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Century Spg. and. Mfg. Co. Ltd. Vs. Commissioner of Income-tax, Bombay City-i - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 50 of 1968
Judge
Reported in[1979]116ITR301(Bom)
ActsWealth-tax - Sections 40; Income Tax Act, 922 - Sections 10(1); Income Tax (Amendment) Act, 1972
AppellantCentury Spg. and. Mfg. Co. Ltd.
RespondentCommissioner of Income-tax, Bombay City-i
Appellant AdvocateS.J. Mehta, Adv.
Respondent AdvocateR.J. Joshi, Adv.
Excerpt:
.....of wealth tax after 01.04.1957 will not be deductible in computing total income - held, amount of wealth tax paid could not be permissible deduction. (ii) professional fees - income tax (amendment) act, 1972 - assessee claimed amount paid as professional fees in case relating to wealth tax as deduction - wealth tax levied in respect of assets of trading company - after passing of amendment act professional fees cannot be claimed as deduction - held, assessee entitled to claim professional fees as deduction as amendment act passed much later from date of income tax officer order. - .....of the case, wealth-tax payable by the assessee under the w.t. act, 1957, of rs. 3,00,528 for the assessment year 1959-60, is an allowable deduction under s. 10(1) of the indian i.t. act, 1922, in arriving at the total income for the said assessment year (2) whether, on the facts and in the circumstances of the case, professional fees of rs. 1,500 in regard to the said wealth-tax assessment is an allowable deduction in arriving at the total income for the assessment year 1959-60 ?' 2. the facts in this case as found by the tribunal are that in respect of the assessment year 1959-60, the assessee claimed a deduction of rs. 3,00,528 as expenditure to be taken note of while computing the income of the assessee as the said amount was paid by way of wealth-tax. the assessee also claimed rs......
Judgment:

Chandurkar, J.

1. The two questions which have been referred the instance of the assessee are :

'(1) Whether, on the facts and in the circumstances of the case, wealth-tax payable by the assessee under the W.T. Act, 1957, of Rs. 3,00,528 for the assessment year 1959-60, is an allowable deduction under s. 10(1) of the Indian I.T. Act, 1922, in arriving at the total income for the said assessment year

(2) Whether, on the facts and in the circumstances of the case, professional fees of Rs. 1,500 in regard to the said wealth-tax assessment is an allowable deduction in arriving at the total income for the assessment year 1959-60 ?'

2. The facts in this case as found by the Tribunal are that in respect of the assessment year 1959-60, the assessee claimed a deduction of Rs. 3,00,528 as expenditure to be taken note of while computing the income of the assessee as the said amount was paid by way of wealth-tax. The assessee also claimed Rs. 1,500 which represented professional fees expended in respect of the case relating to wealth-tax. This was, however, disallowed both by the ITO and the AAC. When the matter was dealt with by the Tribunal in appeal by the assessee, the decision of the Supreme Court in Travancore Titanium Products Ltd. v. CIT : [1966]60ITR277(SC) held the field. In this case, the Supreme Court had held that the tax on the wealth of the assessee was not allowable as business expenditure under s. 10(2)(xv). Consequently, the deduction with regard to the amount of the wealth-tax was held to be impermissible and so also the amount claimed to be deductible by way of professional fees in respect of the wealth-tax assessments.

3. The decision of the Supreme Court in Travancore Titanium Products Ltd.'s case : [1966]60ITR277(SC) was superseded by another decision of the Supreme Court in Indian Aluminium Co. Ltd. v. CIT : [1972]84ITR735(SC) , in which the Supreme Court held that the wealth-tax paid by the assessee, which is a trading company, on assets held by it for the purpose of its business was deductible as business expense in computing the assessee's income from business and that when a person has a dual capacity of a trader-cum-owner and he pays tax in respect of the property, which is used for the purpose of trade, the payment must be taken to be in the capacity of a trader according to ordinary commercial principles.

4. If this was the law of the land declared by the Supreme Court in 1972, there is no doubt that the first question would have been required to be answered in favour of the assessee and the consequence would then have been that even the second question would have had necessarily to be answered in favour of the assessee.

5. It appears, however, that Parliament intervened after the decision of the Supreme Court and by s. 4 of the I.T. (Amend.) Act, 1972, the following provision was made so as to operate retrospectively :

'Wealth-tax not deductible in computing the total income for certain assessment years. -Nothing contained in the Indian Income-tax Act, 1922 (XI of 1922), shall be deemed to authorise, or shall be deemed ever to have authorised, any deduction in the computation of the income of any assessee chargeable under the head 'Profits and gains of business, profession or vocation' or 'Income from other sources' for the assessment year commencing on the 1st day of April, 1957, or any subsequent assessment year, of any sum paid on account of wealth-tax.'

6. We are concerned in this case with the assessment year 1959-60. It is not possible to dispute that the provision reproduced above would by virtue of retrospective operation affect the proceedings for assessment in respect of the assessment year 1959-60. The result, therefore, is that in view of this provision, the amount of wealth-tax paid by the assessee could not be a permissible deduction.

7. However, so far as the professional fees in respect of the said wealth-tax assessment is concerned, the matter, in our view, will have to be viewed in a slightly different manner in view of the peculiar facts of the case. The law declared by the Supreme Court in the Indian Aluminium Co. Ltd.'s case : [1972]84ITR735(SC) was factually the law of the land on the date on which not only the order of the ITO was passed but even on the date on which the orders of the AAC and the order of the Tribunal were passed. On that day, the correct legal position was that the wealth-tax was deductible because the amendment in the I.T. Act came much later. It cannot, therefore, be said that the assessee was not justified in claiming the amount of professional fees in relation to the wealth-tax proceedings since the wealth-tax levied was itself in respect of the assets of the trading company. The fact that further by a legislative provision the decision of the Supreme Court came to be rendered ineffective would be no ground for holding that the assessee was not entitled to deduct the expenses on account of professional fees in regard to the wealth-tax assessment.

8. As a result, the answer to the first question must be in the negative and against the assessee and the answer to the second question must be in the affirmative and in favour of the assessee. Questions answered accordingly. In the circumstances of the case, there will be no order as to costs.


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