Income Tax Appellate Tribunal - Delhi
Lloyds Insulations (India) Ltd. vs Deputy Commissioner Of Income Tax on 22 October, 2001
Equivalent citations: [2002]80ITD465(DELHI)
ORDER
K.C. Singhal, J.M.
1. Since common issue is involved in both the appeals, the same are being disposed of by the common order for the sake of convenience. The common issue is whether the assessee is entitled to deduction from his income in respect of wealth-tax paid under Section 40 of the Finance Act, 1983.
2. The assessee had claimed deduction of Rs. 97,700 and Rs. 1,07,731 for asst. yrs. 1991-92 and 1992-93, respectively, in respect of the wealth-tax paid under Section 40 of the Finance Act, 1983, while computing the income for these two years. The claim of the assessee for both the years was disallowed by the AO by invoking the provisions of Section 40(a)(iia) of IT Act, 1961 (in short 1961Act). The disallowance has been confirmed by the CIT(A) for both the years. Hence, the present appeals before the Tribunal.
3. The learned counsel for the assessee Manian has vehemently assailed the orders of CIT(A) by contending that disallowance under Section 40(a)(iia) of 1961Act can be made only with reference to the wealth-tax leviable under the WT Act, 1957 (in short 1957 Act), or any tax of similar nature chargeable under any law in force in any country outside India and, consequently, no disallowance can be made with reference to wealth-tax chargeable under Section 40 of Finance Act, 1983, which is a different enactment by itself. His line of argument is that initially wealth of closely-held companies was chargeable to tax under 1957 Act but later on by virtue of Section 13 of Finance Act, 1960, wealth of such companies was exempted from the provisions of 1957 Act. However, the wealth of such companies was again made chargeable to wealth-tax by Section 40 of Finance Act, 1983, which is a self-contained code for levy of such tax. Hence, it was contended that levy of such wealth-tax cannot be treated or considered as wealth-tax under 1957 Act. Proceeding further, it was submitted that merely because the other provisions of the 1957 Act have been made applicable by virtue of Sub-section (7) of Section 40 of Finance Act, 1983, it cannot be said that levy under Section 40 of Finance Act, 1983, has become levy under the 1957 Act. According to him, only procedural provisions of the 1957 Act have been made applicable for the purpose of assessment, recovery of tax, appeals, etc. Proceeding further, it was submitted by him that companies have been brought within the mainstream by Finance Act, 1992, w.e.f. 1st April, 1993, by insertion of Sub-section (2) of Section 3 of 1957 Act. In this connection, he also drew our attention to Notes on Clauses Nos. 91, 100 and 102 of Finance Bill, 1992. From this fact, he has drawn the inference that prior to 1st April, 1993, the wealth of companies was not chargeable to wealth-tax under Section 3 of 1957 Act. To support his contentions, he has relied heavily on the decision of Supreme Court in the case of Associated Cement Companies Ltd. v. Director of Inspection, Customs & Centra; Excise (1985) 153 ITR 322 (SC), wherein it has been held that levy of such excise duty under Section 80 of Finance Act, 1965, was different from the levy of excise duty under Central Excises and Salt Act, 1944 fin short Excise Act) and, therefore, assessee was not entitled to tax credit certificate under Section 280ZD of 1961Act with reference to such excise duty. He has also relied on the decision of the Tribunal in the case of CWT v. Park Hotel (P) Ltd (1992) 41 ITD 501 (Cal). It is also pointed out that assessee has included the copy of the order of the Tribunal, Delhi Bench dt. 20th Feb., 2001 in the case of Pun; Sons (P) Ltd. (ITA 954 (Del) of 1995) reported as Fun; Sons v. Dy. CIT (2002) 74 TTJ (Del) 596--Ed.) but the same has not been seriously relied on by the counsel for the assessee.
4. On the other hand, the learned Departmental Representative has strongly supported the orders of the CIT(A) by contending that wealth-tax chargeable under Section 40 of Finance Act, 1983, is nothing but wealth-tax chargeable under Section 3 of 1957 Act. He drew our attention to the provisions of Section 40(1) of Finance Act, 1983, which itself says "wealth-tax shall be chargeable under WT Act". He also referred to Sub-section (7) of this section and submitted that Section 40 of Finance Act, 1983, has been made part of WT Act, 1957. Therefore, it cannot be said that wealth-tax on companies is not chargeable under 1957 Act. Hence, he justified the disallowance under Section 40(a)(iia) of 1961Act. Regarding the Supreme Court judgment, it was submitted by him that provisions of Section 80 of Finance Act, 1965, and provisions of Section 40 of Finance Act, 1983, are differently worded by the legislature and, therefore, the said judgment is distinguishable. 5. After considering the rival submissions of the parties and the relevant provisions of different enactments and the case law referred to by the parties, we are unable to accept the contentions of the learned counsel for the assessee. In order to appreciate the controversy, it would be useful to quote the provisions of Section 40 of the Finance Act, 1983, and Section 40(a)(iia) of 1961Act :
"Section 40 of Finance Act, 1983- 40 Revival of levy of wealth-tax in the case of closely-held companies.--(1) Notwithstanding anything contained in Section 13 of the Finance Act, 1960 (13 of 1960) relating to exemption of companies from levy of wealth-tax under the WT Act, 1957 (27 of 1957), (hereinafter referred to as the WT Act), wealth-tax shall be charged under the WT Act for every assessment year commencing on and from the 1st day of April, 1984 in respect of the net wealth on the corresponding valuation date of every company, not being a company in which the public are substantially interested, at the rate of two per cent of such net wealth' ;
(2) For the purposes of Sub-section (1), the net wealth of a company shall be the amount by which the aggregate value of all the assets referred to in Sub-section (3), wherever located, belonging to the company on the valuation date is in excess of the aggregate value of all the debts owed by the company on the valuation date which are secured on, or which have been incurred in relation to the said assets :
Provided that where any debt secured on any asset belonging to the assessee is incurred for, or enures to, the benefit of any other person, or is not represented by any asset belonging to the assessee, the value of such debt shall not be taken into account in computing the net wealth of the assessee.
(3) The assets referred to in Sub-section (2) shall be the following, namely :
(i) gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals not being any such precious metal or alloy held for use as raw material in industrial production;
(ii) precious or semi-precious stones whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel;
(iii) ornaments made of gold, silver, platinum or any other precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
(iv) utensils made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals; (v) land other than agricultural land :
Provided that nothing in this clause shall apply to any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him;
(vi) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown, warehouse, cinema house, hotel or office for the purposes of its business or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch room mainly used for the welfare of its employees or used as residential accommodation, except as provided in Clauses (via) and (vib), and the land appurtenant to such building or part;
(via) any building used as residential accommodation in the nature of a guest house and land appurtenant thereto;
(vib) any building and the land appurtenant to such building used as residential accommodation by any director, manager, secretary or any other employee of the assessee, such employee holding not less than one per cent of the equity share of the assessee.
Explanation : For the purposes of this clause, "relative" shall have the meaning assigned to it in Clause (b) of Expln. 1 to Section 80F of the IT Act;
(vii) motor-cars; and
(viii) any other asset which is acquired or represented by a debt secured on any one or more of the assets referred to in Clause (i) to Clause (vii):
Provided that this section shall not apply to any asset referred to in Clause (i), (ii), (iii), (iv), (v) or (vi), which is held by the assessee as stock-in-trade in a business carried on by it or, in the case of motor-cars referred to in Clause (vii), they are held as stock-in-trade in such business or registered as taxies and used as such in a business of running motor cars on hire carried on by the assessee.
Explanation . Where any question arises as to whether all or any of the assets referred to in Clause (i), (11), (iii) or (iv) are held by the assessee as stock-in-trade in a business carried on by it, the question shall be decided in accordance with such directions as the Board may, by general or special order, issue for the guidance of the AO, having regard to the ratio which the yearly turnover of a business of trading in such assets bears to the average of the stocks of such assets held from time to time during the year in such business ordinarily and other relevant factors.
(4) The value of any asset specified in Sub-section (3) of Section 7 of the WT Act, be estimated to be the price which, in the opinion of the WTO (now AO), it would fetch if sold in the open market on the valuation date.
(5) For the purposes of the levy of wealth-tax under the WT Act, in pursuance of the provisions of this section,--
(a) Section 5, Clause (a) of Sub-section (2) of Section 7 and Clause (d) of Section 45 of that Act and Part II of Sen. I to that Act shall not apply and shall have no effect;
(b) the remaining provisions of that Act shall be construed so as to be in conformity with the provisions of this section.
(6) Nothing in this section shall apply to any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which the Central Government may, having regard to the nature and object of such institution, association or body, specify by notification in the Official Gazette and every notification issued under this sub-section shall be laid, as soon as may be after it is issued before each House of Parliament.
(7) Subject to the provisions of Sub-section (5), this section shall be construed as one with the WT Act."
Section 40(a)(iia) of 1961 Act:
40, Amounts not deductible.--Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business of profession',--
(iia) any sum paid on account of wealth-tax Explanation : For the purposes of this sub-clause, 'wealth-tax' means wealth-tax chargeable under the WT Act, 1957 (27 of 1957), or any tax of a similar character chargeable under any law in force in any country outside India or any tax chargeable under such law with reference to the value of the assets of, or the capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or profession are allowed as a deduction in computing the amount with reference to which such tax is charged, but does not include any tax chargeable with reference to the value of any particular asset of the business or profession;"
The perusal of Section 40(a)(iia) shows that assessee is not entitled to claim deduction from his income in respect of payment of wealth-tax chargeable under the 1957 Act or any tax of similar nature chargeable under any law in force in any foreign country. We are not concerned with the payment of wealth-tax chargeable under any foreign law. So the only dispute is whether the payment of wealth-tax under Section 40 of Finance Act, 1983, can be said to be payment of wealth-tax chargeable under the 1957 Act.
6. The perusal of Sub-section (1) of Section 40 clearly shows that the levy of wealth-tax is under the WT Act, 1957, as is clear from the words "wealth-tax shall be charged under the WT Act". It has also been made clear that WT Act means WT Act, 1957. In view of such specific words, it is difficult for us to hold that revival of wealth-tax is independent of wealth-tax provisions of 1957 Act. The words "revival of levy of wealth-tax" in the marginal note also indicates that what was exempted earlier by Section 13 of Finance Act, 1963, has been revived. The exemption was from the levy of tax under 1957, and, therefore, by Finance Act, 1983, the levy under 1957 Act has been revived subject to some modifications. Reading of Sub-section (5) also makes it clear that the levy is under WT Act. Lastly, Sub-section (7) is more important since it provides that subject to the provisions of Sub-section (5), this section shall be construed as one with the WT Act. That means Section 40 itself has been made part of the 1957 Act and, therefore, the contention of the learned counsel for the assessee that it incorporates only procedural provisions of 1957 Act, cannot be accepted. Once, Section 40 of Finance Act, 1983, has been made part of 1957 Act, then it is difficult to hold that wealth-tax chargeable under this section is not wealth-tax chargeable under 1957 Act. At this stage, it would be useful to point out that similar view has been expressed by the Tribunal in the case of Bachhrai Factories Ltd. v. Asstt. C1T (1996) 56 ITD 225 (Bom).
7. We have also gone through the case law referred to by the learned counsel for the assessee. In our view, such case law are quite distinguishable and do not help the case of assessee. The decision of Supreme Court in the case of Associated Cement Companies Ltd. (supra), in our opinion, is quite distinguishable because of difference in the language employed by the legislature in Section 80 of the Finance Act, 1965, and Section 40 of Finance Act, 1983. In the case before the Supreme Court, the assessee was entitled to tax credit certificate under Section 280ZD of 1961Act at the rate not exceeding 25 per cent of excise duty payable by him on the quantity of excess production during the financial year as compared to the production of the base year. During the year 1965-66, the cement produced by assessee was chargeable to excise duty under the Excise Act @ Rs. 23.60 per ton but under Section 80 of the Finance Act, 1965, a special excise duty equal to 25 per cent of the total amount of excise chargeable under Excise Act was also levied. The concerned authority granted tax credit certificate only in respect of central excise duty levied under Excise Act taking the view that the assessee was not entitled to have any tax credit in respect of any other excise duty levied under a different enactment, namely, Section 80 of Finance Act. Such action of the concerned authority was challenged before the High Court by the assessee but remained unsuccessful. On further appeal, the Supreme Court held that levy of special excise duty was chargeable under Section 80 of Finance Act, 1965, and, therefore, the assessee was not entitled to tax credit certificate inasmuch as Section 280ZD provided for such certificate only with reference to excise duty chargeable to tax under Excise Act. The said decision can be applied to the present case only if the levy of wealth-lax is itself chargeable under the Finance Act, 1983. The comparison of Section 80 of Finance Act, 1965, and Section 40 of Finance Act, 1983, shows that different language has been employed by the legislature. To appreciate the same, it would be useful to quote the provisions of Section 80 of Finance Act, 1965, as under :
"80(1) When goods of the description mentioned in this section chargeable with a duty of excise under the Central Excise Act (as amended by this Act or any subsequent Act of Parliament) read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, are assessed to duty, there shall be levied and collected-
(a) as respects goods comprised in item Nos. 6, 8, 9, 14D, 22A, 23A except sub-item (1) thereof, 23B, 28, 29, sub-items (2) and (3) of item No. 31 and item No. 32 of the First Schedule to the Central Excises Act, a special duty of excise equal to 10 per cent of the total amounts so chargeable on such goods;
(b) as respects goods comprised in item Nos. 2, 3(1), sub-items I, II (2) and II (3) of item No. 4, item Nos. 13, 14, 14F, 15, 15A, 15B, 16, 16A, 17, 18A (2), 21, 22, 23, 23A(1), 27, 30, 31(1), 33, sub-items (1)(3a) and (4) of item No. 34 and item No. 37 of that Schedule, a special duty of excise equal to 20 per cent of the total amount so chargeable on such goods; and
(c) as respects goods comprised in item Nos. 4 II (1), 18, 18A (1), 18B, 20, 29A, 33A, sub-items (2) and (3) of item No. 34 and radiograms comprised in item No. 37A of that Schedule, a special duty of excise equal to 33 1/3 per cent of the total amount so chargeable on such goods.
(2) Sub-section (1) shall cease to have effect after the 31st day of March, 1966, except as respects things done or omitted to be done before such cesser; and Section 6 of the General Clauses Act, 1897 (10 of 1897) shall apply upon such cesser as if the said sub-section had then been repealed by the Central Government.
(3) The duties of excise referred to in Sub-section (1) in respect of the goods specified therein shall be in addition to the duties of excise chargeable on such goods under the Central Excises Act nor any other law for the time being in force and such special duties shall be levied for purposes of the Union and the proceeds thereof shall not be distributed among the States.
(4) The provisions of the Central Excises Act and the rules made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the duty of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules."
The provisions of Section 40 of Finance Act, 1983, have already been quoted by us and, therefore, need not be repeated. The comparison of both the provisions reveals :
"(1) Section 40(1) of Finance Act, 1983, specifically says that wealth-tax shall be chargeable under the WT Act, 1957, while there are no such wordings in Section 80(1) of Finance Act, 1965. On the contrary, it independently levies the special excise duty.
(2) Sub-section (3) of Finance Act, 1965, says that special excise duty shall be in addition to excise duty chargeable under Excise Act while under the Finance Act, 1983, it is not so.
(3) Sub-section (4) of Finance Act, 1965, makes the provisions of Finance Act applicable relating to the levy and collection of excise duty and refund, etc. to the levy of special excise duty; which is not the position under Section 40 of Finance Act, 1983. On the contrary, Sub-section (7) of Section 40 of Finance Act, 1983, makes the provision of Section 40 as part of WT Act, 1957, itself."
In view of the vital difference in the language of two enactments we hold that the decision of Supreme Court in the case of Associated Cements Co. Ltd. (supra) is quite distinguishable and, therefore, cannot be applied to the present case.
8. The decision of the Tribunal in the case of CWT v. Park Hotel (P) Ltd. (supra) is also distinguishable. The Tribunal in that case was not concerned with the issue, which is before us. The question in that case was whether the leasehold rights could be included in the wealth of assessee- company. The Department wanted to invoke the provisions of Section 2(e) of 1957 Act while according to assessee, only the value, of those properties could be taxed which fell within the ambit of Section 40 of Finance Act, 1983, as specifically provided for the assets, value of which could be included in the net wealth of the assessee. That decision of the Tribunal is not an authority for the proposition that wealth-tax chargeable on the wealth of companies is not wealth-tax chargeable under 1957 Act. Despite the fact that Section 40 of Finance Act, 1983, is self-contained code for levying tax on the wealth of the companies, in our opinion, the wealth-tax so leviable remains chargeable under 1957 Act because of the specific language of Section 40(1) and Section 40(7) of the Finance Act, 1983.
9. Regarding the decision of the Tribunal in the case of Pun] Sons .(P) Ltd. (supra), it would be sufficient to mention that the decision of the Supreme Court in the case of T.S. Krishna v. CIT (1973) 87 ITR 429 (SC) was not brought to the notice of the Bench. Therefore, this judgment does not help the assessee.
10. In view of the above discussion, it is held that wealth-tax levied by virtue of Section 40 of Finance Act, 1983, was wealth-tax chargeable under 1957 Act and accordingly the same was disallowable under Section 40(a)(iia) of 1961Act. The orders of CIT(A) are, therefore, upheld.
11. In the result, appeals of the assessee are dismissed.