Tribunal rules in favor of assessee for balance-sheet adjustments & property valuation. Agreements to sell not capital assets.

The Tribunal accepted the adjustments to the balance-sheet for assessment years 1965-66 and 1966-67, favoring the assessee. Municipal valuation was considered as the annual letting value for properties, also in favor of the assessee. The High Court determined that the right acquired under agreements to sell did not create a capital asset, following previous decisions. Ultimately, all issues were resolved in favor of the assessee, leading to no costs being ordered.

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Issues involved:
1. Acceptance of adjustments to the balance-sheet for assessment years 1965-66 and 1966-67.
2. Treatment of municipal valuation as annual letting value for properties.
3. Determination of whether the right acquired under agreements to sell created a capital asset for the assessee.

Acceptance of adjustments to the balance-sheet:
The Tribunal accepted the assessee's claim of adjustments to the balance-sheet by reference to a sum of Rs. 47.31 lakhs for assessment years 1965-66 and 1966-67. The High Court noted that this issue was previously addressed in a decision dated 2nd November, 1983, where it was held that the overall financial position had to be considered with reference to the adjusted balance-sheet. Therefore, the answer to the first question was in the affirmative, favoring the assessee.

Treatment of municipal valuation as annual letting value:
The Tribunal treated the municipal valuation as the annual letting value for properties located at specific addresses for the assessment years 1965-66 and 1966-67. Previous decisions of the High Court had also addressed this issue, with the answer being in the negative, favoring the assessee. Consequently, the municipal value was to be taken as the annual letting value.

Determination of capital asset creation under agreements to sell:
The Tribunal had to determine whether the right acquired by the assessee under agreements to sell dated May 21, 1955, and August 31, 1959, created a capital asset. Referring to a judgment in CIT v. J Dalmia [1984] 149 ITR 215, the High Court held that the right acquired was not a proprietary right, and therefore, no capital asset was created. As a result, no capital gain could accrue to the assessee.

In conclusion, all the questions raised in the references were covered by previous decisions of the High Court, leading to the answers being in favor of the assessee. Consequently, there was no order as to costs in this matter.

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