- (1.) WHETHER, in the facts and circumstances of this case, the sum of Rs 7,89,611 shown in the balance-sheet as an asset and said to have been paid as bonus to the employees for the year 1952-53 was a permissible deduction under the Wealth-tax Act ? WHETHER, in the facts and circumstances of this case, the Appellate Tribunal was justified, while assessing the petitioner to wealth-tax under section 72 of the Wealth-tax Act, in directing that the value of the fixed assets should be determined by deduction from the total value of such assets the normal depreciation allowed under the Indian Income-tax Act in addition to the depreciation shown in the balance-sheet or else, whether the said Tribunal should have taken the value as shown in the balance-sheet ? WHETHER the Appellate Tribunals interpretation of the words set up, occurring in clause xxi of sub-section 1 of section 5 of the Wealth-tax Act, is correct, and, consequently, whether, in the facts and circumstances of this case, the Appellate Tribunals order of remand for ascertainment as to whether the new industrial undertaking for which exemption to the extent of Rs 1,44,70,359 was claimed under the said clause of sub-section 1 of section 5 of that Act was set up after the 1st April, 1957, was a legally valid order ?"
(2.) THE opposite party-assessee was assessed to wealth-tax for the year 1957-58, on receipt of a return filed by it under section 142 of that Act, the valuation date being October 31, 1956 So far as question No 3 is concerned, it is conceded by Mr Dutt, counsel for the department, that in view of the recent judgment of the Supreme Court in Commissioner of Wealth-tax v Ramaraju Surgical cotton Mills Ltd the view taken by the Tribunal cannot be challenged here We would, therefore, answer question No 3 in the affirmative As regards question No 2, it is necessary to state the following facts : THE assessee had in its balance-sheet showed a certain amount as depreciation value while estimating the net assets But before the wealth-tax authorities it claimed that the total depreciation should be calculated on the basis of the depreciation allowed under the Indian Income-tax Act Both the Wealth-tax Officer and the Appellate Assistant Commissioner, however, disallowed this claim, holding that the sum shown by the assessee in its balance-sheet should be taken as binding on it On appeal the Appellate Tribunal took a contrary view and held as follows : THE normal depreciation allowed under the Income-tax Act had been fixed on the basis of the normal wear and tear in those assets by user THE normal depreciation allowed should, therefore, be deducted in determining the block value of the assets It is the written down value of the assets after deduction of the normal depreciation under the Income-tax Act that should be taken as the basis of valuation for the purposes of the Wealth-tax Act" The result was that the assessee was permitted to claim by way of depreciation not only the sum shown in the balance-sheet but in addition the normal depreciation allowed under the Indian Income-tax Act minus the sum shown in the balance-sheet, so that the total depreciation allowed to it may be equal to the normal depreciation allowed under the Indian Income-tax Act Unfortunately, when a Bench of this court formulated the questions to be referred to this court by the Tribunal, a clerical error crept in so far as this question is concerned, and it has been made to appear as if the assessee claimed not only the depreciation shown in the balance-sheet but also the normal depreciation allowable under the Indian Income-tax Act In the application of the department under section 273 of the Wealth-tax Act, the draft of the questions was correctly given We would, therefore, reformulate question No 2 as follows, after correcting the clerical error : Question No 2 "Whether, in the facts and circumstances of this case, the Appellate Tribunal was justified, while assessing the petitioner to wealth-tax under section 72 of the Wealth-tax Act, in directing that the value of the fixed assets should be determined by deducting from the total value of such assets the normal depreciation allowed under the Indian Income-tax Act after adjusting the depreciation shown in the balance-sheet, or else, whether the said Tribunal should have taken the value as shown in the balance-sheet The legal point involved in this question is now concluded by the judgment of their Lordships of the Supreme Court in Kesoram Industries & Cotton Mills Ltd v Commissioner of Wealth-tax, where the view taken by the Calcutta High Court in Kesoram Cotton Mills Ltd v Commissioner of Wealth-tax was the Wealth-tax Act, held that where the assessee himself has in his balance-sheet shown the net value of his assets at a certain figure, after deducting the amount shown as depreciation, that figure may be taken as correct unless the assessee convinces the authorities that the figure was not acceptable To quote their Lordships words : "It was open to the assessee to convince the authorities that the said figure was inflated for acceptable reasons; but it did not make any such attempt It was also open to the Wealth-tax Officer to reject the figure given by the assessee and to substitute in its place another figure, if he was, for sufficient reasons, satisfied that the figure given by the assessee was wrong" The same view has been expressed by the Andhra High Court in Commissioner of Wealth-tax v Andhra Sugars Ltd It is unnecessary to repeat the reasons given by their Lordships Though, in terms, clause a of sub-section 2 of section 7 of the Wealth-tax Act says that the net value of the assets of the assets of the business as a whole should be determined having regard to the balance-sheet of such business as on the valuation date and after making such adjustment therein as the circumstances of the case may require, nevertheless the decision of the Supreme court is to the effect that normally the figure shown in the balance-sheet should be accepted as correct unless the assessee could convince the authorities concerned that the figure was not acceptable, or else, the taxing authorities are satisfied that there are sufficient reasons for holding that the amount shown in the balance-sheet is incorrect The Supreme Court judgment may, therefore, be taken to be by way of interpretation of the words "making such adjustments therein as the circumstances of the case may require" occurring at the end of the said clause Turning to question No 1, the admitted facts are as follows : For the year 1952-53, the employees of the assessee claimed a certain sum as bonus which was twice the sum of Rs 7,89,611 This was on the basis of an award given by the Industrial Tribunal which was confirmed by the Appellate Tribunal But both the employees and the assessee had filed an appeal and cross-appeal before the Supreme Court against the decision of the Appellate Tribunal During the pendency of the appeal and the cross-appeal the assessee paid the sum as bonus to its employees But as it was challenging the right of the employees to claim that sum, it showed the said payment in its account as advance payment to the employees, such advance payment being in the nature of "debt due" thus became an asset The Supreme Court reduced the amount of bonus by one-half and consequently the said sum of Rs 7,89,611 became, in fact and in law, a mere advance payment by way of loan by the employer assessee to its employees The department, therefore, claimed this sum as an asset But on behalf of the assessee it was contended that sum could never be recovered from the workmen, bearing in mind the normal relationship between the employer and the employee, and that consequently it should be treated as a bad debt and, hence, not an asset The Tribunal, without taking any evidence, accepted this contention in the following words : As the expectation of the recovery of any amount from the workmen would normally be negligible, we agree with the appellants contention that this item cannot be considered to be an asset"
(3.) IT was urged that the aforesaid finding was based on no evidence but on mere surmise But this argument is not convincing Even in the absence of any direct evidence, a judicial or quasi-judicial tribunal can base its conclusions on the basis of what are known as notorious facts, bearing in mind the principles of section 114 of the Evidence Act Any one conversant with the relations between the employer and employee in the industry may be prepared to hold that once a sum is given as bonus to several workmen, that sum can never be realised from those workmen if eventually it is declared that the said sum is not payable as bonus The finding on this point is essentially a finding of fact based on the natural course of conduct between an employer and employee and cannot be questioned in this reference For these reasons, we answer the questions as below : Question No 1 : is answered in the affirmative Question No 3 : is answered in the affirmative Question No 2 : The value of the fixed assets as shown in the balance-sheet after deduction the depreciation is normally to be accepted as correct, unless the assessee convinces the taxing authorities that the figure shown as depreciation should not be accepted for good reasons, or else the taxing authorities are satisfied for sufficient reasons that the figures given by the assessee are incorrect On the facts as mentioned in the order of the Tribunal, we must hold that the decision of the Tribunal on this point was not justified But it will be open to the Tribunal to further decide this point in the light of the law as laid down by us There will be no order for costs;