Foreign currency valuation in wealth tax may use a real exchange rate when the official rate is shown to be unrealistic.

Foreign currency deposits in wealth-tax valuation are ordinarily to be taken at the official exchange rate under section 7(1) of the Wealth-tax Act, 1957, but the assessee may show that the official rate does not reflect the realistic exchange value or was not fixed with reference to convertibility. If such evidence is produced, the valuation can be re-examined on the correct real exchange rate. The Tribunal's remand for fresh determination of the exchange rate was upheld.

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Issues: Whether, for valuation of foreign currency deposits in a wealth-tax assessment, the assessee could contend that the official exchange rate did not reflect the realistic exchange value and seek adoption of a real exchange rate instead.

Analysis: Section 7(1) of the Wealth-tax Act, 1957 governs valuation of assets, and the controlling principle is that the value of money in foreign currency is ordinarily to be taken at the official rate of exchange. However, the assessee is entitled to prove that the official rate does not represent the realistic exchange value or was not fixed with reference to the currency's convertibility. Where such evidence is produced, the matter may be remitted for fresh determination on the correct exchange rate.

Conclusion: The Tribunal's order remitting the matter for determination of the real exchange rate was in accordance with law and was upheld.

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