CALCUTTA ELECTRIC SUPPLY CORPORATION versus COMMISSIONER OF WEALTH TAX, WEST BENGAL

Citation: [1972] 1 S.C.R. 159 · Decided: 12-08-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
D 
E 
G 
H 
159 
CALCUTTA ELECTRIC SUPPLY CORPORATION 
v. 
COMMISSIONER OF WEALTH TAX, WEST BENGAL 
August 12, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.] 
Wealth Tax Act. 1957 s. 7-Computation of value of assets under-
Assets as shown in balance-sheet can be accepted but Wealth-tax Officer 
not bound to accept valuation as shown therein-Electricity company 
seeking deduction of value of service connections installed at cost of con-
sumers-Assessee failing to prove that service connections H'ere·not in 
ownership of company-Shown in ha/ance sheet as company's assets-
Wealth Tax Officer justified in 
refusing deduction-Fact that service 
connections are not to be included in company's assets under s.7 A of Indian 
Electricity Act is irrelevant.for the purpose of s. 7 of Wealth Tax Act. 
The assessee carried on the business of supplying electrical energy 
in the City of Calcutta. During the year 1959-60 the corresponding valu-
ation date being March 31, 1959, the assessee showed in its balance sheet 
a deduction from the value of its total assets on the ground that the 
sum in question represented the contribution made by the consumers 
for putting up service connections. The Wealth Tax Officer proceeded 
to assess the net wealth of the assessee under s. 7 (2) of the Wealth Tax 
Act, 1957 and in doing so refused to grant the deduction claimed, though 
he accepted the valuation of the assets as shown in the balance-sheet. 
The Appellate Assistant Commissioner and the Appellate Tribunal 
however held that the deduction must be allowed. The Tribunal was 
influenced in its decision by the fact that in computing the value of the 
undertaking under s. 7 (A) of the Indian Electricity Act the value of 
service lines and other capital works or any part thereof which had 
been constructed at the cost of the consumers had to 
be ignorned. 
The High Court in rtf,renco decided against assessee. In appeal to 
this Court by the assessee, 
HELD: (i) Section 7 (2) of the Wealth 
Tax Act authorises the 
Wealth-tax officer to accept the valuation of the assets of a business as 
shown in the balancesheet of a company. 
He is not bound to accept 
any deduction shown in the balance sheet if he comes to the conclusion 
that the said deduction was impermissible. 
Section 7(2) does not say 
that the Wealth Tax Officer should accept the balance sheet as a whole 
or reject it as a whole. He is merely authorised to accept the value of 
the assets of the business as shown in the balance sheet. In the present 
case the wealth tax officer had accepted the value of the assets of the 
business as shown in the balance sheet but had not accepted the fact 
that the service lines were not owned b~ the assessee. [164 B-D] 
(ii) There was no material before the authorities under the Act 
to hold that the service connections were not the assets of the company. 
The fact that those assets were acquired by the company by utilising the 
contributions made by the consumers was a wholly irrelevant circums-
tance. The balance sheet showed the service connections as the assets 
160 
SUPREME COURT REPORTS 
[1972] l S.C.R. 
of the assessee. It was not said that they were the assets of the consu-
mers on the relevant valuation date. The admission in the balance 
sheet (profit and loss accounts) was not rebutted by any other evidence. 
Hence the Wealth Tax Officer was justified in holding that they were 
assessee's assets. 
(164 E-H] 
A 
(iii) It is true that in view of s.7(A)(2) of the Electricity Act, in 
computing the market value of the undertaking sold under sub-s.(1) of 
B 
s.5 of that Act, the value of service lines and other capital works or any 
part thereof which had been constructed at the expense of the 
consumers will not be taken into consideration. But s.7(A) only 
deals with sales under s.5(1) of the Act. If a sale is effected under s.8 
the licensee shall have the option to dispose of all land building, works, 
materials and plants belonging to the undertaking in such manner as 
he may think fit. 
In such sales it is open to him to value the service 
connections put up at the expense of the consumers and add the same 
in computing the sale price. It is dear from ss.5 to 8 of the Electricity 
Act that the licensee is the owner of the service connections put up at 
the expense of the consumers. If that is not so, there is no purpose 
in mentioning in s.7A that while determining the market value of the 
undertaking the value of the service connecti

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