COMMISSIONER OF GIFT TAX Vs. GANGANAGAR SUGAR MILLS LIMITED

JUDGEMENT

(1.) THIS is a reference under Section 27(1) of the Wealth-tax Act, 1957 (Act No. XXVII of 1957) (hereinafter called the Act) by the Income-tax Appellate Tribunal, Delhi Bench "A" (hereinafter called the Tribunal), referring the following question to this Court for opinion:--

(2.) THIS reference relates to the assessment years 1957 58, 1958-59 and 1959-60. The statement of the case submitted by the Tribunal shows that the assessee is a limited company carrying on the business of manufacture of sugar. For its business, accounts are maintained by the assessee regularly. In accordance with the provisions of Section 7(2) of the Act, the Wealth Tax Officer determined the net value of the wealth as a whole, having regard to the balance-sheet of the business as on the valuation date. It was claimed by the assessee that adjustment be made in respect of depreciation on the fixed assets. It was pointed out that all along upto the year ending on 30-6-1955, the assets of the business were shown in the balance-sheet as at cost. For the balance-sheet drawn on 30-6-1956, the value of the assets was shown at cost, less depreciation written off for the year ending 30-6-1956. A note to the effect that "the depreciation on the fixed assets up to the previous year ended 30th June 1955, comes to Rs. 16,73,955 against which a sum of Rupees 1,25,000 only has been provided as a reserve in the previous year due to losses" was appended to the balance sheet. It was claimed that adjustment in respect of the depreciation as due on the assets for the preceding years should be made while determining the net value of the assets on the basis of the balance-sheet. The Wealth Tax Officer and on appeal by the assessee to the Appellate Assistant Commissioner of the Wealth Tax, refused to make any adjustment for the depreciation due in respect of the assessment years prior to the year ending on the valuation date. When the matter went up in appeal before the Tribunal, it was held that for a proper valuation of the assets incorporated in the balance sheet, it was only proper that adjustments should be made in respect of the depreciation due on the assets under the Income Tax Act for the various preceding years. The Tribunal directed the Wealth Tax Officer to recompute the net wealth of the assessee after making adjustment for depreciation due under the Income-tax Act for the preceding years but not taken into account while drawing up the balance-sheet. THIS common question referred to us arose in all the three assessment years 1957-58. 1958-59 and 1959-60, so this question of law as mentioned above has, been referred to this Court.