpose of valuation of the investments in the money-lending business.
(3.) AT the instance of the assessee the Tribunal has referred the question quoted above for the opinion of this court. In the first place, the question as drafted by the Tribunal is erroneous, because, as would appear from the appellate order of the Tribunal, the only dispute related to the valuation of the investment in the money-lending business. The Wealth-tax Officer had adopted the value of the investments at the figure shown in the balance-sheet of the assessee, namely, Rs. 2,94,556, while the contention of the assessee, was that necessary adjustment should be made to the value in view of the fact that investments in money-lending business were hardly sold in the open market at par. It was urged on behalf of the assessee that investments in money-lending business were generally sold at fifty per cent. of the book value and therefore, the Wealth-tax Officer was not correct in taking the value of the investments at the figure shown in the balance-sheet of the business. The question postulated by the Tribunal should, therefore, have been related to the value of the investments in the business, assessed at Rs. 2,94,556, and not to the value of all the movable assets of the business, assessed at Rs. 4,70,574. Moreover, the question as framed by the Tribunal appears on the face of it to be a question of fact, because any question as to what is the correct value of an asset can hardly be regarded as a question of law. It appears from the statement of case, which was prepared by the Tribunal without any objection from either party, that two points were contended in the appeal before the Tribunal. The first was that the investments in the money-lending business were generally sold at fifty per cent. of their book value and, therefore, it was not correct on the part of the taxing authority to have taken the value at the figure shown in the books. Apparently, this contention as to the market value of the investments was based on the terms of Section 7(1) of the Act. The second contention was that it was wrong to suppose that under Section 7(2) of the Wealth-tax Act the value of an asset must necessarily be taken at the figure shown in the balance-sheet. On behalf of the assessee it was suggested that an adjustment of fifty per cent. should be made as regards the value of the investments mentioned in the balance-sheet of the business. This contention was evidently based on the provision of Section 7(2) of the Act. The Tribunal, therefore, should have raised not a question of fact, but a question of law bearing on the applicability of the terms of Sub-section (1) and/or Sub-section (2)(a) of Section 7 of the Act to the facts of the case before it.;