Wealth-tax valuation of jewellery stock: export invoice value alone was insufficient, and Rule 2B(2) could not be invoked.

Rule 2B(2) of the Wealth-tax Rules was held inapplicable to the valuation of closing stock of jewellery and precious stones because export invoice value could not, by itself, be treated as the foreign market value. A 35 per cent deduction from export invoice value was accepted as a fair market valuation method, and on that basis the fair market value did not exceed the declared value by more than the 20 per cent threshold required to invoke the rule. The Revenue also failed to discharge the burden of proving that the balance-sheet valuation was not the true value or that the statutory condition for addition to net wealth was satisfied.

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Issues: Whether rule 2B(2) of the Wealth-tax Rules, 1957 was attracted on the facts so as to justify valuation of the closing stock of jewellery and precious stones by reducing the export invoice value by 35 per cent and making an addition to net wealth.

Analysis: The matter was treated as covered by earlier binding decisions of the Court. It was held that export invoice value could not, by itself, be taken as the market value in foreign markets for the purpose of closing stock valuation. The Court accepted the approach of estimating fair market value by making a deduction of 35 per cent from export invoice value. On that basis, the fair market value did not exceed the declared value by more than 20 per cent, which was the threshold for invoking rule 2B(2). The Court also held that the Revenue had not discharged the burden of proving that the balance-sheet valuation was not the true value or that the statutory threshold for application of the rule was satisfied.

Conclusion: Rule 2B(2) was not applicable, and the additions made by the Wealth-tax Officer were not sustainable; the answer was in favour of the assessees and against the Revenue.

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