G.K. Mitter, J. - (1.) This is a Reference under Section 27(1) of the Wealth Tax Act of 1957 for determination of the following questions: (1) Whether on the facts and in the circumstances of the case, the Wealth Tax Officer was justified in taking the value of the assets of the assesses as shown in its balance sheet on the relevant valuation date? (2) Whether on the facts and in the circumstances of the case, in computing the net wealth of the assessee, the amount of proposed dividend was deductible from the total assets? (3) Whether on the facts and circumstances of the case, in computing the net wealth of the assessee, the amount of the provision for payment of income-tax and super-tax in respect of the year of account was a debt owed within the meaning of Section 2(m) of the Wealth Tax Act, 1957 and as such deductible in computing the net wealth of the assessee?
(2.) The facts are as follows: The assessee is a company incorporated under the Indian Companies Act. Its subscribed capital at the end of the relevant accounting year was Rs. 2,29,99,125/-. In Schedule 'D' annexed to the balance sheet its fixed assets were shown as being worth Rs. 2,60,52,357/-, the original cost of the same being Rs. 2,30,32,833/-. The assets had been revalued during the year ending on March 31, 1950 when a sum of Rs. 1,45,87,000/- was added to the value at cost. On the valuation date the figure of Rs. 2,60,52,357/- was arrived at after making certain adjustments. The first question relates to this revaluation. The contention of the assessee is that the increase of Rs. 1,45,87,000/- ought to be ignored altogether in computation of the net wealth under the Act. This amount has been shown in Schedule 'B' to the balance sheet as capital reserve not available for dividend. In the profit and loss account a sum of Rs. 15,29,855/- has been shown as the amount of dividend proposed to be distributed for the year ending on March 31, 1957. This dividend was declared by the company at the general meeting held on November 27, 1957. As the declaration was made after the accounting year the Wealth Tax Authorities rejected the assessee's contention that the amount of the net wealth should be computed after giving a deduction for the above. Provision was also made in the balance sheet for income-tax and super-tax payable by the company for the year of account and a claim for deduction of the same in computation of the net wealth was raised. This too was not accepted by the Wealth Tax Authorities on the ground that there was no debt owed by the assessee on the valuation date.
(3.) Before going into the merits of the case it is necessary to note the relevant provisions of the Wealth Tax Act. Section 2(m) of the Act defines 'net wealth' as the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than certain debts not relevant for the purpose of this Reference. Under Section 2(q) 'valuation date' in relation to any year for which an assessment is to be made under the Act, means the last date of the previous year as defined in Clause (11) of Section 2 of the Income-tax Act if an assessment were to be made under that Act for that year. Section 3, the charging section provides that a tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company shall be charged for every financial year commencing on and from the first day of April, 1957 at the rate or rates specified in the Schedule. Section 7 lays down how the value of the assets are to be determined for the purpose of the Wealth Tax Act. The relevant provision thereof is as follows: (1) 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 the circumstances of the case may require.;