1987 (1) TMI 136 - AT - Wealth-tax

Film rights deemed part of net wealth despite non-disclosure in balance sheet

The tribunal held that valuable rights in films must be included in the assessee's net wealth, despite not being disclosed in the balance sheet, as per ... Valuation Of Assets, Distribution Rights Of Picture Issues: Valuation of proprietary interest in film distribution concern; Inclusion of undisclosed assets in balance sheet for wealth tax assessment; Applicability of rule 2C of Wealth-tax Rules, 1957; Treatment of distributorship rights in films for wealth tax assessment; Valuation of interest in partnership firm; Treatment of credit balance in CDS account for wealth tax assessment; Valuation of self-occupied residential property for wealth tax assessment.The judgment involves the valuation of the assessee's proprietary interest in a film distribution concern for the assessment years 1979-80 and 1980-81. The WTO valued the assessee's rights in the films, considering the market value despite the net book value being nil due to amortization rules. The Commissioner (Appeals) deleted the additions based on the contention that the unexpired portion of distribution rights had no value, citing relevant case law. However, the department appealed, relying on previous tribunal orders emphasizing the inclusion of all valuable rights in the assessee's net wealth. The tribunal held that the valuable rights in the films must be included in the net wealth, even if not disclosed in the balance sheet, as per section 7(2)(a) of the Wealth-tax Act, 1957. The tribunal rejected the argument that the system of accounting is relevant, emphasizing the inclusion of all assets in the balance sheet.Regarding the undisclosed assets in the balance sheet, the tribunal found that the balance sheet should clearly indicate all assets, and the WTO is entitled to make adjustments under rule 2C if necessary. The tribunal noted that the balance sheet should reflect the value of pictures as a distributor or owner, and not disclosing these assets makes the balance sheet incomplete. The tribunal also highlighted that the system of accounting, whether cash or mercantile, is not relevant for determining assets under the Wealth-tax Act.The judgment also addressed the valuation of the assessee's interest in a partnership firm, Saishyam Pictures, for the relevant years. The tribunal directed a re-examination of the valuation of films concerning distributorship rights, exploitation on a commission basis, and own films. Additionally, the treatment of credit balance in the CDS account and the valuation of self-occupied residential property were discussed. The tribunal upheld the inclusion of the credit balance in the assessee's hands and the valuation of the residential property under specific rules, following relevant case law.In conclusion, the tribunal allowed the revenue's appeal for the assessment year 1979-80 and partly allowed it for the assessment year 1980-81, addressing various issues related to the valuation of assets and treatment of undisclosed assets in the wealth tax assessment.