1980 PLP (Trib (PTD)

MUHAMMAD MAZHAR ALI (MEMBER).‑This appeal relating to the charge year 1976‑77 arises from the order of the Appellate Assistant Commissioner, whereby he has upheld the order of the Assessing officer disallowing the assessee's claim for deduction of wealth tax amounting to Rs. 3,940 paid for the charge year 1975‑76 from the property income computed under section 9 of the Income‑tax Act, for the charge year under consideration.

2. It was contended by the learned Authorised Representative of the appellant that wealth tax leviable by the Central Government in respect of the property falls within the purview of annual charge and hence the amounts thereof is a permissible allowance in terms of section 9(1) (iv) of the Income‑tax Act. The assessee had, he so contended, paid Rs. 3,940 towards wealth tax in respect of the property in question, pertaining to wealth tax assessment year 1975‑76, and had claimed it by way of allowance which was disallowed by the Assessing Officer, without assigning any reason. The action of the income‑tax Officer has been upheld by the learned Appellate. Assistant Commissioner, by following the ratio of the decision of the Bombay High Court in C. L. T. v. Elphinston Spinning & Weaving Co. Ltd. ((1975) 100 I T R 139). The learned Authorised Representative of the appellant vociferously argued that the Bombay High Court's decision relied upon by the learned Appellate Assistant Commissioner was inapplicable to the facts of the instant case. The learned Departmental Representative, on the other hand, faintly supported the impugned order.

3. Having examined the case with care and anxiety which it deserved, we have come to the conclusion that the contention of the appellant's Authorised Representative should prevail. We also find ourselves in agreement with the appellant's Authorised Representative that the Bombay High Court authority relied upon by the learned Appellate Assistant Commissioner was quite irrelevant to the facts of this case. In the Bombay case the facts were that the assessee had claimed deduction under section 10(2) (xv) of Indian Income‑tax Act, 1922 as a business expenditure in respect of the sum of Rs. 46,641 paid on account of wealth tax debited to Profit and Loss account of the year ending December 31, 1957. The High Court found that, "In more than one decision the Supreme Court took the view, that the wealth tax paid by a trading company on its assets held for the purpose of its business was deductible as a business expense in computing the assessee's income from business". The High Court, however, found that the relevant provisions of Income‑tax Act, 1922 were amended, after the decision of the Supreme Court, by the Income‑tax (Amendment) Act, 1972 (No. 41 of 1972), which received the assent of the President on August, 1972. Sec tion 4 of the amending Act provided that: "Nothing contained in the Indian Income‑tax Act, 1922 shall be deemed to authorise or shall be deemed t9 have been ever authorised, any deduction in the computation of income of any assessee chargeable under the head `profit & gains of business, profession or vocation. or `from other sources' for the assessment year commencing from the 1st of April, 1957 or any other subsequent year, or any sum paid on account of wealth tax : . . . . . . . ." The High Court, therefore, held : "Normally, if the Legislature had not intervened, the decisions of the Supreme Court would have been clearly applicable". It is, therefore, obvious that it was but for the said amendment introduced by Act XLI of 1972, that the Bombay High Court held that the wealth tax paid by a trading company on its assets held for the purpose of its business was no more deductible as a business expense in computing the assessee's income from business. It is thus manifest that the Bombay High Court's judgment has no bearing on the facts of the instant case which :does not, at all, concern with deductibility of wealth tax as a business expenses from income taxable under the head profits and gains of business, profession or vocation. The learned Appellate Assistant Commissioner therefore, grievously fell into an error in placing reliance on the aforesaid ruling of the Bombay High Court for his decision.

4. Now reverting back to the facts of the case, we find that the appellant above‑named had claimed allowance for wealth tax as an `annual charge' under section 9(I) (iv) of the Income‑tax Act, 1922. Before proceeding further, we think it would be appropriate if we reproduce there under the relevant provision of law of section 9(1) (iv) of the Income‑tax Act, 1922 on the basis whereof the learned Authorised representative of the appellant has developed his arguments :‑

"9.‑(1) The tax shall be payable by an assessee under the head "Income from property" in respect of the bona fide annual value of property consisting of any buildings or lands apartment thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax, subject to the following allowance, namely :‑

(iv) Where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge ; where property is subject to an annual charge not being a capital charge, the amount of such ground rent ; and where the property is subject to a ground rent and where the property has been acquired constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital: Provided‑‑‑

(omitted being irrelevant). Explanation.‑The expression "annual charge" as used in this clause, includes any tax leviable, in respect of property or income from property, by a local authority (including a Cantonment‑Board) or a Provincial Government but does not include the tax leviable under this Act."

5. A bare perusal of the aforesaid provision of law manifestly indicates that the Legislature has in clear and unambiguous terms provided that where the property is subject to an annual charge' not being a 'capital charge', the amount of such charge shall be allowed by way of allowance while, computing the tax payable by an assessee under the head "income from property in respect of the bona fide Annual Letting value of property consisting of any buildings or lands apartment thereto of which he is the owner.' The expression "annual charge" as used in clause (iv) of subsection (1) of section 9 has been duly defined vide "Explanation" engrafted to the said clause (iv), so as to include any tax leviable in respect of property or income from property, by a local authority (including a Cantonment Board) or a provincial Government or the Central Government. The income‑tax has, it is pertinent to note, been specifically excluded from the ambit of the expression "annual charge". And hence it leads to an irresistable conclusion that the tax leviable in respect of property or income from property by the Central Government etc. Is covered by the term "annual charge". Now there can be no denying that wealth tax is a tax leviable by the Central Government in respect of the 'net wealth', which term embraces within its fold the property of every description, moveable or immovable, save those specifically excluded, on the corresponding valuation date of every individual etc., at the rate or rates specified in Schedule to the Wealth Tax Act, 1963.

6. For the foregoing reasons, we would hold that the amount of wealth tax in respect of property in question levied by the Central Government is an admissible allowance under section 9(1) (iv) of the Income‑tax Act, 1922.

7. In the result, the impugned order of learned Appellate Assistant Commissioner is set aside quo ad hoc, and the case is sent back to the income‑tax Officer with a direction to ascertain the exact amount of wealth tax levied on the property in question and to make an allowance in respect thereof, while computing the tax payable by the appellant under the head "income from property".

8. Consequently, the appeal succeeds and is accordingly allowed. Appeal allowed.