2001 (10) TMI 260 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee is entitled to deduction from income in respect of wealth-tax paid under section 40 of the Finance Act, 1983.

Detailed Analysis:

Issue 1: Deduction of Wealth-tax Paid under Section 40 of the Finance Act, 1983

Background:
The assessee claimed deductions for wealth-tax paid under section 40 of the Finance Act, 1983, for the assessment years 1991-92 and 1992-93. The Assessing Officer disallowed these claims under section 40(a)(iia) of the Income-tax Act, 1961, a decision upheld by the CIT(A). The assessee appealed to the Tribunal.

Assessee's Argument:
The counsel for the assessee argued that disallowance under section 40(a)(iia) of the 1961 Act pertains only to wealth-tax under the Wealth-tax Act, 1957, or similar taxes in foreign countries. He contended that wealth-tax under section 40 of the Finance Act, 1983, is distinct and should not be disallowed under the 1961 Act. He emphasized that section 40 of the Finance Act, 1983, is a self-contained code and not part of the 1957 Act, despite procedural provisions of the 1957 Act being applicable. He cited the Supreme Court decision in Associated Cement Companies Ltd. v. Director of Inspection [1985] 153 ITR 322, where a similar distinction was made regarding excise duties under different enactments.

Revenue's Argument:
The Department argued that wealth-tax under section 40 of the Finance Act, 1983, is indeed chargeable under the Wealth-tax Act, 1957, as indicated by the wording in section 40(1) of the Finance Act, 1983. They contended that section 40 of the Finance Act, 1983, integrates with the 1957 Act, making the wealth-tax chargeable under the latter. They distinguished the Supreme Court decision cited by the assessee, noting differences in legislative wording.

Tribunal's Analysis:
The Tribunal examined the relevant statutory provisions:
- Section 40 of the Finance Act, 1983, explicitly states that wealth-tax shall be charged under the Wealth-tax Act, 1957.
- Sub-section (7) of section 40 of the Finance Act, 1983, integrates section 40 with the Wealth-tax Act, 1957, making it part of the 1957 Act.
- The Tribunal referred to the decision in Bachhraj Factories Ltd. v. Asstt. CIT [1995] 56 ITD 225 (Bom.), which supported this interpretation.

The Tribunal distinguished the Supreme Court decision in Associated Cement Companies Ltd., noting that the legislative language in section 80 of the Finance Act, 1965, and section 40 of the Finance Act, 1983, was different. Section 80 of the 1965 Act independently levied special excise duty, whereas section 40 of the 1983 Act revived wealth-tax under the 1957 Act.

The Tribunal also found the decision in Park Hotel (P.) Ltd. distinguishable, as it dealt with whether leasehold rights could be included in the wealth of the assessee-company, not the nature of wealth-tax under section 40 of the Finance Act, 1983.

Conclusion:
The Tribunal held that wealth-tax levied under section 40 of the Finance Act, 1983, is indeed wealth-tax chargeable under the Wealth-tax Act, 1957. Consequently, the disallowance under section 40(a)(iia) of the Income-tax Act, 1961, was justified. The appeals of the assessee were dismissed, and the orders of the CIT(A) were upheld.