Valuation of business assets: motor cars may be priced by open market value, with insurance value serving as a fair indicator.

Rule 14 of Schedule III applies to a global valuation of business assets, not to a single asset in isolation. For depreciable assets, written-down value is the general rule under clause (a), but clause (b) requires a higher value where the valuation under the relevant provisions or rule 20 exceeds that figure by more than 20 per cent. In the absence of a specific rule for motor cars, rule 20 applies and valuation may be based on open market value. Insurance value was treated as a reasonable, though approximate, indicator of market value, and the fair market value was estimated at 80 per cent of the insurance value.

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Issues: Whether motor cars shown as business assets were to be valued at their written-down value under rule 14(2)(a) of Schedule III, or at a higher market-related value where the difference exceeded 20 per cent, and whether insurance value could be adopted as a reasonable basis for valuation.

Analysis: Rule 14 of Schedule III applies to a global valuation of the assets of a business as a whole and not to the valuation of a single asset in isolation. Even assuming its applicability, clause (a) only lays down the general rule that a depreciable asset is to be taken at written-down value, while clause (b) requires adoption of the higher value where the value determined for the asset under the relevant valuation provisions or under rule 20 exceeds the clause (a) value by more than 20 per cent. In the absence of a specific rule for motor cars, rule 20, which contemplates valuation at the price the asset would fetch in the open market, becomes applicable. The insurance value was treated as a reasonable indicator of market value, though only approximately, and the Tribunal estimated the fair market value at 80 per cent of the insurance value.

Conclusion: The written-down value was not accepted as the final valuation basis and the higher market-related valuation was upheld with moderation to 80 per cent of the insurance value, resulting in partial relief to the assessee.

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