1. DIXIT C. J.-This consolidated reference under section 27(1) of the Wealth Tax Act, 1957 (hereinafter referred to as the "Act"), by the Appellate Tribunal at the instance of the assessee, Central India Machinary Manufacturing Co. Ltd., Gwalior, arises out of the Tribunal's orders disposing of the assessee's appeals arising out of the wealth tax assessment proceedings for the years 1957-58 and 1958-59. The question which the Tribunal has placed before us for decision and which is common to the two references is as follows: "Whether, on the facts and in the circumstances of the case, the initial and additional depreciation granted under sec--tions 10(2)(vi)(a), (b), (c) and 10(2)(via) should be allowed for computing the not wealth of the assessee?"
2. The material facts are that the assessee carries on the business of manufacturing automatic looms for textile industry and other machinery components used in weaving and finishing processes in textile industry. In the balance-sheets of the company, valuation of assets as on the valuation date was shown at Rs. 98,94,881 for the assessment year 1957-58 and Rs. 1,14,36,560 for the assess--ment year 1958-59. In the balance-sheets the assessee had made no deduction on account of depreciation. The Wealth Tax Officer, therefore, rejected the claim of the assessee that the valuation of its assets for the purposes of its assessment to wealth tax should be made after allowing depreciation according to the provisions of the Income-tax Act, 1922.
3. Having heard learned counsel for the parties, we have reached the conclusion that the Tribunal was right in holding that the initial and additional depreciation permissible under sections 10(2)(vi)
4. (a), (b) and (c) and 10(2)(via) of the Income-tax Act, 1922, could not be taken into account in determining the not value of the assessee under section 7(2)(a) of the Act. Under section 7(2)(a), as it stood at the material time, it is the not value of the assets of the business as a whole that has to be determined having regard to the balance-sheet of the business as on the valuation date after making such adjustments therein as the circumstances of the case may require. In ascertaining the true value of the assets, depreciation which is allowable for income-tax purposes is allowed for the reason that fixed assets such as plant and machinery run out their utility by lapse of time and wear and tear. As observed by a Division Bench of this Court in Commissioner of Wealth tax v. Swadeshi Cotton & Flour Mills Ltd. ((1968) 69 I T R 543): "Normally, fixed assets such as plant and machinery run their utility by lapse of time and wear and tear. There is a permanent and continuing diminution in the quality or value of such assets. A machine may be kept in high state of efficiency, i.e., by constant overhauling and prompt replace- -ment of parts, such being always necessary; but the expenditure on upkeep and preservation can never be a substitute for making provision for the time when the machine is merely a bundle of scrap-iron. These assets suffer depreciation, although the process may be invisible or gradual. The maintenance of such assets in a state of efficiency is neither a substitute for the depreciation in value nor is it sufficient for ensuring their replacement. There is no manner of doubt that the valuation given in the balance-sheet was not a true index of the real value of the assets. The Tribunal had, therefore, the right as well as the duty to make such adjustments, as the circum-- stances required."
5. The nature of depreciation allowed under sections 10(2)(vi)(a), (b) and (c) and 10(2)(via) is, however, different. It is not on account of any wear and tear of the fixed assets. It is initial and additional depreciation intended to give incentive to industries. It is quite independent and over and above the normal depreciation allowed on account of wear and tear of the fixed assets. It is, therefore, plain that in its very nature the depreciation spoken of in sections 10(2)(vi)(a), (b) and
(c) and 10(2)(via) cannot be allowed in computing the not value of the assets under section 72(2)
(a) of the Act.
6. To us it seems that, so far as this Court is concerned, the matter is really concluded by the decision of this Court in Commissioner of Wealth Tax v. Swadeshi Cotton & Flour Mills Ltd. In that case the question which was referred to this Court for decision was: "Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the value of the assets should be taken to be the written down value according to income-tax assessm ent, but so as to exclude therefrom initial and extra-normal depreciation and develop--ment rebate?"
7. For those reasons, our answer to the question referred to us is in the negative. The assessee shall pay costs of this reference. Counsel's fee fixed at Rs. 150.