COMMISSIONER OF WEALTH TAX versus HINDUSTAN MOTORS LIMITED

Citation: [1976] 3 S.C.R. 579 · Decided: 10-03-1976 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Appeal(s) allowed

Judgment (excerpt)

I 
• 
COMMISSIONER OF WEALTH TAX 
v. 
HINDUSTAN MOTORS LIMITED 
March 10, 1976 
(H. R. KHANNA AND P. K. GOSWAMI, JJ.] 
579 
Wca/tli 1ax Act, 1957 (Act XXV/l of 1957)-Sec. 7(1)(2)-Valuation of 
depreciable assets-Valuation of assets in balance Sheet, if not proper, whether 
depreciation 1111der the lncon1e Tax Act cnn be taken into account-Onus to 
proi'e raluativ11. 
A 
B 
The respondent assessee maintains accounts regularly. 
In 
the 
accounts 
maintained by him adequate depreciation could not be provided in the balance 
sheet in regard to the depreciable fixed assets on account of paucity of profits 
C 
and hence the depreciation as provided in the balance sheet was very much 
lower than the depreciation allowable under the Income Tax Act. The assessee 
claimed before the Wealth Tax Officer that in computing the wealth on the 
basis of the balance sheet he should· reduce the book value of the assets by 
f 
the difference between the written down value that \\'Ould be determined for 
the purpo<;e of Income Tax Act and the actual book figures disclose-cl by the 
balance sheet. 
The \i\l'ealth Tax Oflicer rejected the contention of the assessee 
and estimated the net value of the assets as shown in the balance sheets for 
the respective years. 
The appellate Assistant Comn1issioner confirmed the orders 
D 
of the \\'calth Tax Officer. _ The Appellate Tribunal, however, took a contrary 
• 
vie\\' and held that \\'here proper depreciation has not been allowed in the 
balance sheet it is proper to accept the \Vritten down value of the assets as 
worked out for the purpose of income tax assessments. 
On a reference n1ade 
to the 1-li.c;h Court, the Hi~h Court answered the question in favour of the 
assessee. 
Allowing an appeal by certificate under section 29( 1) of the Wealth Tax 
Act. 
1-fELD: Under Section 7(1) of the Wealth Tax Act the value of .any asset 
is the Innrket value. 
Section 7(2) provides that notwithstanding anything in 
sc('tion 7( 1) where the assessee carries on business for which accounts are 
n1aint::1ined 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 
balanc(' sheet of such business as on the valuation date and making such 
adjustn1en!s therein as the circumstances of the case might require. The object. 
of the \\.'e:ilth Tax officer under section 7 is to arrive at the true value of the 
assets of the business. 
If what is shown in the balance sheet is not the true 
value of the assets disclosed it is open to the assessee to satisfy the Wealth 
Tnx Officer by producing relevant materials that the value given of the fixed 
assets in the balance sheets is not the true value, and, therefore a reduced 
v,alue of the assets should be taken into account. In case the assessee wants the 
written do\1/TI value. to be accepted it is open to him to establish, by ~cceptable 
reason that the wntten down v~lue represents the proper value of the assets 
at the relevant date. 
The onus in that case \\'ould be entirely on the assessee. 
1\-ferely a statement. that on ~ccount of paucity of. profits adequate depreciation 
oould not b~ provided for in the balance s~eet 1s not sufficient to discharge 
the onus \Vh1ch rests upon the assessee. 
The 1udgment of the High Court is set 
aside and the question answered against the assessee. [581E-H 582A-B H 
58JA. 584CJ 
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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 
894-896 of 
E 
F 
G 
1971. 
H 
From the Judgment and order dated the 29th January 1965 of the 
Calcutta High Court in Wealth Tax Matter No. 21 /52. 
580 
SUPREME COURT REPORTS 
(1976] 3 S.C.R. 
A 
R. N. Sachthey and S. P. Nayar, for the Appellant. 
Leila Seth, Neelima Thakur, Praveen Kumar and B. P. Maheshwari 
for the Respondent. 
The Judgment of the Court was delivered by 
GOSWAMI, J.-These appeals are by certificate of the Calcutta High 
B 
Court under section 29 (1) of the Wealth-tax Act (briefly the Act). 
c 
D 
E 
F 
G 
H 
The assessment years of the respondent company (hereinafter to be 
described as the assessee) involved in the composite reference to the 
High Court under section 27(1) of the Act are 1957-58, 1958-59 and 
1959-60 for which the correspoRding valuation dates are 31st March, 
1957, 31st March, 1958 and 31st March, 1959. 
The only common question of law which was referred to the High 
Court appertaini

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