1976 (10) TMI 7 - HC - Wealth-tax

AAC And Tribunal Interim Dividend Revision By Commissioner Tax Deducted At Source Writ Petition

Summary

Issues: Competency of the Income-tax Appellate Tribunal to decide on the vires of rule 1D of the Wealth-tax Rules, 1957 and the correctness of the Tribunal's decision regarding the validity of rule 1D in relation to sections 7(1) and 24(6) of the Wealth-tax Act, 1957.

Analysis:
The case involved a dispute regarding the valuation of shares for Wealth-tax assessment. The Wealth-tax Officer valued the shares based on rule 1D of the Wealth-tax Rules, which was challenged by the assessee before the Tribunal. The Tribunal declared rule 1D as ultra vires the provisions of the Wealth-tax Act and directed acceptance of the assessee's valuation method.

On the first issue of the Tribunal's competence to decide on the vires of rule 1D, the department contended that the Tribunal lacked jurisdiction to question the validity of the rule. The Supreme Court precedent established that a Tribunal can only decide disputes within the provisions of the Act and cannot rule on the vires of statutory provisions. The Tribunal's declaration of rule 1D as ultra vires was deemed beyond its jurisdiction.

The assessee argued that the Tribunal had the authority to assess the conformity of rules with the Act and ignore inconsistent rules. However, the Tribunal's outright declaration of rule 1D as ultra vires, instead of merely disregarding it, was found to exceed its jurisdiction. The Supreme Court precedent further emphasized that challenges to the validity of statutory provisions or rules cannot be raised before authorities constituted under the Act.

Regarding the second issue, the Tribunal's declaration of rule 1D as ultra vires was compared to a similar decision by the High Court of Madras, which was affirmed by the Supreme Court due to repugnancy between the Income-tax Act and the Tribunal's Rules. However, the current case did not involve such repugnancy, and the Tribunal's decision was held invalid. The judgment concluded that the Tribunal was not competent to decide on the vires of rule 1D, ruling in favor of the Commissioner and against the assessee.

In conclusion, the High Court answered the first question negatively, stating that the Income-tax Appellate Tribunal was not competent to entertain and decide on the vires of rule 1D of the Wealth-tax Rules. The second question was not addressed due to the ruling on the first question. The department was awarded costs amounting to Rs. 200.