1. The following question has been referred under Section 27 of the W.T. Act:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Wealth-tax Officer was justified in adopting, for the assessment year 1967-68, the equivalent in Indian rupees at the official exchange rate for the value of the wealth in Ceylon rupees, the quantum of which wealth in Ceylon rupees was not in dispute.'
2. The assessee submitted his wealth-tax return in respect of the assessment year 1967-68, corresponding to the year ending June 30, 1966. He was assessed in the status of 'individual' who is a citizen of India. He was resident and ordinarily resident. The valuation date was June 30, 1966. The assessee had certain wealth in Ceylon comprising, of a co-ownership share in immovable properties as also some bank deposits and monies due from his brother. He had shown in the return his wealth in Ceylon at a figure of Rs. 70,604 in Ceylon currency. The WTO converted the Ceylon currency into Indian currency at the official exchange rate which came to Rs. 94,139 and this was included in the net wealth of the assessee. There is no dispute about these figures.
3. The contention of the assessee is that the WTO should have taken the realisable and remittable value of foreign wealth instead of adopting the official exchange rate. In any case, the official rate of exchange was very often not realistic and did not represent the real foreign exchange rate and, therefore, only a real foreign exchange value would have to be adopted for the purpose of assessment to wealth-tax. We are unable to understand how the first part of the contention arises for consideration in this case. The argument was advanced on the basis that by some laws of Ceylon there was a prohibition from converting and repatriating the assets to India and in the case of capital repatriation of assets a single remittance of Rs. 75,000 less the foreign exchange tax was alone permitted and there was a total prohibition of the remittance of the balance. According to the learned counsel, there were also certain other restrictions relating to remittance even of income and that even such remittance of income as so permitted was subject to a scheme known as 'freeze remittance' and that, therefore, it was necessary for the WTO to have taken the realisable and remittable value of the foreign wealth instead of adopting the official exchange rate. It is true that under Section 7(1) of the W.T. Act, the value of any asset 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. As pointed out by the Supreme Court in Ahmed G. H Ariff v. CWT : 76ITR471(SC) , the phrase 'if sold in the open market' found in Section 7(1) of the W.T. Act, 1957, does not contemplate actual sale or the actual state of the market but only enjoins that it should be assumed that there is an open market and that the property can be sold in such market and on that basis the value has to be found out. It is a hypothetical case which is contemplated and the tax officer must assume that there is an open market in, which the asset can be sold. But whether the restriction on remittances would affect the realisable market value does not arise for consideration at all in this case and the assessee himself has valued his wealth in Ceylon at Rs. 70,604 Ceylon currency and this has been accepted by the WTO.
4. There is also no substance in the contention that the remittable value of foreign wealth alone should have been adopted by the WTO. The W.T. Act imposes a tax in respect of the 'net wealth' on the corresponding valuation date.'Net wealth' is defined in Section 2(m) as meaning the amount by which the correct value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee on the valuation date. The phrase 'wherever located' in Section 2(m) and the definition of the word 'asset' as including property of every description, movable or immovable, show that every asset belonging to the assessee wherever situated in the world be liable to be included as an asset of the assessee. Section 7 of the Act relating to. the determination of the valuation of the assets only speaks of the price which in the opinion of the WTO it would fetch if sold in the open market on the valuation date. It does not speak of any remittable value in the case of assets situated outside India. Thus, there is nothing in the charging section or in the definition of 'net wealth' or in Section 7(1) which indicates that only the remittable value of the asset is to be included in the net wealth. In fact, Section 31(7) clearly indicates that irrespective of the restrictions on remittance, for the purpose of assessment, the value of the asset will have to be included because that section provides that where an assessee has been assessed in respect of assets located in a country outside India the laws of which prohibit or restrict the remittance of money to India, the WTO shall not treat the assessee as in default in respect of that part of the tax which is attributable to those assets and shall continue to treat the assessee as not in default in respect of that part of the tax until the prohibition or restriction of remittance is removed.
5. We now proceed to consider the second part of the contention of the learned counsel for the assessee. In the case of foreign wealth computed in terms of foreign currency, it is necessary for working out the wealth-tax to convert the same into Indian currency as a common norm has to be arrived at for the purpose of computing the net wealth. The assessee has valued his foreign wealth at Rs. 70,604 Ceylon currency and this will have to be converted in terms of Indian currency for the purpose of computing the net wealth. In the case of money, its value can be no other than the value of that money in the legal currency. Normally, the value of money in legal currency would be that value which is equivalent at the official exchange rate. But what the learned counsel for the assessee contended is that the official rate of exchange was often not realistic and that this fact is well recognised in the financial world, and that only a realistic exchange value had to be adopted for the purpose of arriving at the net wealth. According to the learned counsel, we have an official exchange rate which is linked with the U.S. Dollar or the Pound Sterling and that with reference to the value of the U.S. Dollar or the Pound-Sterling as on the valuation date alone the real exchange value will have to be ascertained. In this connection, he also referred to some financial journals. These journals do show that in some countries no realistic exchange rate is prevailing. We agree with the contention of the assessee that on principle the real exchange value alone could be the basis for computation of the net wealth. But we do not agree with him that the WTO could not take the official rate of exchange as the real exchange value. Unless there is evidence to show--which evidence has to be produced by the assessee that the real value is different from the official rate, the WTO would be justified in taking the official exchange rate for purposes of valuation. In fact, the Supreme Court in Annamalai Chettiar v. CIT : 56ITR109(SC) accepted the principle of adopting the official exchange rate in the absence of any other basis available. This decision is sought to be distinguished on the ground that it was a decision under the I.T. Act. The learned judges of the Supreme Court did not rely on any particular provision of the I.T. Act; on general principles it was held that where property is purchased and sold in essentially different currencies, though they are current in the same country it is not possible to ascertain the real profit or loss unless there is a common standard and, in the absence of availability of any other basis, the conversion at the official rate could be adopted. Thus, while we agree that it would be open to the assessee to prove that the official exchange rate was not the real exchange value, we are of the view that the burden is on the assessee to prove that the official exchange rate does not reflect the realistic exchange value or that it was not fixed with reference to convertibility of the currency. In the absence of such evidence the conversion at the officialrate could be adopted.
6. In the instant case, the Tribunal and the WTO proceeded on the basis that the official exchange rate represented the real exchange value. They came to this conclusion not on any factual basis but as a principle of law. We have seen that the official exchange rate need not necessarily represent the real exchange value of the currency and that it is necessary to adopt the real exchange value for the purpose of computation of net wealth. In the view we take that it would be open to the assessee to prove that the official exchange rate was not the real exchange value and since the Tribunal did not proceed on factual basis, we think it desirable now to direct the Tribunal to give an opportunity to the assessee to prove the real exchange value. We cannot, therefore, answer the reference. Accordingly, we return the same to the Tribunal with a direction to re-hear the appeal after giving an opportunity to the assessee to adduce such evidence as he may choose to prove the real exchange value of the Ceylon currency in terms of Indian rupees,
7. There will be no order as to costs.