Law:

Section:

JUDGMENT Shah, J.-In computing the total earned income of the appellant-company for the calendar year 1959, the Income-tax Officer, Trivandrum, disallowed a claim for deduction of Rs. 80,255 in respect of liability for payment of tax under the Wealth-tax Act, 1957 (27 of 1957) incurred by the company for the calendar years 1957 and 1958. The order was confirmed by the Appellate Assistant Commissioner and by the Appellate Tribunal. On the following question referred by the Wealth-tax Appellate Tribunal, "Whether on the facts and circumstances of the case, the assessee-company is entitled to a deduction of Rs. 12,873 being the wealth-tax paid during the account year ended February 29, I960, against the profits and gains of its business for the assessment year 1960-61 under section 10(2)(xv) of the Indian Income-tax Act ?", the High Court of Kerala recorded an answer in the negative. The company has appealed to this court with special leave. The company claims that wealth-tax paid by it represented expenditure laid out wholly and exclusively for the purpose of its business, and on that account is a permissible allowance under section 10(2)(xv) of the Income-tax Act. In determining the admissibility of this claim, it is necessary to ascertain the true character of the liability for payment of tax under the Wealth-tax Act. Tax is charged under section 3 of the Wealth-tax Act, 1957, for every financial year in respect of the net wealth of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule to the Act; and "net wealth" under the Act means the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee on that date other than the debts specified. The tax under the Act is payable by all individuals, Hindu undivided families and companies on the value of taxable assets belonging to the taxpayer : it is charged on the net value of the assets, and not on the business or trading activity carried on by the taxpayer. The rates of tax for companies as well as…

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