1. This appeal of the appellant, for the assessment year 1990-91, is directed against the order dated 15-3-1995 of the Commissioner of Wealth-tax (Appeals)-IX, Mumbai, Rival contentions have been heard and records perused.
2. The first ground of appeal is relating to determination of the value of unquoted shares. Assessee had disclosed the value of the said shares on the basis on yield method. The Assessing Officer determined the value as per Schedule III of the Wealth-tax Act, 1957. The learned counsel for the assessee conceded that in view of the decision of the Supreme Court in the case of Bharat Hari Singhania v. CWT [1944] 207 ITR 1/73 Taxman 33, the value of the shares is to be determined in accordance with Rule 1D. He, however, pointed out that the Assessing Officer has committed a mistake while determining the value of the shares as per Rule 1D. Inviting our attention to Rule 1D. Schedule III, the learned counsel for the assessee pointed out that after determination of the value of the shares, only 80 per cent is to be adopted for the purposes of assessment under the Wealth-tax Act. The Assessing Officer has omitted to apply the said part of the rule without assigning any reason. The CWT(A) has refused to entertain the claim of the assessee on the ground that a new plea taken by the assessee at the appellate stage would be like taking a new ground of appeal. The learned counsel contended that this view taken by the CWT(A) is too technical and contrary to law. It was contended that there is a clear mistake committed by the Assessing Officer in applying rule 1D/Schedule III, and the CWT(A) was wrong in denying relief to the assessee.
3. The learned Departmental Representative, on the other hand, relied upon the orders of the revenue authorities.
4. In our considered view, the assessee is entitled to succeed. The Assessing Officer has committed a glaring error in applying Rule 1D.Rule 1D corresponding Rule 11(2) of Schedule III, provides for determination of the value of unquoted equity shares in companies other than investment companies. The said rule provides that the value of all the liabilities as shown in the balance sheet shall be deducted from all its assets and the net amount so arrived at shall be divided by the total amount of its paid-up equity shares capital as shown in the balance-sheet. The result multiplied by paid up value of each equity share shall be the break up value of each unquoted equity share. The rule further provides that an amount equal to 80 per cent of the break up value so determined shall be the value of unquoted equity share for the purposes of this Act. Whereas the Assessing Officer has worked out the break up value of the equity shares, he has not worked out the 80 per cent of the value so determined for the purposes of assessment. The CWT(A), in these circumstances, was not justified in refusing to grant relief to the assessee. We accordingly, set aside the order of the CWT(A) on this issue and direct the Assessing Officer to determine the value of equity shares in accordance with Rule 11(2) of Schedule III of the Wealth-tax Act, 1957, and allow necessary relief to the assessee.
5. The only other ground in this appeal is relating to valuation of gas cylinders. The assessee had, in its wealth-tax return, disclosed the value of cylinders at "nil". However, during the course of assessment proceedings, a letter dated 17-3-1993 was submitted before the Assessing Officer in which the Assessing Officer had been requested to adopt the value of the cylinders at 50 per cent of the cost price. The Assessing Officer, however, adopted the value of the cylinders at Rs. 11,85,066 being 90 per cent. of the purchase price of Rs. 13,16,740. On appeal to the CWT(A), it had been pointed out that for the assessment year 1983-84 the Tribunal had accepted the value of the gas cylinders of similar nature at "nil" value and accordingly pleaded to allow the appeal. The CWT(A), did not accept the plea of the assessee that the value of cylinders be taken at nil. He, however, held that the valuation made by the Assessing Officer at 90 per cent of the cost was not based on relevant material, and since assessee had admitted the value of the cylinders to be at 50 per cent of the cost, CWT(A) adopted the same value for purposes of assessment.
6. The assessee, still not being satisfied, is in appeal before us. The learned counsel for the assessee contended that the issue relating to valuation of cylinders was covered by the decision of the Tribunal in assessee's own case for the assessment year 1983-84 in WTA Nos. 1369 & 1370 (Bom.)/90 vide order dated 13-4-1992. When confronted as to whether the value had been determined in accordance with Schedule III to the Wealth-tax Act, 1957, the learned counsel fairly conceded that Schedule III was incorporated with effect from assessment year 1989-90 and accordingly the valuation had not been done in accordance with the aforementioned Schedule. It was, however, contended that the value as per Schedule III also works out to be "nil" as disclosed by the assessee. In this connection, our attention was drawn to Schedule III, Rule 14 sub-rule (2)(a). It was explained that depreciation @ 100 per cent was allowed in respect of gas cylinders under the provisions of the Income-tax Act, 1961, and accordingly the written down value of the gas cylinders was "nil". As per Rule 14(2) of Schedule III, the value of any asset on which depreciation is admissible is to be taken as its written down value, contended the learned counsel for the assessee. It was further contended that Rule 14(2)(b) of Schedule III to Wealth-tax Act, 1957, is inapplicable in respect of assets where the written down value is "nil". (The learned counsel contended that since the written down value of gas cylinders was "nil", 20 per cent of the same was not workable). In such circumstances, Rule 14(2)(b), according to the learned counsel, is unworkable and as such, it cannot be invoked in the case of the assessee. Relying upon the following decisions of the Supreme Court, the learned counsel contended that breaking down the rules is not permissible : CIT v. Official Liquidator, Palai Central Bank Ltd. [1984] 150 ITR 539/19 Taxman 11 (SC); and Reliance was also placed on the decision of Hyderabad Bench of the Tribunal in the case of M.V.R.K. Mutyalu v. WTO [1988] 26 ITD 508 in this regard.
7. The learned counsel for the assessee further contended that as per Schedule III, the assessee's case is much stronger than as per section 7 as it stood before the introduction of Schedule III.8. Relying upon the following decisions, the Ld. counsel contended that it was further for the revenue to establish that the market value of the cylinders exceeded 20 per cent of the written down value. Since that burden has not been discharged, Rule 14(2)(b) could not be pressed into service : CWT v. Smt. S. K. Bader [1987] 167 ITR 890/[1986] 29 Taxman 343 (Raj.), The learned counsel further contended that in assessee's own case, the Tribunal had refused to uphold the cost price of the cylinders to be the market value of the cylinders on the ground that no enquiry had been made by the Assessing Officer for determination of the market value.
9. The learned counsel further pleaded that the matter should not be sent back for the purpose of determination of the market value. Such a request made by the revenue was rejected in the case of M.V.R.K.Mutyalu (supra) and Shyam Mohan Rawat (supra). It was accordingly contended that the value of the cylinders may be accepted at "nil" as in the earlier years.
10. The learned Departmental Representative, on the other hand, contended that the decision of the Tribunal in assessee's own case is inapplicable as these were before coming into operation of Schedule III to the Wealth-tax Act, 1957. Since Schedule III is applicable according to the learned D.R., the value has got to be determined in accordance with the said Schedule. It was further contended that as per Rule 14, the procedure for determination of the value of depreciable assets is clearly provided. As per the said rule, the value of the assets is to be taken at the written down value as per the balance-sheet. It the nature of the asset is such for the valuation of which there is any provision under the Schedule, then the value has got to be determined in accordance with that provision under the Schedule. After this exercise, if there is difference between the written down value and the value determined in accordance with any other provision under Schedule III by more than 20 per cent then the higher value is to be adopted.
When there are no provisions under Schedule III to determine the value of assets, then the value has to be determined under Rule 20 of Schedule III. Rule 20 of Schedule provides for estimation of the value to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date. If the difference between the value determined under Rule 20 and the value as per Rule 14(2)(a) is more than 20 per cent, then the higher value is to be adopted. Replying to the contentions raised on behalf of the assessee that Rule 14(2)(b) is not workable in the case of assets where 100 per cent depreciation is allowable, the learned D.R. contended that income-tax and wealth-tax are to separate statutes and the value has got to be adopted as per the Wealth-tax Act for the purposes of wealth-tax. The mere fact that the value as per the Income-tax Act, has been adopted at "nil" is no bar for adoption of higher value under the Wealth-tax Act, as determined in accordance with Schedule III to the Wealth-tax Act, 1957. It was further contended that the decisions cited on behalf of the assessee are inapplicable as in this case the assessee had herself requested the Assessing Officer as per letter dated 17-3-1993 to adopt the value of the cylinders at 50 per cent of the cost and the CWT(A) has upheld the said value as disclosed by the assessee. There was thus no merit in the appeal of the assessee, contended the learned D.R.11. We have given our careful consideration to the rival contentions.
Since, it has been conceded that the decisions of the Tribunal in assessee's own case for earlier years are not based on Schedule III to the Wealth-tax Act, 1957, we proceed to consider as to whether the value adopted by the CWT(A) for the year under appeal is in consonance with Schedule III. Schedule III to the Wealth-tax Act, 1957, provides the procedure for determination of the value of assets for purposes of assessment under the Wealth-tax Act, 1957. Certain specific rule have been made for determination of the value of some properties such as immovable property, value of shares or debentures of companies valuation of interest in firm or Association of Persons, computation of net wealth of the firm or Association and its allocation amongst partners or members, valuation of life interest and valuation of jewellery, etc. There is a residuary rule, namely, Rule 20, for valuation of assets in other cases. This rule provides that "the value of any assets other than cash, being an asset which is not covered by rules 3 to 19 for the purposes of this Act shall be estimated to be the price which, in the opinion of the Assessing Officer it would fetch if sold in the open market on the valuation date." 12. Rule 14 of Schedule III provides the procedure for global valuation of assets of business. It provides for adoption of the value of assets of business as per the balance-sheet subject to certain adjustments as provided under sub-rule (2) of rule 14.
"(a) the value of any asset as disclosed in the balance-sheet shall be taken to be - (i) in the case of an asset on which depreciation is admissible, its written-down value; (b) where the value of any of the assets referred to in clause (a), determined in accordance with the provisions of this Schedule as applicable to that particular asset or if there are no such provisions, determined in accordance with rule 20, exceeds the value arrived at in accordance with clause (a) by more than 20 per cent, then the higher value shall be taken to be the value of the asset".
14. Before we proceed further, it may be pertinent to mention that there was a controversy raised by the Departmental Representative as to whether the gas cylinders were reflected in the balance-sheet or not.
The learned counsel for the assessee insisted that the gas cylinders were reflected in the balance-sheet with 'nil' value. The copy of the balance-sheet is not available on record. We have, therefore, proceeded on the basis of the statement made by the learned counsel for the assessee that the value of the gas cylinders is disclosed in the balance-sheet at "nil" and, therefore, in our view sub-rule (c) of Rule 14 is not material for our consideration. Reverting back to Rule 14(2)(a) and (b), it is observed that the assessee had claimed 100 per cent depreciation on gas cylinders. Thus, the value as per Rule 14(2)(a) would be 'nil'.
Now, we have to work out the value of cylinders as per Rule 14(2)(b).
It is observed that there is no special provision under Schedule III for valuation of gas cylinders. As such, one has to fall back on the residuary rule, namely, rule 20 of Schedule III, for valuation of the gas cylinders. We have already reproduced rule 20 which provides for determination of the value as may be estimated by the Assessing Officer which, in his opinion, it would fetch if sold in the open market. In other words, under Rule 20, the market value of the asset has got to be estimated by the Assessing Officer. In this case the Assessing Officer had estimated the value of the gas cylinders by deducting 10 per cent out of the total cost of cylinders (the assets had been purchased during the year under appeal). The CWT(A) has not approved this valuation as it is not supported or based on relevant material.
However, the CWT(A) has held that since the assessee had admitted the market value of the cylinders to be at 50 per cent of the cost and therefore, the same should be taken as the market value of the cylinders. Thus, for the purposes, of the present controversy, the value determined under Rule 20 is 50 per cent of the cost of the cylinders, i.e., Rs. 6,58,370. Now we have got the value as per Rule 14(2)(a) as well as under Rule 14(2)(b) as under :Value under rule 14(2)(a) = Nil 15. We now proceed to consider as to whether the value determined under rule 14(2)(b) exceeds, the value determined under Rule 14(2)(a) by more than 20 per cent. The value under rule 14(2)(a) has been worked out at 'Nil' value works out to zero. Any amount exceeding zero would be more than 20 per cent of 'Nil' value. The value determined under rule 14(2)(b) is Rs. 6,58,370 which is much more than 20 per cent of the value determined under rule 14(2)(a). Therefore, the higher value is to be adopted for purposes of assessment as per Rule 14(2)(b) of Schedule III to the Wealth-tax Act, 1957. The contention raised on behalf of the assessee that Rule 14(2)(b) is unworkable and its breaking down is not permissible, in our considered view, is not well founded. The intention of the legislature is very clear. When the difference between the written down value and the market value is less than 20 per cent, it is provided that the written down value may be adopted as the market value. However, where the difference between the written down value and the market value is more than 20 per cent, the higher value has got to be adopted. In a case where 100 per cent depreciation is allowed under the provisions of Income-tax Act, 1961, the value as per the balance-sheet would work out to be 'nil'. Such assets need not be excluded from the purview of Wealth-tax Act, 1957. The Supreme Court in the case of CWT v. Hindustan Motors Ltd. [1976] 104 ITR 430 held that the value disclosed in the balance-sheet need not be the value of the assets assessable to wealth-tax. The observations of their lordships at page 434 may be quoted below : "If the contention of the learned counsel is accepted it will be tantamount to laying down a rule that in the determination of the value of assets the written down value allowable under the Income-tax Act, shall always be the value of the assets. In that event there would be no necessity for any exercise by the Wealth-tax Officer. This is, however, not the intention of section 7, which clearly shows that the Wealth-tax Officer may make such adjustments in the value of the assets shown in the balance-sheet in accordance with the requirements of the circumstances disclosed by the assessee".
In the case of Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485/16 Taxman 1, Their Lordships of the Supreme Court had an occasion to consider Rule 2B(2) of Wealth-tax Rules which is more or less similar to Rule 14(2)(b) of Schedule III to the Wealth-tax Act, 1957. In this case, it was held as under - "Rule 2B(2) clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 per cent, the value of that asset for the purposes of rule 2A shall be taken to be its market value. It is clear, therefore, that even where the Wealth Tax Officer has resorted to section 7(2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance-sheet are not sacrosanct and when the market value exceeds the written value or book value by more than 20 per cent, the Wealth Tax Officer has to adopt the market value of such assets for the purposes of the Act".
15.1 The aforementioned decision do not leave us in doubt that where the difference between the written down value and the market price is more than 20 per cent, the Assessing Officer is duty bound to adopt the higher value.
16. The contention raised on behalf of the assessee that since the written down value is zero, therefore, 20 per cent different is not workable, does not appeal to us. In the case of assets, the written down value of which is "nil", if it is found that the market value is more than "nil", the higher value has got to be adopted as anything more than zero would exceed "nil" value by than 20 per cent. We, however, agree with the contention raised on behalf of the assessee that for the purpose of applicable of Rule 14(2)(b), it is necessary for the Assessing Officer to make an enquiry for determination of the market value and base his decision on relevant material. In this case, the Assessing Officer had evidence to show that the purchase value of the cylinders was Rs. 13,16,740. The Assessing Officer had the offer of the assessee of adopting the market value of the cylinders at 50 per cent of the cost of the cylinders. There is no other material available on record. The Assessing Officer had adopted 90 per cent of the purchase value. The CWT(A) has found no material for adoption of the value at 90 per cent. However, when assessee herself has admitted the value of the cylinders at 50 per cent, no further material is required to establish that the value of the cylinders was at least the value admitted by the assessee, i.e., Rs. 6,58,370. The assessee has not gone back at any stage before the Assessing Officer from the offer of assessment at the value of Rs. 6,58,370. In these circumstances we are of the firm view that the CWT(A) was justified in directing the Assessing Officer to adopt the value offered by the assessee in her letter dated 17-3-1993, to be the market value for the purpose of rule 20 read with rule 14(2)(b). The decisions relied upon by the learned counsel relating to Assessing Officer's duty to make an enquiry for determination of market value are found to be inapplicable to the facts of this case. The principle laid down in the decided cases relied upon by the learned counsel for the assessee is not disputed. Since in this case, the value ultimately adopted on the basis of the decision of the CWT(A) is the value as indicated by the assessee herself, there was no need for the Assessing Officer to make further enquiry if the same was to be adopted. However, for adopting of higher value than admitted by the assessee, it was incumbent upon the Assessing Officer to make further enquiry and place material on record to justify still higher value. The CWT(A) has allowed relief to the assessee of Rs. 5,26,696 on the basis that such addition lacked adequate material. In other words, the principles laid down by various High Courts and Benches of ITAT have been taken into account in deciding the issue in the case of the appellant by the learned CWT(A).
17. Similarly, the other decisions relating to refusal to send back the matter to the Assessing Officer are inapplicable to the facts of this case.
18. For the aforementioned reasons, we uphold the decision of the CWT(A) on this issue.