1977 (12) TMI 13 - HC - Wealth-tax

Tribunal allows deduction for unrecorded depreciation to compute net wealth

Commissioner Of Wealth-Tax, Bombay City-I, Bombay Versus Asarwa Mills Limited

Commissioner Of Wealth-Tax, Bombay City-I, Bombay Versus Asarwa Mills Limited - [1978] 115 ITR 612, 1978 CTR 602 Issues:- Whether the Tribunal was justified in allowing the assessee's claim for deduction on account of accumulated depreciation not written off in the books for the purpose of computing net wealth under s. 7 of the W. T. ActRs.Analysis:The case pertains to the assessment year 1957-58, where the Wealth Tax Officer (WTO) adopted the value of fixed assets as per the balance sheet for computing net wealth. The company argued that only the written down value as per income-tax records should be considered. The balance sheet value was Rs. 54,52,180, while the written down value was Rs. 44,79,088. The Assistant Commissioner (AAC) acknowledged that assets were not fully depreciated due to losses and adjusted the value to the depreciated value as per income-tax records. The department appealed, and the Tribunal allowed the appeal partially, determining the asset value as original cost less depreciation actually allowed. The main issue was whether the adjustment for depreciation not written off in the books was justified for wealth tax computation.The revenue contended that if assets were not written down in the books, their book value should be considered for wealth tax purposes, without any adjustment for depreciation. The Tribunal's method of assessment was challenged for lacking sufficient material to support the depreciation adjustment. The Court noted that the AAC's full depreciation allowance was erroneous as it was an automatic application, not permissible. The Tribunal's adjustment was considered somewhat arbitrary, though attempting to strike a fair balance. The Court emphasized that the question focused on the non-provision of depreciation in the books and whether an adjustment could be made in favor of the assessee if assets were overvalued in the balance sheet.The Court found that the AAC's conclusion of inflated asset values necessitated a downward adjustment. The Tribunal's modification of the adjustment was based on this finding, although its method was not deemed entirely scientific. Despite some reservations about the Tribunal's approach, the Court concluded that the question primarily addressed the adjustment for non-provision of depreciation in the books. As the assessee demonstrated inflated asset values, an adjustment in favor of the assessee was warranted. Therefore, the Court answered the question in the affirmative, favoring the assessee based on the facts and circumstances of the case. The parties were directed to bear their own costs.