Balance-sheet value is the primary basis in wealth-tax valuation unless the assessee proves good grounds to reject it.

For wealth-tax valuation under section 7(2), the balance-sheet figure is the primary basis for valuing a business as a whole, and departure from it is justified only where there are good reasons to treat it as incorrect. A company's accounts must also reflect a true and fair view, so a revaluation credited to capital reserve does not automatically reduce net wealth. On the stated facts, the assessee failed to show any acceptable basis for excluding the revaluation increase, so the balance-sheet value was accepted and the claimed deduction was not allowed.

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Issues: Whether, in computing net wealth under section 7(2) of the Wealth-tax Act, the value of assets shown in the balance-sheet could be reduced by the amount by which the assessee had earlier revalued its fixed assets and credited the increase to capital reserve.

Analysis: Section 7(2) permits valuation of a business as a whole with reference to the balance-sheet as on the valuation date. The book figure shown by the assessee is ordinarily the primary basis of valuation, though the Wealth-tax Officer may depart from it where there are good reasons to treat it as wrong. A company's balance-sheet is also required to present a true and fair view under section 211 of the Companies Act, 1956. On the facts, the revaluation had been made with a view to facilitating issue of bonus shares, but no convincing material was produced to show any acceptable reason for inflating the asset values by the amount claimed. The assessee therefore failed to displace the figure shown by itself in the balance-sheet.

Conclusion: The assessee was not entitled to deduction of the revaluation amount, and the valuation shown in the balance-sheet was rightly accepted; the question was answered in favour of the Revenue.

Ratio Decidendi: For wealth-tax valuation under section 7(2), the balance-sheet figure is the primary basis and may be rejected only on shown good grounds; an assessee cannot insist on exclusion of an asset revaluation figure without proving acceptable reasons for the inflation.

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