1982 (2) TMI 51 - HC - Wealth-tax

Summary

Issues:
Interpretation of Wealth-tax Act, 1957 - Exemption under section 5(1)(xix) - Definition of "company" - Declaration by Central Government - Treatment of shares in Bombay State Financial Corporation for wealth tax purposes.

Analysis:
The judgment by the High Court of Bombay pertains to a reference under section 27(1) of the Wealth-tax Act, 1957 concerning the assessment years 1958-59 and 1959-60. The issue at hand was whether a sum of Rs. 14,000, representing the value of shares in the Bombay State Financial Corporation, should be excluded from the assessee's net wealth under section 5(1)(xix) of the said Act. The assessee's claim for exemption was rejected by the WTO, the AAC, and the Income-tax Appellate Tribunal, leading to the reference to the High Court for determination.

The key contention revolved around the interpretation of section 5(1)(xix) of the Wealth-tax Act, which granted exemptions for the value of shares held by an assessee-company in another company. The definition of "company" under the Act, as per section 2(h) before its amendment in 1975, included a corporation established by or under a Central, Provincial, or State Act, declared by the Central Government to be a company for the Act's purposes. In this case, it was established that the Bombay State Financial Corporation was not a company as defined in the Companies Act, 1956, and had not been declared by the Central Government to be a company for the Wealth-tax Act's purposes.

The court emphasized that despite the Corporation being recognized as a company for the Indian Income Tax Act, 1922, under the State Financial Corporations Act, 1951, this did not automatically extend its classification as a company for the Wealth-tax Act, 1957. The judges highlighted that any anomaly in the treatment of the Corporation should be addressed by the Legislature and not the court. Consequently, the court ruled against the assessee, denying the exemption claim for the shares in the Bombay State Financial Corporation under section 5(1)(xix) of the Wealth-tax Act, 1957. The assessee was directed to pay the costs of the reference to the Commissioner.