Law:

Section:

Section 7(1) of the Wealth-Tax Act, 1957 - Valuation of assets - General - Assessment year 1977-78 - Whether in quantifying value of asset under section 7(1), deduction of capital gains tax which assessee might have to pay, if asset was actually sold, could be allowed - Held, no - Whether in computing value of such asset price which is relevant is price which will be paid by a willing purchaser and it has nothing to do with return vendor will receive - Held, yes FACTS The assessee owned shares in joint stock companies. For the assessment year 1977-78, in her wealth-tax return, she claimed deduction of capital gains tax which would have been attracted in case she sold the assets on the valuation date. The WTO rejected the assessee's claim. On appeal, the AAC also disallowed its claim. The second appeal to the Tribunal was also dismissed. On reference : HELD Section 7(1), as it stood at the material time, provided that subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of Act shall be estimated to be the price which in the opinion of the WTO it would fetch if sold in the open market on the valuation date. Section 7(1) uses the expression 'if sold in the open market', but it does not contemplate any actual sale. Notional sale alone is envisaged. There is nothing in the language of section 7(1) which permits any deduction on account of expenses of sale which may be borne by the assessee if he were to sell the asset in question in the open market. The value according to section 7(1) has to be the price which the asset would fetch if sold in the open market. On a good many cases, the amount which the vendor would receive would be less than the price fetched by the asset. The vendor may, for example, have to pay for the brokerage commission or may have to incur other expenses for effectuating the sale. It is not, however, the amount which the vendor would receive after deduction of those expenses but the price which the asset would fetch when sold in the open market that would constitute the value of the asset for the purpose of section 7(1). Therefore, the price which is relevant is the price which will be paid by a…

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