Skip to content


Punj Sons (P) Ltd. Vs. Deputy Commissioner of Income Tax - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
AppellantPunj Sons (P) Ltd.
RespondentDeputy Commissioner of Income Tax
Excerpt:
.....40(a)(iia) provides as under : explanation--for the purpose of this sub-clause, "wealth-tax" means wealth-tax chargeable under the wt act, 1957 (27 of 1957), or any tax of a similar character chargeable under any law in force in any country outside india or any tax chargeable under such law with reference to the value of the assets of, or the capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or profession are allowed as deduction in computing the amount with reference to which such tax is charged, but does not include any tax chargeable with reference to the value of any particular asset of business or profession." in view of the supreme court decision in acc ltd. case (supra), last part of the explanation i.e., "but does.....
Judgment:
1. This is an appeal by the assesses which is a private limited company engaged in the business of manufacture and sale of Lloyd wool and other allied products. It also derived income from dividend, rent, commission, etc.

2. Ground No. 1 is directed against the disallowance of the claim of deduction amounting to Rs. 1,55,820 paid in pursuance to Section 40 of the Finance Act, 1983. The AO disallowed the claim on the ground that such deduction was prohibited by Section 40(a)(iia) of the Act.

3. In the first, appeal, it was submitted on behalf of the assessee that the claim was allowable -in view of the Supreme Court's decision in Associated Cement Companies Ltd. v. Director of Inspection Customs & Central Excise case reported in (1985) 153 ITR 322 (SC). The learned CIT(A) did not accept the assessee's contention. He observed that the wealth-tax in question paid in pursuance to Section 40 of the Finance Act, 1983 was wealth-tax and was covered by the provisions of Section 40(a)(iia) of the Act, and, therefore, it was not admissible for deduction.

4. Aggrieved further the assessee has come up in second appeal before this Tribunal.

5. The learned authorised representative of the assessee submitted that the AO and the learned CIT(A) had not correctly appreciated the provisions of Section 40 of the Finance Act, 1983. He added that under Section 40 of the Finance Act, 1983, wealth-tax was leviable on specific assets and not on total wealth of the assessee and, therefore, this wealth-tax was not covered under the provisions of Section 40(a)(iia) of the Act. He relied on the Supreme Court decision in the case of ACC Ltd. (supra) and Delhi High Court decision Associated Cement Companies Ltd- v. Director of Inspection, Customs & Central Excise 6. The learned Departmental Representative, on the other hand, supported the orders of the AO and the learned CIT(A).

7. We have considered the rival submissions and the materials on the file. We are of the view that the issue in the present case is covered by the Supreme Court decision in the case of AAC Ltd (supra). Section 40(a)(iia) prohibits deduction of "any sum paid on account of wealth-tax". However, Explanation to Section 40(a)(iia) provides as under : Explanation--For the purpose of this sub-clause, "wealth-tax" means wealth-tax chargeable under the WT Act, 1957 (27 of 1957), or any tax of a similar character chargeable under any law in force in any country outside India or any tax chargeable under such law with reference to the value of the assets of, or the capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or profession are allowed as deduction in computing the amount with reference to which such tax is charged, but does not include any tax chargeable with reference to the value of any particular asset of business or profession." In view of the Supreme Court decision in ACC Ltd. case (supra), last part of the Explanation i.e., "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession" has to be read as in continuation of the beginning part of the Explanation i.e., "for the purpose of this sub-clause wealth-tax means wealth-tax chargeable under the WT Act, 1957 (27 of 1957)". Thus, these two parts of the Explanation put together would read as under: "For the purpose of this sub-clause wealth-tax means wealth-tax chargeable under the WT Act, 1957 (27 of 1957), but does not include any tax chargeable with reference to the value of any particular asset of the business or profession".

8. Accordingly, the wealth-tax chargeable with reference to the value of any particular asset of the business or profession will not be covered by the prohibition clause of Section 40(a)(iia) of the IT Act, 1961, and as such wealth-tax could be admissible for deduction.

Admittedly, the wealth-tax paid in pursuance to Section 40 of the Finance Act, 1983, was with reference to the value of particular asset of the business of the assessee. Under Section 40 of the Finance Act, 1983, total wealth of the company was not chargeable to wealth-tax. It was only the assets specified under Sub-section (3) of Section 40 of the Finance Act, 1983, which was chargeable to wealth-tax. 'Therefore, the exception part of Explanation to Section 40(a)(iia) of the Act referred to above became applicable in the present case and the wealth-tax amounting to Rs. 1,55,820 paid by the assessee in pursuance to Section 40 of the Finance Act, 1983, was admissible for deduction.

9. In the above view of the matter, we direct the AO to allow deduction of Rs. 1,55,820.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //