Case: Mitsui Steamship Co. Ltd Vs. C.I.T. West Bengal, Ii Calcutta

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."To this section also an explanation was added saying :"Explanation - For the purposes of this section, "wealth-tax" shall have the same meaning as is assigned to it in the Explanation to sub-clause (iia) of clause (a) of Section 40 of the principal Act."Section 5 of the Amendment Act contains a saving clause to which it is not necessary to refer for the purpose of these appeals.9. We have mentioned earlier the assessment years concerned in the instant appeals. The question is, what is the effect of the Income-tax (Amendment) Act, 1972 on these appeals. The amendments introduced do not appear to touch the principle laid down in Indian Aluminium Companys case. 84 ITR 735 = (AIR 1972 SC 1880 ) that when a person has a dual capacity of a trader-cum-owner, and he pays tax in respect of property which is used for the purpose of trade, the payment must be taken to be in the capacity of a trader. The Amendment Act only adds the sum paid on account of wealth tax to the list of amounts not deductible in computing the assessees income from business. Therefore, any amount paid by the assessee on account of a tax, other than the wealth tax on his business assets would be outside the scope of the Amendment Act and would continue to be governed by the law laid down in Indian Aluminium Companys case, 84 ITR 735 = (AIR 1972 SC 1880 ). The explanation to the new sub-cl. (iia) inserted in Section 40 of the Income-tax Act, 1961 which Section 4 of the Amendment Act adopts for the purposes of that section, defines "wealth tax" to include, inter alia besides wealth tax chargeable under the Wealth Tax Act, 1957, "any tax of a similar character chargeable under any law in force in any country outside India". The only contention raised before us on behalf of the revenue was that the nature of the tax paid by the assessees in Japan on their business assets is similar to the wealth tax payable under the Wealth Tax Act, 1957. This leads to a comparison of the two statutes. Wealth Tax Act, 1957 and the Local Tax Law of Japan, to find out whether they are of a similar character.The supplementary statement of case drawn up by the Tribunal pursuant to an order of this Court dated Apri1 11, 1973 discloses that the assets belonging to the appellants with which we are concerned in these appeals were all used by them in their business during the relevant previous years and also that the payment of tax under the Japanese law was incidental to the carrying on of the business of the assessees.10. From an examination of the provisions contained in Book Four of the Japanese Statute, it appears to us that there is a basic difference between the Wealth Tax Act, 1957 and the Local Tax Law of Japan. Wealth Tax in India is charged on the net wealth of the assessee. Net wealth as defined in Section 2 (m) of the Wealth Tax Act, 1957 means broadly, the aggregate value of all the assets, wherever located, belonging to the assessee minus the total amount of the debts. With certain exceptions, owed by him. Generally speaking by the value of an asset, other than cash, is meant its market value. Assets has been defined in clause (e) of Section 2 of the Act as including property of every description. Moveable or immovable, with certain specified exemptions. Wealth Tax in India is a national tax charged by the Central Government. The municipa1 property tax in Japan is imposed on property as defined in Article 341 (1). In this definition, Property includes only land, houses and depreciable assets and not property of every description. Depreciable assets has been defined in Article 341 (4), inter alia, as assets other than land and house which can be used for business purpose, but these assets again exclude all depreciable intangible property and property which are the objects of other taxes like automobiles, bicycles and carts. Article 342 lays down that the municipal property tax shall be imposed on property by the city, town or village in which the property concerned is located and provides that with respect to vessels, vehicles and other objects similar in nature which are included in depreciable assets the city town and village in which the principal port of anchorage or regular keeping place is located shall be the city, town or village authorised to impose the municipal property tax Further, it appears that under the Japanese law tax is charged at the standard rate of 1.4 per cent on the value of the Property computed in the manner laid down in the statute providing the taxable basis, and in certain special cases it may go up to 2.5 per cent., which is the maximum; in India, the rates of wealth tax vary increasing progressively with the amount of net wealth of the assessee.11. The broad features of the two statutes we have noted above reveal their basic dissimilarity. Unlike the wealth tax in India, the municipal property tax of Japan is a local tax imposed on certain specified properties by the city, town or village in which the properties are located, The wealth tax is a national tax chargeable on the net wealth of a person with certain specified exemptions. The difference in the manner of determination of the taxable basis of the properties and the rates of taxation emphasize the basic difference between the two taxes. Of course, there are certain points of similarity between the two laws. as there must be, both being taxing statutes, but these similarities do not remove the fundamental difference in the aim, object and the basic structure of the two Acts.

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

Explanation:
1[ds]The amendments introduced do not appear to touch the principle laid down in Indian Aluminium Companys case. 84 ITR 735   = (AIR 1972 SC 1880  ) that when a person has a dual capacity of a trader-cum-owner, and he pays tax in respect of property which is used for the purpose of trade, the payment must be taken to be in the capacity of a trader. The Amendment Act only adds the sum paid on account of wealth tax to the list of amounts not deductible in computing the assessees income from business. Therefore, any amount paid by the assessee on account of a tax, other than the wealth tax on his business assets would be outside the scope of the Amendment Act and would continue to be governed by the law laid down in Indian Aluminium Companys case, 84 ITR 735   = (AIR 1972 SC 1880  ). The explanation to the new sub-cl. (iia) inserted in Section 40 ofthe Income-tax Act, 1961 which Section 4 of the Amendment Act adopts for the purposes of that section, defines "wealth tax" to include, inter alia besides wealth tax chargeable underthe Wealth Tax Act, 1957, "any tax of a similar character chargeable under any law in force in any country outside India".From an examination of the provisions contained in Book Four of the Japanese Statute, it appears to us that there is a basic difference betweenthe Wealth Tax Act, 1957 and the Local Tax Law of Japan. Wealth Tax in India is charged on the net wealth of the assessee. Net wealth as defined in Section 2 (m) ofthe Wealth Tax Act, 1957 means broadly, the aggregate value of all the assets, wherever located, belonging to the assessee minus the total amount of the debts. With certain exceptions, owed by him. Generally speaking by the value of an asset, other than cash, is meant its market value. Assets has been defined in clause (e) of Section 2 of the Act as including property of every description. Moveable or immovable, with certain specified exemptions. Wealth Tax in India is a national tax charged by the Central Government. The municipa1 property tax in Japan is imposed on property as defined in Article 341 (1). In this definition, Property includes only land, houses and depreciable assets and not property of every description. Depreciable assets has been defined in Article 341 (4), inter alia, as assets other than land and house which can be used for business purpose, but these assets again exclude all depreciable intangible property and property which are the objects of other taxes like automobiles, bicycles and carts. Article 342 lays down that the municipal property tax shall be imposed on property by the city, town or village in which the property concerned is located and provides that with respect to vessels, vehicles and other objects similar in nature which are included in depreciable assets the city town and village in which the principal port of anchorage or regular keeping place is located shall be the city, town or village authorised to impose the municipal property tax Further, it appears that under the Japanese law tax is charged at the standard rate of 1.4 per cent on the value of the Property computed in the manner laid down in the statute providing the taxable basis, and in certain special cases it may go up to 2.5 per cent., which is the maximum; in India, the rates of wealth tax vary increasing progressively with the amount of net wealth of the assessee.11. The broad features of the two statutes we have noted above reveal their basic dissimilarity. Unlike the wealth tax in India, the municipal property tax of Japan is a local tax imposed on certain specified properties by the city, town or village in which the properties are located, The wealth tax is a national tax chargeable on the net wealth of a person with certain specified exemptions. The difference in the manner of determination of the taxable basis of the properties and the rates of taxation emphasize the basic difference between the two taxes. Of course, there are certain points of similarity between the two laws. as there must be, both being taxing statutes, but these similarities do not remove the fundamental difference in the aim, object and the basic structure of the two Acts.