Y.S.TAMBE, J. - (1.) THIS is a reference at the instance of the CWT under S. 27(1) of the WT Act and the question referred to us relates to the construction of S. 7(2)(a) of the Act.
(2.) THE assessee is a private limited company doing business of manufacture and sale of sugar. We are here concerned with two asst. yrs. 1957 -58 and 1958 -59, the relevant valuation dates for these two years being 30th Sept., 1956, and 30th Sept., 1957, respectively. It appears, at the material time two concerns, Dahanukar Sons (P) Ltd. and Worli Chemical Works (P) Ltd., were indebted to the assessee -company. In the assessee -company's balance sheet as on 30th Sept., 1956, on the assets side under the head "Loans and Advances"(unsecured) the debts of the aforesaid two debtors were shown. The debt due from Dahanukar Sons (P) Ltd. was shown as amounting to Rs. 2,29,417 and that due from the Worli Chemical Works (P) Ltd. was shown as amounting to Rs. 1,29,548. Against the entry relating to both these debts on the assets side, there was a remark "considered doubtful". In the balance sheet for the next year, i.e., as on 30th Sept., 1957, under the same head on the assets side, i.e., under the head of "Loans and Advances"(unsecured), the amount of debt due from Dahanukar Sons (P) Ltd. was shown at Rs. 1,69,384 and that due from Worli Chemical Works (P) Ltd. was shown at Rs. 1,30,383. Again in this balance sheet also against both these items there was a remark "considered doubtful." In both these years the assessee -company claimed that the aforesaid two amounts should be excluded from the computation of wealth of the assessee -company inasmuch as it was not possible to recover any amount from these debtors. The claim of the assessee was rejected. The view taken by the WTO in his own words was : "Apart from the question whether the amount is recoverable or not the claim cannot be considered in view of S. 7(2) under which the wealth is being computed by taking the balance sheet as a whole. The claim is, therefore, not allowed." The assessee -company filed two appeals against the order of the WTO. The AAC disagreed with the view taken by the WTO that it was not open to the WTO to go into the merits of the claim made by the assessee -company that the said debts were irrecoverable. In his opinion S. 7(2)(a) in terms empowers the WTO to make such adjustments in the balance sheet as the circumstances of the case may require. The AAC, after examining the evidence that had been tendered before him, came to the conclusion that in the asst. year 1957 -58 the debt due from Dahanukar Sons (P) Ltd. had become bad only to the extent of Rs. 1,69,334 and not to the extent of Rs. 2,29,417 as claimed by the assessee. As regards the other debt, viz., the debt owed by Worli Chemical Works (P) Ltd., the AAC came to the conclusion that the entire debt had become bad and, therefore, the value of that asset had become nil in the said asst. year 1957 -58. In this view of the matter, he directed the WTO to exclude from the value of the assets the two amounts of Rs. 1,69,334 and Rs. 1,29,548. For the next assessment year, i.e., 1958 -59, the AAC accepting the claim of the assessee in its entirety directed the exclusion from the value of the assets the said two amounts of Rs. 1,69,334 and the amount of Rs. 1,30,383. It may, at this stage, be stated that as regards the debt from Worli Chemical Works (P) Ltd., there is a slight variation of the amounts in the balance sheet of these two years. In the balance sheet as on 30th Sept., 1956, the figure is shown at Rs. 1,29,548 while in the balance sheet as on 30th Sept., 1957, the amount is shown at Rs. 1,30,383. There is a slight increase of the amount. The reason for the increase of the amount has not been mentioned in the statement of the case, but it has been assumed at the hearing that the increase represented the interest for that year.
(3.) AGAINST the said two orders of the AAC, appeals were taken by the Department to the Tribunal. The contention raised by the Department before the Tribunal, as summarised by the Tribunal, was : "It is vehemently argued on behalf of the Department that the AAC has gone completely wrong in going behind the figures shown on the balance sheet of the assessee -company, because, admittedly, the valuation of the assets had been done on the global method, i.e., on the basis of the balance sheet figures as such, and since the debts in question had been shown as assets on the face of the balance sheets, no further adjustments could be made by the WTO. According to the Departmental Representative, S. 7(2)(a) gives power to the WTO only in respect of making such adjustments as are necessary to include or to exclude items either on the liabilities side or on the assets side with reference to the other provisions of the Act, but so far as valuation of the assets and liabilities is concerned, he has got no hand in the matter to increase or decrease the value thereof." ;