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V. Muthukrishnan (Deceased) (by Legal Representatives) Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 4 of 1973 (Reference No. 3 of 1973)
Judge
Reported in[1979]119ITR77(Mad)
ActsFinance Act, 1965 - Sections 68; Income Tax Act
AppellantV. Muthukrishnan (Deceased) (by Legal Representatives)
RespondentCommissioner of Wealth-tax
Appellant AdvocateS.V. Subramaniam, Adv. for ;Subbaraya Iyer, Padmanabhan and Ramamani
Respondent AdvocateNalini Chidambaram, Adv.
Excerpt:
- - we prefer to follow the views of the majority of the high courts especially when we are also satisfied on the statutory construction that that was the more reasonable view to take......wealth-tax act, 1957. the wealth-tax officer was, therefore, in error in not having deducted the income-tax liability on the various valuation dates for the four years in question on the amounts declared by the assessees under section 68(2) of the finance act, 1965.' 3. we have chosen to quote this judgment since this was an independent view taken without reference to the earlier judgments but purely on the construction of the statutory provisions and also on the principles laid down by the supreme court in h. h. setu parvali bayi v. cwt : [1968]69itr864(sc) and kesoram industries and cotton mills ltd. v. cwt : [1966]59itr767(sc) . as against this preponderance of view, we have one decision of the gujarat high court in cwt v. ahmed ibrahim sahigara : [1974]93itr288(guj) , taking a.....
Judgment:

V. Ramaswami, J.

1. The following question has been referred at the instance of the assessee under Section 27(1) of the W.T. Act, 1957 :

' Whether, on the facts and in the circumstances of the case, the tax payable under the Income-tax Act, on the amount disclosed under Section 68 of the Finance Act of 1965, is deductible in computing the net wealth for the assessment years 1960-61 to 1965-66? '

2. The facts leading to the reference are as follows:

In pursuance of the Finance Act of 1965, the assessee made a declaration disclosing voluntarily an income of Rs. 3 lakhs derived by him prior to the assessment year 1960-61, and offering the same for tax. This voluntary disclosure was accepted by the revenue and the assessee paid tax at 60% amounting to Rs. 1,80,000 thereon. He had already filed wealth-tax returns for the assessment years 1960-61 to 1965-66. After the voluntary disclosure, the WTO issued notice to the assessee calling upon him to file revised returns. In the revised returns, the assessee included a sum of Rs. 1,20,000, which was the balance out of Rs. 3 lakhs after deducting the tax of Rs. 1,80,000 paid in the voluntary disclosure scheme in each one of these assessment years under the W.T. Act. The WTO considered that the tax amount of Rs. 1,80,000 paid was not liable to be deducted in computing the wealth of the assessee and, accordingly, assessed on the basis of Rs. 3 lakhs as the undisclosed wealth. Aggrieved by this order, the ^assessee preferred an appeal to the AAC. The AAC also held that the assessee was not entitled to the deduction of Rs. 1,80,000 in computing the net wealth of the assessee. This view was upheld by the Tribunal also. It is under those circumstances, the above question has been referred to us. The matter is not res integra and it is covered by a number of authorities. The earliest one is the decision of the Punjab High Court in CIT v. Vijay Kumar Behal [1971] 81 ITR 202. It was held therein under almost similar circumstances that in determining the assessee's net wealth, the assessee is entitled to the deduction of the income-tax payable by him on the concealed income included in his wealth. This was for the reason that the liability to pay income-tax arises on the true income and true income will include both disclosed and undisclosed income. This view was followed by the Delhi High Court in CWT v. Giridhari Lal : [1975]99ITR79(Delhi) , CWT v. Keskardeo S. Morarka : [1977]107ITR576(Bom) and CWT v. B. K. Sharma : [1977]110ITR902(All) . A Division Bench of the Kerala High Court, towhich one of us was a party, had to consider a similar question in W.A. Nos. 279 and 280 of 1971, and by a judgment dated June 6, 1973 (since reported as Babu Naidu v. WTO : [1978]112ITR341(Ker) it was held (p. 345): ' When we read the provisions in the above section with Section 4 of the Income-tax Act, 1961, we have irresistibly to come to the conclusion that the Finance Act, 1965, only provided the rate of tax that is to be imposed and also provided that it should be imposed on the income declared by the assessee. The latter part is only a machinery provision and the earlier provision provides what is envisaged by Section 4 of the Income-tax Act, 1961, that the Finance Act, 1965, shall declare the rates applicable. Neither of these things can alter the liability, a liability that arises and stems from the existence of the Income-tax Act containing the charging section, Section 4. We have no doubt that the liability is a liability that arises on the valuation date (vide Supreme Court decision in H. H. Setu Parvati Bayi v. CWT : [1968]69ITR864(SC) , and that that liability was a debt owed by the assessee on the valuation dates falling under Section 2(m) of the Wealth-tax Act, 1957. The Wealth-tax Officer was, therefore, in error in not having deducted the income-tax liability on the various valuation dates for the four years in question on the amounts declared by the assessees under Section 68(2) of the Finance Act, 1965.'

3. We have chosen to quote this judgment since this was an independent view taken without reference to the earlier judgments but purely on the construction of the statutory provisions and also on the principles laid down by the Supreme Court in H. H. Setu Parvali Bayi v. CWT : [1968]69ITR864(SC) and Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) . As against this preponderance of view, we have one decision of the Gujarat High Court in CWT v. Ahmed Ibrahim Sahigara : [1974]93ITR288(Guj) , taking a contrary view. We prefer to follow the views of the majority of the High Courts especially when we are also satisfied on the statutory construction that that was the more reasonable view to take. Accordingly, we answer the question in the affirmative and in favour of the assessee. The assessee will be entitled to his costs. Counsel's fee is Rs. 250.


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