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TMI Blog1972 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer. The High Court on a reference in that case as well as in others raising a similar question, while rejecting the contention of the assessee, observed that the wealth-tax was paid by him as the owner and on the value of the totality of his assets which has nothing to do with his making or earning income from such assets and that the production of the income from the assets appeared to it to be wholly unconnected with the payment of wealth-tax. The court drew support from the Kumbakonam Electric Supply Corporation Ltd. v. Commissioner of Income-tax and Travancore Titanium Products Ltd. v. Commissioner of Income-tax. The learned advocate who appeared for the assessee and who has also addressed his arguments before us had contended before the High Court that the preservation of assets is incidental to the purpose of making or earning income, that these are cases in which the assets themselves automatically produced income and that therefore payment of wealth-tax was virtually a condition for making or earning income because default in payment of such tax will endanger the ownership of the asset which in its turn will destroy the very source of income. Several cases were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s character as a trader. A larger Bench of this court recently in Indian Aluminium Co. Ltd. v. Commissioner of Income-tax has not accepted the test adopted in Travancore Titanium case that : " 'to be a permissible deduction, there must be a direct and intimate connection between the expenditure and the business, i.e., between the expenditure and the character of the assessee as a trader, and not as owner of assets, even if they are assets of the business'. " That view was qualified by stating that if the expenditure is laid out by the assessee as owner-cum-trader, and the expenditure is really incidental to the carrying on of his business, it must be treated to have been laid out by him as a trader and as incidental to his business. It further held that in the case of individuals who have both business assets and debts and non-business assets and debts it should not be difficult to evolve a principle or frame statutory rules to find out the proportion of the wealth-tax which is really incidental to the carrying on of the trade. Immediately after the judgment was rendered the President issued the Income-tax (Amendment) Ordinance on July 15,1972, by the addition of sub-clause (ii-a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f making or earning such income. " The amendments to sections 40 and 58 as stated earlier do not allow deduction of wealth-tax or tax of similar character, etc., where it is levied and paid under the law of any country outside India. The following are the relevant provisions of the amendment Act : " 2. In section 40 of the Income-tax Act, 1961 (hereinafter referred to as the principal Act), after sub-clause (ii) of clause (a), the following sub-clause shall be, and shall be deemed always to have been, inserted, namely :--- '(ii-a) any sum paid on account of wealth-tax. Explanation.---For the purposes of this sub-clause, " wealth-tax " means wealth-tax chargeable under the Wealth-tax Act, 1957, or any tax of a similar character chargeable under any law in force in any country outside India or any tax chargeable under such law with reference to the value of the assets of, or the capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or profession are allowed as a deduction in computing the amount with reference to which such tax is charged, but does not include any tax chargeable with reference to the value of any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was given retrospective operation. The changes introduced in sections 40 and 58, we should have thought, were clear in disallowing any deduction of the wealth-tax from the computation of an assessee's income. The learned advocate for the assessee, however, has made a valiant attempt, which attempt, we think, is totally abortive, even if we were inclined to stretch and strain the interpretation in favour of the assessee, because neither the language nor the diction of the amended provisions permits the construction sought to be placed on the amendments. What the learned advocate seeks to contend is that the Explanation to sub-clause (ii-a) of clause (a) of section 40, which Explanation mutatis mutandis is by reference to be read into sub-section (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 ", save the wealth-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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th while section 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 section 7 deals with the determination of the value of the assets 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-clause (ii-a) of clause (a) of section 40 as the aggregate of the assets as defined in " net wealth " under section 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 section 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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