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Century Spinning and Manufacturing Co. Ltd. Vs. Commissioner of Wealth-tax Bombay City-i - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth-tax Reference No. 16 of 1972
Judge
Reported in(1982)28CTR(Bom)210; [1982]138ITR562(Bom); [1982]10TAXMAN108(Bom)
ActsIncome Tax Act 1961 - Sections 5 and 27; Wealth Tax Act 1957 - Sections 2, 3, 5 and 5(1)
AppellantCentury Spinning and Manufacturing Co. Ltd.
RespondentCommissioner of Wealth-tax Bombay City-i
Excerpt:
- - this claim of the assessee has been rejected by the wto, the aac as well as the income-tax appellate tribunal. by a general or special order to be a company for the purpose of the said act, we fail to see how the shares therein could attract the exemption contained in s......by the finance act, 1975, granted exemption in respect of the value of any shares held by an assessee-company in any other company. the material portion of cl. (h) of s. 2, which defines the term 'company', before its substitution by the finance act, 1975, with effect from 1975, ran as follows :''company' means a company as defined in section 3 of the companies act, 1956, and includes - ...(iia) a corporation established by or under a central, provincial or state act, which is declared by the central government, by general or special order, to be a company for the purposes of this act;...'3. in the present case, there is no dispute that the assessee is a company as defined in the said act. it is common ground that the said bombay state financial corporation was not a company as.....
Judgment:

Kania, J.

1. This is a reference under s. 27(1) of the W.T. Act, 1957 (referred to hereinafter as 'the said Act') in respect of the assessment years 1958-59 and 1959-60. The assessee claimed that a sum of Rs. 14,000 representing the value of the shares in the Bombay State Financial Corporation held by the assessee should be excluded from its net wealth, on the ground that this amount was exempted under the provisions of cl. (xix) of sub-s. (1) of s. 5 of the said Act. This claim of the assessee has been rejected by the WTO, the AAC as well as the Income-tax Appellate Tribunal. The question referred to us for our determination in this reference is as follows :

'Whether, on the facts and in the circumstances of the case, the applicant is entitled to deduction from the net wealth of the sum of Rs. 14,000 representing the value of shares of the Bombay State Financial Corporation under section 5(1)(xix) of the Wealth-tax Act, 1957 ?'

2. It is beyond dispute that the said shares in the Bombay State Financial Corporation of the value of Rs. 14,000 are a part of the wealth of the assessee and the only question which arises is whether the assessee is entitled to an exemption in respect of the said shares under the provisions of s. 5(1)(xix) of the said Act. It may be mentioned that the charging section under the said Act is s. 3. Section 5 grants certain exemptions. Clause (xix) of sub-s. (1) of s. 5, before its amendment by the Finance Act, 1975, granted exemption in respect of the value of any shares held by an assessee-company in any other company. The material portion of cl. (h) of s. 2, which defines the term 'company', before its substitution by the Finance Act, 1975, with effect from 1975, ran as follows :

''Company' means a company as defined in section 3 of the Companies Act, 1956, and includes - ...

(iia) a corporation established by or under a Central, Provincial or State Act, which is declared by the Central Government, by general or special order, to be a company for the purposes of this Act;...'

3. In the present case, there is no dispute that the assessee is a company as defined in the said Act. It is common ground that the said Bombay State Financial Corporation was not a company as defined in s. 3 of the Companies Act, 1956, and that it was a Corporation established under a Central Act, It is also an admitted position that the said Corporation has not been declared by the Central Govt. by a general or special order to be a company for the purpose of the said Act.

4. In view of the aforesaid provisions and the fact that the said Corporation has not been declared by the Central Govt. by a general or special order to be a company for the purpose of the said Act, we fail to see how the shares therein could attract the exemption contained in s. 5(1)(xix) of the said Act. The only contention of Mr. Mehta, the learned counsel for the assessee, is that although the said Corporation has not been declared to be a company for the purpose of the said Act, it has been declared to be a company for the purpose of the Indian I.T. Act, 1922, under the provisions of s. 143 of the State Financial Corporations Act, 1951. It was urged by him that, in view of this, it must be treated as a company also for the purposes of the said Act, because not to do so would result in an anomaly. We are afraid that this contention of Mr. Mehta has to be at once rejected. Merely because the said Corporation is declared to be a company for the purposes of the Indian I.T. Act, 1922, it cannot be said that the said Corporation must be deemed to have been declared to be a company for the purposes of the said Act, namely, W.T. Act, 1957. If there is an anomaly, as is contended by Mr. Mehta, it is for the Legislature and not the court to remedy the same. Merely because the said Corporation has been recognised as a company for the purposes of the Indian I.T. Act, 1922, we cannot assume, as is contended, that it should also be recognised as a company for the purposes of the said Act.

5. In the result, the question referred to us is answered in the negative and against the assessee. The assessee to pay to the Commissioner costs of the reference.


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