Wealth-tax valuation excludes incentive depreciation; only wear-and-tear depreciation can reduce business asset value.

For wealth-tax valuation of business assets under section 7(2)(a), the balance-sheet value may be adjusted only to reach the true value of the assets, and only depreciation reflecting actual diminution from wear and tear is relevant. Initial and additional depreciation under the Income-tax Act, 1922, being incentive allowances for industrial growth and not measures of physical deterioration, do not reduce the real value of the assets for wealth-tax purposes. The claimed deductions were therefore not allowable in computing the assessee's net wealth.

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Issues: Whether initial and additional depreciation allowed under sections 10(2)(vi)(a), (b), (c) and 10(2)(via) of the Income-tax Act, 1922, could be deducted while computing the net wealth of the assessee under section 7(2)(a) of the Wealth-tax Act, 1957.

Analysis: Under section 7(2)(a), the value of the business assets has to be determined with reference to the balance-sheet, making such adjustments as the circumstances require, so as to arrive at the true value of the assets. Normal depreciation attributable to lapse of time and wear and tear is relevant to that exercise because it reflects the diminution in value of fixed assets. The initial and additional depreciation under the relevant provisions of the Income-tax Act, 1922, is of a different character. It is an incentive allowance for industrial growth and is independent of the physical deterioration of the assets. That allowance, therefore, does not represent a reduction in the real value of the assets for wealth-tax purposes.

Conclusion: The claimed initial and additional depreciation was not allowable in computing the net value of the assessee's assets under section 7(2)(a) of the Wealth-tax Act, 1957.

Ratio Decidendi: For wealth-tax valuation of business assets, only depreciation reflecting actual diminution in asset value by wear and tear may be taken into account, and incentive depreciation under the Income-tax Act cannot be deducted.

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