Banerjee, J. - (1.) This is a reference under Section 27(1) of the Wealth-tax Act, 1957, made under circumstances hereinafter stated.
(2.) The respondent-assessee is a company limited by shares. In the assessment year 1948-49, the assessee revalued its assets and enhanced the existing book value thereof by Rs. 1,45,00,000, which was credited to the capital reserve account. The revaluation was made with the object of issuing bonus shares; but apparently the assessee could not obtain permission to issue such shares. The result was that the object with which the revaluation of assets was made by the asses see-company remained unfulfilled.
(3.) In the assessment year 1957-58, the Wealth-tax Officer proceeded to value the assets of the assessee under Section 7(2) of the Wealth-tax Act and took the value of the assets at Rs. 5,01,40,897, as shown in the balance-sheet on the relevant valuation date, namely, March 31, 1957. The assessee objected to the method of valuation and claimed that the sum of Rs. 1,45,00,000, by which the book value of the fixed assets were enhanced in the year 1948-49, should be deducted from the computation of the net wealth. The Wealth-tax Officer rejected the plea with the observation : "The assessee has claimed exclusion of revaluation of Rs. 1,45,00,000, being the enhancement of the value of the fixed assets in 1948-49, to conform to the market price. This claim cannot be accepted as the value of the assets shown in the balance-sheet is being taken into account in terms of Section 7(2) and as the assessee itself had put a market value on its assets, there is no justification for diminishing it.";