Wealth-tax valuation must reflect realisable market value, with disputed receivables and unrealised interest adjusted for recovery uncertainty.

For wealth-tax valuation, quoted shares must be taken at realisable market value, and a general ad hoc discount is not allowed without concrete evidence that the quoted price is not realisable. A debt is not excluded from net wealth merely because recovery is disputed, but interest that has remained unrealised under the mercantile system may be deleted from valuation where recovery has not occurred. Where sale consideration is subject to genuine dispute, rival claims, and litigation, the asset must be valued by reflecting that uncertainty rather than at its face amount, and the disputed receivable was accordingly brought down to a lesser value.

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Issues: (i) Whether the quoted shares held by the assessee-HUF were liable to a 10% ad hoc reduction in valuation for wealth-tax purposes; (ii) whether the amount due from Kohinoor Traders Pvt. Ltd. had become irrecoverable and was liable to be excluded from net wealth, and whether the interest debited to that account could be deleted; (iii) whether the outstanding sale consideration of Rs. 25 lakhs from Harinagar Sugar Mills Ltd. was to be excluded entirely or valued at a lesser figure in the net wealth of the assessee-HUF.

Issue (i): Whether the quoted shares held by the assessee-HUF were liable to a 10% ad hoc reduction in valuation for wealth-tax purposes.

Analysis: For wealth-tax valuation, the basis is the market value in a hypothetical market between a willing seller and a willing purchaser. The assessee did not produce concrete material to show that the listed prices of the shares were not realisable or that any identified shares required a reduction. The claimed reduction was based only on general assertions and probabilities.

Conclusion: The claim for a 10% reduction in the value of the shares was rejected against the assessee.

Issue (ii): Whether the amount due from Kohinoor Traders Pvt. Ltd. had become irrecoverable and was liable to be excluded from net wealth, and whether the interest debited to that account could be deleted.

Analysis: The material did not establish that the principal debt had become valueless or irrecoverable during the years under appeal. However, the interest amounts credited to that debtor's account had merely been debited year after year under the mercantile system and had not been recovered. In wealth-tax valuation, that interest element did not justify inclusion at full value.

Conclusion: The principal debt was not excluded, but the interest debited to the account was directed to be deleted in favour of the assessee.

Issue (iii): Whether the outstanding sale consideration of Rs. 25 lakhs from Harinagar Sugar Mills Ltd. was to be excluded entirely or valued at a lesser figure in the net wealth of the assessee-HUF.

Analysis: The surrounding facts showed that the assessee-HUF had treated the cane farm and the sale proceeds as its asset, but the company disputed liability and there was continuing litigation and a challenge to title. For wealth-tax purposes, the asset had to be valued on its realisable market value, taking into account the dispute and rival claims. The material also showed substantial control interest and the disputed character of the asset.

Conclusion: The entire amount was not excluded, but the asset was valued at Rs. 15 lakhs for wealth-tax purposes, in favour of the assessee to that extent.

Final Conclusion: The appeal succeeded only in part, with partial relief granted on the valuation of the disputed sale proceeds and deletion of the interest element, while the challenge to the share valuation and the principal debt claim failed.

Ratio Decidendi: For wealth-tax purposes, assets are to be valued at their realisable market value, and where the title to an asset or its recovery is substantially disputed, the dispute must be reflected in valuation rather than ignored.

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