1967 (7) TMI 55 - HC - Income Tax

Wealth Tax - held that sum paid by the assessee as wealth-tax, was an admissible deduction in computing the assessee s income u/s 12 of the IT Act, 1922

Summary

Issues:
1. Deductibility of wealth-tax paid by the assessee in computing income under section 12 of the Indian Income-tax Act, 1922.
2. Entitlement to rebate under section 13B for shares donated to a charitable institution.

Analysis:
The High Court of Calcutta addressed two key issues in this judgment. Firstly, the court examined whether the wealth-tax paid by the assessee, amounting to Rs. 1,05,679, could be considered as a deductible expenditure in computing the assessee's income under section 12 of the Indian Income-tax Act, 1922. The assessee, a Hindu undivided family deriving income from dividends and interest on investments, claimed this deduction. The Income-tax Officer and the Appellate Assistant Commissioner had rejected this claim, stating that wealth-tax was not an allowable deduction under section 12. The court upheld this decision, emphasizing that wealth-tax was a liability on the owner of assets, not an expenditure incurred solely for earning income, as required by section 12(2) of the Act. The court distinguished between expenses for earning income and those for preserving assets, concluding that the wealth-tax did not qualify as an allowable deduction under section 12(2).

Secondly, the court considered the assessee's entitlement to a rebate under section 13B for donating shares valued at Rs. 97,000 to a charitable institution. The Tribunal had denied this claim, relying on a previous decision that donations must be part of the assessable income of the relevant accounting year to qualify for rebate under section 15B. As the shares donated were acquired from past savings, the court held that they did not meet the criteria for rebate under section 15B. Despite the assessee's attempt to challenge this decision by citing distinctions made by other High Courts, the court upheld the previous decision, stating that they were bound to follow it. Consequently, the court ruled against the assessee on both issues.

In conclusion, the High Court of Calcutta answered both questions in the negative and against the assessee, requiring the assessee to pay the costs of the reference. Justice B. N. Banerjee agreed with the judgment, solidifying the decision of the court on the deductibility of wealth-tax and entitlement to rebate for donated shares.