Wealth-tax valuation of depreciable assets requires proof that balance-sheet value is inflated before substituting written down value.

For valuation under section 7(2)(a) of the Wealth-tax Act, the balance-sheet figure is not conclusive, but it may be adjusted only on reliable material showing that it does not reflect the true value on the valuation date. A mere claim that depreciable assets were not fully depreciated in the accounts because profits were insufficient is not enough to replace the balance-sheet value with the written down value under the Income-tax Act. The assessee must show that the balance-sheet value is artificially inflated and that the written down value is the proper wealth-tax value. The written down value could not be substituted automatically, and the issue was answered against the assessee.

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Issues: Whether, for valuation under section 7(2)(a) of the Wealth-tax Act, the written down value of depreciable assets under the Income-tax Act could be substituted for the balance-sheet value on the ground that adequate depreciation had not been provided because of paucity of profits.

Analysis: Section 7(2)(a) permits the Wealth-tax Officer to determine the net value of business assets with reference to the balance-sheet, but only after making such adjustments as the circumstances require. The balance-sheet figure is not conclusive, yet the assessee bears the burden of producing reliable material to show that the figure shown is not the true value on the valuation date. A mere assertion that depreciation could not be fully provided for because profits were insufficient does not, by itself, establish that the written down value represents the real value of the assets. The assessee must further show that the balance-sheet value is artificially inflated and that the written down value is in fact the proper value for wealth-tax purposes.

Conclusion: The written down value could not be automatically substituted for the balance-sheet value. The question was answered in the negative, against the assessee and in favour of the revenue.

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