TMI Blog1980 (4) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in the Ordinance as " controlled business ". The crucial provision in the Ordinance was in cl. 3 of the Ordinance under which on and from the appointed day, which was 19th January, 1956, the management of the controlled business of all insurers vested in the Central Govt. and pending the appointment of a Custodian for the controlled business of any insurer, the persons in charge of the management of such business immediately before the appointed day were to be in charge of the management of the business for and on behalf of the Central Govt. Clause 3 also provided that the persons in charge of the management of the business would carry on the controlled business subject to the provisions of sub-cls. (3) and (5) and to such further directions, if any, as the Central Govt. may give to them by notice addressed and sent to the principal office of the insurer. The Ordinance defined " insurer " as meaning an insurer as defined in the Insurance Act, who carried on life insurance business in India and includes the Govt. and a provident society as defined in s. 65 of the Insurance Act. There is no dispute that this Ordinance became applicable in the case of the assessee-company and wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this Act shall not apply to (a) a banking company as defined in section 5 of the Banking Companies Act, 1949; (b) an insurer within the meaning of the Insurance Act, 1938." This contention was negatived by the WTO as well as by the AAC who confirmed the assessment made by the WTO. Before the Tribunal the contention of the assessee-company was that for the purpose of s. 45(b) of the W.T. Act, it was enough if the assessee was an insurer at any time during the previous year and, according to the assessee, on the 1st of January, 1956, which was the first day of the previous year, the assessee-company was an insurer inasmuch as before the management of the company vested in the Govt. with effect from 19th January, 1956, under the Life Insurance (Emergency Provisions) Act, 1956, the assessee-company was carrying on the insurance business and even for the period prior to the vesting of the insurance business in the Life Insurance Corporation, the assessee was also carrying on insurance business. The Tribunal took the view that so far as the provisions of s. 45(b) were concerned, the valuation date had no significance and that it was also not necessary that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1949, the reference to the insurer is made in a different manner by using the words within the meaning of the Insurance Act, 1938 ". The learned counsel, therefore, contended that it was not enough for the purposes of finding out whether an insurer could invoke the provisions of s. 45(b) to merely look at the definition of insurer in the Insurance Act. According to the learned counsel, the word " insurer " has been used in several provisions of the Act and, in certain provisions, even an insurer who has ceased to do or carry on the insurance business has been referred to as an insurer. The learned counsel, therefore, contended that notwithstanding the fact that the life insurance business of the assessee-company had ceased because of the statutory provisions in the Life Insurance Corporation Act, the company could still claim to be an insurer having regard to the fact that the Act contemplated that even an insurer who has ceased to carry on the business of insurance can be called an insurer. In particular, reference has been made to the provisions of s. 3(4) and particularly cls. (b) and (c) thereof. Sub-s. (4) of s. 3, inter alia, provides as follows: " The Controller sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the W.T. Act will not become applicable. In cl. (a), while referring to the banking company, the reference is made only to the definition in s. 5 of the Banking Companies Act, 1949, because the words used are, " a banking company as defined in section 5 of the Banking Companies Act, 1949". When you go to cl. (b) of s. 45, the words used are, " an insurer within the meaning of the Insurance Act, 1938 ". When we go to the Insurance Act, the word " insurer " is defined in s. 2(9) of the Act. The definition is in three parts and reads as follows: " 'insurer' means- (a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country other than India, carrying on insurance business not being a person specified in sub-clause (c) of this clause which (i) carries on that business in India, or (ii) has his or its principal place of business or is domiciled in India, or (iii) with the object of obtaining insurance business, employs representative, or maintains a place of business, in India; (b) any body corporate (not being a person specified in sub-clause (c) of this clause) carrying on the business of insurance, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, was to be ascertained in the light of the other provisions of the Act because the definition of " insurer " in the Insurance Act itself requires a reference to the other provisions of the Insurance Act in order to determine whether an individual or a company can be called an insurer as defined in the definition. On going through the provisions of the Insurance Act also, it is clear that such a reference becomes necessary for the simple reason that the definition of insurer in the Insurance Act does not appear to be self-sufficient at all and the mere definition of the word " insurer " would not have been enough, to sufficiently identify the persons or companies in respect of whom the non-applicability of the provisions of the W.T. Act was intended to be laid down. The first thing that strikes one is that the definition of insurer refers to " carrying on insurance business " in cl. (a) and " carrying on the business of insurance " in cl. (b). Both these phrases, however, mean the same thing, namely, that the persons or the body corporate, as the case may be, must carry on the business of insurance. Insurance business is of different kinds. Now, which kind of the business of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts of insurance which is not principally or wholly of any kind or kinds included in clauses (6A), (11) and (13 A). " These definitions will, therefore, show two things. One is that the concept of an insurer for the purposes of the Act is not complete unless reference is made to ascertain which different kinds of insurance business an insurer is entitled to carry on. The other thing which is made clear by these definitions is that when the definition of insurer refers to carrying on business of insurance or insurance business, the nature of that business has to be ascertained from the different definitions referred to above. The nature of that business must be that it must bring about a contract of insurance. There is one more provision to which a reference becomes necessary and that is to be found in s. 3 of the Insurance Act. The material part of s. 3 of the Insurance Act provides as, follows : " (1) No person shall, after the commencement of this Act, begin to carry on any class of insurance business in India and no insurer carrying on any class of insurance business in India shall, after the expiry of three months from the commencement of this Act, continue to carry on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be classified as an insurer. It is obvious, therefore, that unless a person who claims the benefit of s. 45(b) of the W.T. Act is able to show that he carries on the insurance business, that is, he holds a valid registration, that he enters into contracts of insurance and that he deals in the insurance business of the kind contemplated by the definition referred to earlier, he will not be entitled to claim the benefit of s. 45. It is no doubt true, as contended by the learned counsel for the company, that in certain provisions, a person who has ceased to carry on the business of insurance is also referred to as an insurer and an illustration thereof is to be found in the decision of the Supreme Court in Vanguard Fire General Insurance Co. v. Fraser Ross [1960] 30 Comp Cas (Ins) 13; AIR 1960 SC 971 (hereinafter referred to as the " Vanguard Co.'s case "). The Vanguard. Co. was carrying on various classes of insurance business other than life insurance till at an extraordinary general meeting of the shareholders held on 15th October, 1956, the shareholders passed a resolution by which all its insurance business was to cease forthwith and no further policies of any kind wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of insurance closes it down completely, he no longer remains an insurer and the provisions of the Act do not apply to him. Thus, the contention was that an order under s. 33 cannot be made against a person who was an insurer who had closed his business. This contention was negatived by the Supreme Court. The Supreme Court took the view that generally the word " insurer " has been defined for the purposes of the Act to mean a person or body corporate, etc., which is actually carrying on the business of insurance, that is, the business of effecting contracts of insurance of whatever kind they might be, but s. 2 began with the words, " In this Act, unless there is anything repugnant in the subject or context ". The Supreme Court observed that even where definition is exhaustive inasmuch as the word defined is said to mean certain thing, it was possible for the words to have a somewhat different meaning in different sections of the Act and depending upon the subject or the context. The Supreme Court, therefore, pointed out that in finding out the meaning of the word " insurer " in various sections of the Act, the meaning to be ordinarily given to it is that which is given in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 45(b) does not merely use the word " insurer ", but the words used are " insurer within the meaning of the Insurance Act, 1938 " and, therefore, consideration of the context in which that word is used for the purpose of finding out whether a different meaning than what is given in the definition should be given does not really arise in this case. There is nothing in the provisions of s. 45(b) of the W.T. Act which requires the words " insurer within the meaning of the Insurance Act, 1938 " to be so construed as to include a company which has ceased to carry on insurance business. The learned counsel has also referred us to the decision in Biswambar Singh v. State of Orissa, AIR 1954 SC 139, which turned on the construction of the word " intermediary " used in the Orissa Estates Abolition Act, 1951, which was defined with reference to the merged territories as meaning " maufidar including the Ruler of an Indian State merged with the State of Orissa, a zamindar, ilaquedar, khorposhdar or jagirdar within the meaning of the Wajib-ul-arz, or any sanad, deed or other instrument... " It is no doubt true that, on the facts of the particular case, the meaning of the word " intermediary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case where it becomes applicable. In other words, in the case of any other assessee who does not claim exemption, what is the material date with reference to which the applicability of the Act can be ascertained. To this question the only answer is: The valuation date. Section 3, which is the charging section, creates a charge in respect of the net wealth on the corresponding valuation date. This charge is for every assessment year from 1st of April, 1957. The valuation date is defined in s. 2(q) as follows: " 'Valuation date', in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in section 3 of the Income-tax Act, if an assessment were to be made under that Act for that year..." The assessment year in the present case is 1957-58. Consequently, as already pointed out, the last day of the previous year will be 31st December, 1956, a position which is not disputed. Apart from the other provisions of the Act, the contention of the assessee-company is that its wealth cannot be charged to wealth-tax. In other words, according to the assessee, the charge created by s. 3 of the W.T. Act is not attracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act of insurance and is entitled to do so by virtue of holding a valid certificate of registration, that for the purposes of the Insurance Act or within the meaning of the Insurance Act he can be said to be carrying on the business of insurance. Therefore, on the provisions of the Insurance Act itself, the contention that the assessee was still carrying on the business of insurance will have to be rejected. The learned counsel, in support of his proposition that the words " carrying on business " have a wide meaning, has relied on Lord Sumner's observations in South Behar Railway's case [1925] AC 476 ; 12 TC 657 (HL). The facts of that case were simple. The South Behar Railway Co. had entered into a contract with the Secretary of State in India relating to the construction of a railway in India. The company was to use its own capital for the construction of the railway which was to be undertaken by the Secretary of State through such agency as he should appoint, but the work was to be at the risk and cost of the company. Under the contract the Secretary of State was, as from the opening of the railway an until the determination of the contract, to work and maintain the railway a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Corporation and since the assessee is still in the process of collecting its compensation, it must be treated as continuing to carry on the business, as pointed out by Lord Sumner. We need not independently consider the scope of these observations because these very observations fell for consideration before the Supreme Court in CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1, in which the question was whether certain expenses in respect of which deduction was claimed by the assessee-company, who originally held a licence to supply electricity granted under the Electricity Act, were deductible and whether the company could be still said to carry on its business when its only income was from investment of compensation moneys received by the company from the Government. It was contended before the Supreme Court that the company had to pay the Government half share of the profits and that it had still to return to the consumers the deposits made by them and the company was, therefore, carrying on its business. Rejecting this contention, the Supreme Court observed as follows (p. 5): " It would be laying down strange law to hold that where a business has in fact ceased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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