TMI Blog1975 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year sending on the 31st March, 1957, 1958, 1959 and 1960, respectively. Civil Appeals Nos. 1076 to 1079 of 1970, relate to the assessment years 1956-57, 1957-58, 1958-59 and 1959-60, the corresponding previous years being the financial years ending on the 31st March, 1956, 1957, 1958 and 1959, respectively. The appellant in each case had been assessed to income-tax for the years mentioned above under the Indian Income-tax Act, 1922 (hereinafter referred to as the Act of 1922 ), in respect of its net Indian earnings. In the assessment proceedings the appellant companies had claimed as deductible allowance under section 10(2)(xv) of the Act of 1922, the tax paid by them on their business assets under the Local Tax Law in force in Japan. The Income-tax Officer rejected the claim on the view that the incidence of tax under the Japanese law falls on the assessee-companies in their capacity as the owners of the business assets and not as traders. On appeals preferred by the assessees the Appellate Assistant Commissioner took the view that the tax paid under the Local Tax Law in Japan was an allowable expenditure under section 10(2)(xv) of the Act of 1922. The Tribunal also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are assets of the business. The judgment of the High Court mainly turned on article 341(4) of the Japanese statute. From an English translation of the statute filed before the Tribunal it appears that the statute is divided into four books. All the articles to which we will refer for the purpose of these appeals are in Chapter III. Section 2 of Book Four contains articles 341 to 746, Chapter III bears the heading Ordinary Taxes of City, Town or Village and section 2 deals with Municipal Property Tax . Article 341 defines certain terms concerning municipal property tax, and in so far as it is relevant for the present purpose, it reads as follows : With respect to municipal property tax, the terms listed in the following items shall have the definition given to them under the respective items : (1) Property : Land, houses and depreciable assets ; (2) Land ; (3) Houses ; (4) Depreciable assets : Assets (excluding the mining right, fishing right, patent right and other depreciable intangible property) other than land and house which can be used for business purpose and the amount of depreciation of which is included in the loss or necessary expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, 1972 (7 of 1972), was promulgated on July 15, 1972, to amend the Income-tax Act, 1961, and to provide for barring, in the computation of total income in respect of certain assessment years prior to the assessment year 1962-63, deduction of amounts paid on account of wealth-tax. The Ordinance was later repealed and replaced by the Income-tax (Amendment) Act, 1972 (41 of 1972), containing similar provisions. The Amendment Act which received the assent of the President on August 28, 1972, sought to restore, as the Statement of Objects and Reasons says, the position established in the case of Travancore Titanium Products Ltd. v. Commissioner of Income-tax which was virtually overruled by the later decision in Indian Aluminium Co. Ltd. v. Commissioner of Income-tax that wealth-tax paid by an assessee in respect of his business assets was not deductible as a business expense in computing the assessee's income from business. Section 2 of the Amendment Act inserted with retrospective effect a new sub-clause (iia) in clause (a) of section 40 of the Income-tax Act, 1961, which specifies the amounts not deductible in computing the income chargeable under the head Profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m-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 assessee's 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 Company's case. The Explanation to the new sub-clause (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 assessee 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 tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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. 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. Accordingly, we allow the appeals, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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