1975 (2) TMI 1

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.... the financial years ending on the 31st March, 1956, 1957, 1958 and 1959, respectively. The appellant in each case had been assessed to income-tax for the years mentioned above under the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act of 1922 "), in respect of its net Indian earnings. In the assessment proceedings the appellant companies had claimed as deductible allowance under section 10(2)(xv) of the Act of 1922, the tax paid by them on their business assets under the Local Tax Law in force in Japan. The Income-tax Officer rejected the claim on the view that the incidence of tax under the Japanese law falls on the assessee-companies in their capacity as the owners of the business assets and not as traders. On appeals preferred by the assessees the Appellate Assistant Commissioner took the view that the tax paid under the Local Tax Law in Japan was an allowable expenditure under section 10(2)(xv) of the Act of 1922. The Tribunal also affirmed the view taken by the Appellate Assistant Commissioner overruling the contention raised on behalf of the revenue that the nature of tax imposed by the Japanese statute was similar to the wealth-tax payable in India which wa....

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....to four books. All the articles to which we will refer for the purpose of these appeals are in Chapter III. Section 2 of Book Four contains articles 341 to 746, Chapter III bears the heading " Ordinary Taxes of City, Town or Village " and section 2 deals with " Municipal Property Tax ". Article 341 defines certain terms concerning municipal property tax, and in so far as it is relevant for the present purpose, it reads as follows : " With respect to municipal property tax, the terms listed in the following items shall have the definition given to them under the respective items : (1) Property : Land, houses and depreciable assets ; (2) Land ; (3) Houses ; (4) Depreciable assets : Assets (excluding the mining right, fishing right, patent right and other depreciable intangible property) other than land and house which can be used for business purpose and the amount of depreciation of which is included in the loss or necessary expenditure in the computation of income as provided for in the Corporation Tax Law or the Income-tax Law (including the property similar to those properties which are owned by the person upon whom the corporation tax or the income-tax has not bee....

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....uction of amounts paid on account of wealth-tax. The Ordinance was later repealed and replaced by the Income-tax (Amendment) Act, 1972 (41 of 1972), containing similar provisions. The Amendment Act which received the assent of the President on August 28, 1972, sought to restore, as the Statement of Objects and Reasons says, the position established in the case of Travancore Titanium Products Ltd. v. Commissioner of Income-tax which was virtually overruled by the later decision in Indian Aluminium Co. Ltd. v. Commissioner of Income-tax that wealth-tax paid by an assessee in respect of his business assets was not deductible as a business expense in computing the assessee's income from business. Section 2 of the Amendment Act inserted with retrospective effect a new sub-clause (iia) in clause (a) of section 40 of the Income-tax Act, 1961, which specifies the amounts not deductible in computing the income chargeable under the head " Profits and gains of business or profession ". Sub-clause (iia) adds to the list of amounts not to be deducted " Any sum paid on account of wealth-tax ". To this sub-clause an Explanation was added extending the meaning of the expression " wealth-tax " ....

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....ctible in computing the assessee's income from business. Therefore, any amount paid by the assessee on account of a tax other than the wealth-tax on his business assets would be outside the scope of the Amendment Act and would continue to be governed by the law laid down in Indian Aluminium Company's case. The Explanation to the new sub-clause (iia) inserted in section 40 of the Income-tax Act, 1961, which section 4 of the Amendment Act adopts for the purposes of that section, defines " wealth-tax " to include, inter alia, besides wealth-tax chargeable under the Wealth-tax Act, 1957, " any tax of a similar character chargeable under any law in force in any country outside India'. The only contention raised before us on behalf of the revenue was that the nature of the tax paid by the assessee in Japan on their business assets is similar to the wealth-tax payable under the Wealth-tax Act, 1957. This leads to a comparison of the two statutes, the Wealth-tax Act, 1957, and the Local Tax Law of Japan, to find out whether they are of a similar character. The supplementary statement of case drawn up by the Tribunal pursuant to an order of this court dated April 11, 1973, discl....