TMI Blog1978 (4) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, Jabalpur Bench, Jabalpur, at the instance of eight different assessees, referring a common question of law said to arise from its consolidated order in Wealth Tax Appeals Nos. 70 to 78 (Ind.) of 1969-70, dated December 13, 1971, to the High Court for its opinion, viz.: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that neither the tax liability at the rate applicable in accordance with the Finance Act of the year concerned on the disclosed income included on assessment nor at the rate of 60% prescribed under s. 68 of the Finance Act, 1965, was deductible in arriving at the net wealth of the assessee ?" The assessee is a HUF, which is carrying on business in partnership styled "M/s. Bhagwandas Shobhalal Jain, Sagar ", through Bhagwandas, karta of the joint Hindu family. The partnership is engaged in the business of manufacture and sale of bidis. The assessment years involved are 1957-58 to 1964-65 and the valuation date for each year is the last day of Diwali year preceding the year of assessment. During the assessment year 1966-67, the valuation date for which was the last day of Diwali 1965, the firm made a voluntary disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation date, within the meaning of s. 2(m) of the W.T. Act, 1957. On further appeal, the Tribunal upheld the view of the WTO as well as of the AAC of Wealth-tax, following the view expressed by a single judge of the Kerala High Court in C. K. Babu Naidu v. WTO [1971] 82 ITR 410. Feeling aggrieved, the assessee applied to the Tribunal under s. 27(1) of the W.T. Act, 1957, to have the aforesaid question of law referred to this court for its opinion. Incidentally, we may mention that the WTO, in computation of the net wealth under s. 3 of the W.T. Act of the assessees while re-opening their wealth-tax assessments for the assessment years 1957-58 to 1964-65, spread out the total disclosure of Rs. 20,60,000 and not the resultant sum of Rs. 10,04,000 remaining with the firm after payment of tax amounting to Rs. 10,56,000. To appreciate the rival contentions, it is necessary to set out a few relevant provisions. s. 3 of the W.T. Act, 1957, which is the charging provision, reads: " 3. Charge of wealth-tax.--Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax at the rate specified in sub-section (3) in respect of the amount so declared ......... (3) The rate of income-tax chargeable in respect of the amount referred to in sub-section (1) shall be sixty per cent. of such amount. s. 3 of the Indian I.T. Act, 1922, runs thus: "3. Charge of income-tax.--Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually." S. 4 of the I.T. Act, 1961, reads: "4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person: Provided that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on the valuation date, viz., March 31, 1957, and was as such deductible in computing the net wealth of the company as on the valuation date. In H. H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864, their Lordships of the Supreme Court reiterated their view in Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC), with respect to the liability to pay wealth-tax. According to their Lordships, the wealth-tax liability of an assessee on the valuation date for the assessment year beginning on the 1st of April following, is a "debt owed" within the meaning of s. 2(m) of the Act and should be deducted from the estimated value of the assets as on the valuation date. That was because their Lordships were of the view that the language of the charging s. 3 of the W.T. Act, 1957, was in pari materia with the language of the charging s. 3 of the Indian I.T. Act, 1922, and, therefore, the same meaning must be given to the expression "debt owed" occurring in s. 2(m) of the W.T. Act, 1957. Taking up the decisions of the different High Courts, which are directly on the point, viz., whether the liability to pay tax on disclosed income under the Voluntary Disclosure Scheme frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity view, therefore, the liability to pay tax under s. 68 of the Finance Act, 1965, was a liability that arose on the valuation date and that liability was "debt owed" by the assessee on the valuation date falling within s. 2(m) of the W.T. Act, 1957, and the assessee is entitled to deduct the income-tax liability on the valuation date on the amounts voluntarily declared under s. 68 of the Finance Act, 1965. Bhagwati C.J. (as he then was) in CWT v. Ahmed Ibrahim Sahigara [1974] 93 ITR 288 (Guj), however, held that s. 68 of the Finance Act, 1965, was not intended to lay down a concessional rate at which income-tax may be charged under the I.T. Act, but it enacts a new charge to tax, on an ad hoc basis, on disclosed income irrespective of the assessment year in which it was earned. With great respect, we are unable to subscribe to the view expressed by him. None of the High Courts have agreed with his view that the tax paid on concealed income disclosed by an assessee under s. 68 of the Finance Act, 1965, was not in satisfaction of any liability under s. 3 of the Indian I.T. Act, 1922, or s. 4 of the I.T. Act, 1961, or that s. 68 of the Finance Act, 1965, creates a new charge to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
