Wealth-tax valuation under section 7(2): income-tax depreciation is not controlling, but additional depreciation may be considered.

For valuation of business assets under section 7(2) of the Wealth-tax Act, the balance-sheet figure is only prima facie evidence and may be adjusted on relevant material. Depreciation allowed in income-tax assessments does not automatically control wealth-tax valuation, so the wealth-tax authority is not bound to substitute the higher income-tax depreciation figure for the amount written off in the books. Additional depreciation, however, is not excluded as a matter of principle and may be considered where the statutory valuation exercise justifies it.

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Issues: (i) Whether, for valuation of business assets under section 7(2) of the Wealth-tax Act, depreciation shown in income-tax records must be allowed even when the amount written off in the books is less; (ii) Whether additional depreciation can be allowed while arriving at the value of assets under section 7(2) of the Wealth-tax Act.

Issue (i): Whether, for valuation of business assets under section 7(2) of the Wealth-tax Act, depreciation shown in income-tax records must be allowed even when the amount written off in the books is less.

Analysis: The balance-sheet value is not conclusive for wealth-tax valuation, but it is the primary basis and may be adjusted where necessary. Depreciation allowed under income-tax assessments is not automatically relevant for valuation under section 7(2); the Wealth-tax Officer must make the valuation on the basis of the statutory scheme and the material available, not by treating income-tax depreciation as controlling. The amount written off in the books could not therefore be replaced as of right by the higher depreciation figure claimed from income-tax records.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether additional depreciation can be allowed while arriving at the value of assets under section 7(2) of the Wealth-tax Act.

Analysis: Additional depreciation is not excluded as a matter of principle from consideration in wealth-tax valuation. The valuation under section 7(2) permits appropriate adjustments to the balance-sheet figures, and depreciation including additional depreciation may be taken into account where the statutory valuation exercise justifies it.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was disposed of by holding that income-tax depreciation could not automatically govern wealth-tax valuation, while additional depreciation could be considered within the statutory valuation process under section 7(2).

Ratio Decidendi: For valuation under section 7(2) of the Wealth-tax Act, the balance-sheet figure is only prima facie evidence and may be adjusted on relevant material, but depreciation allowed under income-tax law is not automatically determinative of the net value of business assets.

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