TMI Blog1980 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets had been allowed by the AAC. For the revenue, the contention was that the assessee was not entitled to the deduction of normal depreciation as is allowed under the I.T. Rules, but such deduction could be allowed only on the basis of depreciation actually provided by it in its books of account. Following the decision of the Madhya Pradesh High Court in MCC No. 309/1968 decided on 12-9-1974 (CWT v. Gwalior Rayon Silk Mfg.(Wvg.) Co. Ltd. [1981] 131 ITR 148) in respect of this very assessee, the Tribunal rejected the objections raised by the assessee as well as the revenue and confirmed deduction of normal depreciation from the value of the fixed assets. The assessee had claimed deduction of arrears of dividend on cumulative preference shares amounting to Rs. 54,79,375 for assessment year 1958-59 and Rs. 49,22,434 for assessment year 1959-60. It was contended on behalf of the assessee before the Tribunal and also before the AAC that the preference shares being cumulative, the dividend at 6% per annum was payable by the assessee-company on the said shares whether profits were earned or not and hence the arrears of dividend on preference shares should be held to be deductible f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total value of the assets in the wealth-tax A. Ys. 1958-59 and 1959-60, respectively, being the arrears of dividend on preference shares ?" (4) Question of the Commissioner : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the additional managing agency commission for which the sanction of the Central Government as required u/s. 329 of the Companies Act, 1956, and was allowable as a deduction for determining the taxable wealth of the assessee-company irrespective of the fact that no provision for such liability was made in the books of account ?" Questions Nos. 1 2 were answered by this court in MCC No. 309/1968 decided on 12-9-1974(CWT v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Following the above decision, we answer question No. in the affirmative and in favour of the revenue. Question No. 2 is answered in the affirmative and in favour of the assessee. The claim out of which question No. 3 arose is based on the facts which have been briefly narrated in para. 4 of this Order. In its balance-sheet, the assessee-company had shown a sum of Rs. 54,79,375 under the head: " Contingent liability not provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions, the author goes on to note: "If it is plain that a preferential dividend is to come only out of the profits of a particular year, the court will give effect to the intention though imperfectly expressed. " This being the legal position, the Tribunal was fully justified in repelling the contention of the assessee and holding that there was no such statutory liability on the assessee-company to pay dividends compulsorily on cumulative preference shares and the same was not a " debt owed " within the ambit of s. 2(m) of the W.T. Act. Learned counsel alternatively raised an entirely new contention before us. He submitted that the assessee-company had declared that dividends on preference shares will be paid irrespective of the fact whether profits were earned or not. There is no foundation for this argument in the statement of the case nor any material was placed before us to support it. If such a condition had been introduced by the assessee-company in its articles of association, the same should have been placed before the authorities below. We will, therefore, not consider such hypothetical argument. It is thus clear that dividends on preference shares which had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commission to 7 1/2% on the net profits of the company with effect from 1st April, 1957. Copy of the letter has been filed as annex. " B-III ". It was claimed by the company that the sum of Rs. 6,32,832, which became payable as additional managing agency commission, was a " debt owed " and qualified for deduction for the computation of the net wealth of the assessee. The WTO and the AAC rejected this contention, but the Appellate Tribunal disagreed with the view of the revenue and allowed deduction of this amount holding that a " debt owing ", meaning thereby a " debt payable at a future date", was as much a debt as a " debt owed " and, therefore, such a debt was also deductible for computing the net wealth. The Tribunal referred to the Government letter dated September 11, 1959, raising the managing agency commission with effect from 1st April, 1957. According to the Tribunal, the effect of this order was to give rise to debt owing from April 1, 1957, onwards, which could be claimable on the two valuation dates of the assessee-company falling after that date, i.e., March 31, 1958, and March 31, 1959. Learned counsel for the revenue referred to the decision of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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