Case: T.S. Krishna Vs. Commissioner of Income Tax Madras

of Section 40 which Explanation mutatis mutandis is by reference to be read into sub-s. (1A) of Section 58 so far as may be applicable in computing the income chargeable under the income from other sources as they apply in computing the income chargeable under the head "profits and gains of business and profession" saves the excess profits tax chargeable with reference to the value of any particular asset of the business or profession. In other words, this contention amounts to saying that the legislature left untouched the decision of this Court in Indian Aluminium Co. 84 ITR 735 = (AIR 1972 SC 1880 ). Reliance for this submission is based on the words "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession" in the last part of the Explanation to the said sub-clause because according to him the prohibition to deduction under S. 2 of the Amending Act is the amount paid on account of wealth-tax which expression has been given an extended meaning to cover the wealth-tax payable under the wealth-tax Act in this country as well as taxes of similar character and other taxes on assets of or the capital employed in the business or profession carried on by the assessee payable under the law of any country outside India. The learned advocate further proceeds to submit that the Explanation however excludes from the prohibition to deduct wealth-tax under the sub-chause or sub-section the tax chargeable with reference to a particular asset whether such charge is either under the laws of this country i. e. the Wealth-tax Act or under the laws in force outside India. There is no warrant for this construction because the words upon which reliance has been placed are related to the tax chargeable under a law in force in any country outside India with reference to the value of the assets of a employed in a business or profession carried on by the assessee. The exclusion contemplated by the exception on which emphasis is placed is wholly unrelated to the scheme of the Wealth-tax Act because wealth-tax under the Act is not chargeable with reference to the value of any particular asset of the business or profession but under S. 3 the charge is in respect of the net wealth on the corresponding valuation date of every individual Hindu undivided family and company at the rate or rates specified in the Schedule. Net wealth under S. 2 (m) means the amount by which the aggregate value computed in accordance with the provisions of the Wealth-tax Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under that Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those specified in items (i), (ii) and (iii) of that section. Section 4 includes certain assets in the net wealth while S. 5 provides for exemption in respect of specified assets on which wealth-tax is not payable and such assets are not to be taken into account in computing the net wealth of the assessee. Section 6 concerns with the exclusion of assets and debts outside India and S. 7 deals with the determination of the value of the as sets which are to be included in the net wealth. It is thus clear that under the scheme of the Wealth-tax Act, tax is leviable not on any separate or particular asset but on the net wealth as defined under that Act. The learned advocate wanted us to read "any particular asset" in Explanation to sub-cl. (iia) of cl. (a) of S. 40 "as the aggregate of the assets as defined in net wealth" under S.2 (m).To accept such an argument would be to give a go-by to the scheme of the Wealth-tax Act where though each asset comprised in the net wealth can be separately valued under S. 7, nevertheless net wealth would be the amount by which the aggregate value of all those assets, exceed the aggregate value of debts owed by the assessee on the valuation date. Even otherwise to read the exception "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession" with the first part of the Explanation "wealth-tax means wealth-tax chargeable under the Wealth-tax Act, 1957" would not grammatically make any sense. These two read together would make the following sentence "wealth-tax" means wealth-tax chargeable under the Wealth-tax Act, 1957" "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession." As already pointed out, on the scheme of the Act there is not logical connection between the import of the two parts of that sentence, the first definitely indicates the wealth-tax chargeable under the Wealth-tax Act while the latter seeks to except a tax chargeable with reference to the value of any particular business or profession, which is not a tax leviable as such under the Wealth-tax Act and hence does not relate to that part of the Explanation where wealth-tax in sub-cl. (iia) means that it is the wealth-tax chargeable under the Wealth-tax Act. In our view, sub-section (1A) of Section 58 clearly excludes any deduction as claimed.5. Even apart from the amendment disallowing the deduction the very nature of the income from dividends in respect of which deduction of wealth tax is claimed does not, as pointed out by the High Court, bear any relationship direct or incidental to the earning of that income and cannot therefore be said to be laid out or expended exclusively for the purpose of making or earning such income within the meaning of sub-cl. (iii) of S. 57 of the Act or under the corresponding provisions of S.10 (2) (xv) of the Indian Income-tax Act, 1922.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]4. What the learned advocate seeks to contend is that the Explanation to sub-clause (iia) of cl. (a) of Section 40 which Explanation mutatis mutandis is by reference to be read into sub-s. (1A) of Section 58 so far as may be applicable in computing the income chargeable under the income from other sources as they apply in computing the income chargeable under the head "profits and gains of business and profession" saves the excess profits tax chargeable with reference to the value of any particular asset of the business or profession. In other words, this contention amounts to saying that the legislature left untouched the decision of this Court in Indian Aluminium Co. 84 ITR 735  = (AIR 1972 SC 1880 ). Reliance for this submission is based on the words "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession" in the last part of the Explanation to the said sub-clause because according to him the prohibition to deduction under S. 2 of the Amending Act is the amount paid on account of wealth-tax which expression has been given an extended meaning to cover the wealth-tax payable under the wealth-tax Act in this country as well as taxes of similar character and other taxes on assets of or the capital employed in the business or profession carried on by the assessee payable under the law of any country outside India. The learned advocate further proceeds to submit that the Explanation however excludes from the prohibition to deduct wealth-tax under the sub-chause or sub-section the tax chargeable with reference to a particular asset whether such charge is either under the laws of this country i. e. the Wealth-tax Act or under the laws in force outside India. There is no warrant for this construction because the words upon which reliance has been placed are related to the tax chargeable under a law in force in any country outside India with reference to the value of the assets of a employed in a business or profession carried on by the assessee. The exclusion contemplated by the exception on which emphasis is placed is wholly unrelated to the scheme of the Wealth-tax Act because wealth-tax under the Act is not chargeable with reference to the value of any particular asset of the business or profession but under S. 3 the charge is in respect of the net wealth on the corresponding valuation date of every individual Hindu undivided family and company at the rate or rates specified in the Schedule. Net wealth under S. 2 (m) means the amount by which the aggregate value computed in accordance with the provisions of the Wealth-tax Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under that Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those specified in items (i), (ii) and (iii) of that section. Section 4 includes certain assets in the net wealth while S. 5 provides for exemption in respect of specified assets on which wealth-tax is not payable and such assets are not to be taken into account in computing the net wealth of the assessee. Section 6 concerns with the exclusion of assets and debts outside India and S. 7 deals with the determination of the value of the as sets which are to be included in the net wealth. It is thus clear that under the scheme of the Wealth-tax Act, tax is leviable not on any separate or particular asset but on the net wealth as defined under that Act. The learned advocate wanted us to read "any particular asset" in Explanation to sub-cl. (iia) of cl. (a) of S. 40 "as the aggregate of the assets as defined in net wealth" under S.2 (m).To accept such an argument would be to give a go-by to the scheme of the Wealth-tax Act where though each asset comprised in the net wealth can be separately valued under S. 7, nevertheless net wealth would be the amount by which the aggregate value of all those assets, exceed the aggregate value of debts owed by the assessee on the valuation date. Even otherwise to read the exception "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession" with the first part of the Explanation "wealth-tax means wealth-tax chargeable underthe Wealth-tax Act, 1957" would not grammatically make any sense. These two read together would make the following sentence "wealth-tax" means wealth-tax chargeable underthe Wealth-tax Act, 1957" "but does not include any tax chargeable with reference to the value of any particular asset of the business or profession." As already pointed out, on the scheme of the Act there is not logical connection between the import of the two parts of that sentence, the first definitely indicates the wealth-tax chargeable under the Wealth-tax Act while the latter seeks to except a tax chargeable with reference to the value of any particular business or profession, which is not a tax leviable as such under the Wealth-tax Act and hence does not relate to that part of the Explanation where wealth-tax in sub-cl. (iia) means that it is the wealth-tax chargeable under the Wealth-tax Act. In our view, sub-section (1A) of Section 58 clearly excludes any deduction as claimed.5. Even apart from the amendment disallowing the deduction the very nature of the income from dividends in respect of which deduction of wealth tax is claimed does not, as pointed out by the High Court, bear any relationship direct or incidental to the earning of that income and cannot therefore be said to be laid out or expended exclusively for the purpose of making or earning such income within the meaning of sub-cl. (iii) of S. 57 of the Act or under the corresponding provisions of S.10 (2) (xv) of the Indian Income-tax Act, 1922.