Law: Wealth Tax Act, 1957

Section: 7,7(2)

[Indian Wealth Tax Act, 1957]........Section 7(2)-Valuation-Balance sheet-Revaluation of assets for the purpose of issuing bonus shares-Government declining to grant permission-Assets continued to be shown at revalued figure-Na reason given for the inflated valuation-Wealth-Tax Officer whether justified in accepting figures shown in the balance sheet as the correct figure for valuation of assets-Held yes. In 1948-49, the assessee-Company revalued its assets enhancing their -existing book value by the sum of Rs. 145 lakhs which was credited to the capital reserve account, the assets being shown at the revalued figure of Rs. 510 lakhs. Before the Tribunal the sole reason given by the assessee for revaluing the assess in that year was that it contemplated issuing bonus shares for which consent of the Central Government was necessary. Consent of the Government was not granted, but the assessee showed the -enhanced valuation in its balance-sheet thereafter -every year. For the assessment year 1957-53, the Wealth Tax Officer to the value of the assets at Rs. 510 lakhs rejecting the claim of the assessee that the sum of Rs. 145 lakhs should he deducted from the book value. No evidence was produced before the Tribunal showing the reasons why permission for the issue of bonus shares was declined nor was any evidence placed by the assessee demonstrating how it became necessary to inflate the valuation of the assets by Rs. 145 lakhs for the purpose of issuing bonus shares : Held, that the main idea underlying the issue of bonus shares was to bring the nominal amount of the issued share capital into line with the true excess of assets over liabilities and that involved a genuine and correct valuation of the assets and not either under-valuation or inflation ; and in the absence of material placed by the assessee showing how it became necessary to inflate the value of the assets by Rs. 145 lakhs, the Wealth Tax Officer was justified in accepting the figure which the assessee itself had given in its balance-sheet as the correct figure and value the assets accordingly. In computing the net value of the assets of the business of the assessee as a whole under Section 7(2) of…

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