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TMI Blog1967 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 ? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to rebate in terms of section 13B of the Indian Income-tax Act, 1922, in respect of the sum of Rs. 97,000 being the value of the shares donated by the assessee to Jaya Shree Charity Trust, a charitable institution to which section 15B applies? " The assessment year concerned in this reference is 1960-61, for which the relevant accounting year is the financial year ending on the 31st March, 1960. The assessee is a Hindu undivided family. It derives income from dividends and interest on its investments, which is assessed under section 12 of the Act. The assessee claimed deduction of Rs. 1,05,679, being the wealth-tax paid by it during the accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. The Tribunal also rejected the assessee's claim for rebate under section 15B relying on the decision of this court in Commissioner of Income-tax v. Samnugger Jute Factory Co. Limited, where it had been held that a sum contributed to the Gandhi Memorial Fund, which was an institution to which donations were entitled to rebate under section 15B, was not entitled to rebate under that section as it was not contributed by the assessee from its earnings in the relevant previous year but was paid out of its savings of a year prior to the previous year. Accordingly, the Tribunal dismissed the assessee's appeal. At the instance of the assessee the aforesaid questions of law have been referred to this court by the Tribunal. Dr. Pal, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth-tax Act on the owner of assets and not on any commercial activity. The charge of the tax is the same, whether the assets are part of or used in the trading organisation of the owner or are merely owned by him. The assets of the taxpayer, incorporated or not, become chargeable to tax because they are owned by him and not because they are used by him in the business." Dr. Pal submitted that income-tax is charged under section 12 on the income from dividends and interest from investments on the owner of the shares and of the investments. There is no question of carrying on any business with such shares or with such investments. There is no question of any expenditure incurred by the assessee in such a case, being an expenditure of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was assessed to income-tax under section 12 in respect of the rent realised under the lease and claimed deduction of the municipal tax paid for the property. The Madras High Court held that the municipal tax paid was allowable as deduction under section 12(2) with the following observation : " The point we have to consider accordingly is whether the municipal taxes paid by the assessee can come within the description of any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of making or earning such income, profits or gains. We are of the view that in a lease of this kind, the income from which the department seeks to tax as income from other sources, it is not the category of income labelled as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. " Mr. Mukherjee submitted that even under the wider expression " for the purpose of the business ", the Supreme Court has held in that case that wealth-tax paid by the assessee was not allowable as deduction in computing his income from business. Mr. Mukherjee further submitted that the tax paid on the value of the assets could not be said to be an expenditure incurred for earning income from those assets. The point is not free from difficulty. We agree with Dr. Pal that the ratio laid down by the Supreme Court in Travancore Titanium case is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In our opinion, the Tribunal was correct in disallowing the assessee's claim for deduction of wealth-tax. So far as the second question is concerned, our attention was drawn to the decision of this court in Commissioner of Income-tax v. Samnugger Jute Factory Company Ltd, on which reliance was placed by the Tribunal. In that case this court held that the sums claimed for allowance of rebate as donations to recognised charitable institutions must be sums assessable in their nature, being part of the assessable income of the relative accounting year and sums brought into the assessment and about to be brought to charge. As, in this case, admittedly the shares donated by the assessee were acquired out of its past savings the value of those ..... X X X X Extracts X X X X X X X X Extracts X X X X
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