LexMITSUI STEAMSHIP CO. LTD. versus C.I.T. WEST BENGAL, II CALCUTTA
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A B c D E F G H MITSUI STEAMSHIP CO. LTD. v. C.I.T. WEST BENGAL, II CALCUTTA February 7, 1975. [H. R. KHANNA AND A. C. GUPTA, JJ) 467 Indian Incc>me-tax Act (11 of 1922) s. 10(2)(xv) and Indian Income-tax 1ct (43 of 1961) s: 40, cl. (ii) (a) as amended by Amendment Act of l9i2~ Tax 011 property paid by ow11er-cum-trader-If deductible expenditure. The appellants, non-resident companies wit;1 registered offices in Japan, had been assessed to income-tax for the assessment years 1956-1961 under the Indian lncome-tax Act, 19.22 in respect .of their Indian earnings. In the assessment pro- c~0dmgs they claimed as dedt•ct1ble allowance, under s. 10(2) (xv), the tax paid by them on their business assets under the local tax law in force in Japan. But the Income-tax Officer rejected the claim. The Appellate Assistant Commissioner, however, allowed the claim and his order was confirmed by the Tribunal. On re- ference, the High Court, on a consideration of the various provisions of the Japanese statute, held that under the Japanese law it was the ownership of the as- sets that was material and not their actual user in business, and relying on the decision of this Court in Tran//lcore Titanium Product Ltd. v. C.l. T. Kew/a ( 60 I.T.R. 277), decided in favour of the Revenue. Allowing the appeal to tliis Court, HELD: ( l) In Indian Aluminium Co. Ltd. v. C.l.T. West Be11gal (84 I.T.R. 735) this Court held that the test adopted in the Travancore Tita11i11111 case, that to be a permissible deduction there must be a direct and intimate connection bet- ween the expend itL<re and the business, that is, between expenditure and the charac- ter of the assessee as a trader, and not as owner of the asset~, even if they arc assets of the business, ''needs to be qualified by stating that 1f th~ expenditure is laid out by the assessee as owner-cum-trader, and the expenditure is really inci- dental to the carrying on of his business, it must be treated tzi have been laid oct by him as a trader and as incidental to bis business. [470H-47 Jq (2} The Income-tax Act, 1961, was amended by the Income-tax Amendment Act, 1972. The amendments were introduced to restore the position established in Travancore Titanium cas~ namely, that Wealth Tax paid by an assessee in res- pect of his business assets was not deductible as a business expense in computing the assessee 's income from his business, which was virtually overruled by the later decision in the Indian Aluminium Company case. But the amendments do not appear to touch the principle laid down in the later case, that where a person has a dual capacity of a trader-cum-owner, and be pays tax in respect of property which is used for the purpose of the trade, the payment mu,t be taken to be in the capacity of a trader. The Amendment Act only adds the sum paid on account of wealth tax to the list of amounts no: deductible in computing the assessee's in- come 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 Amending Act and would continue 'to be governed by the law laid c:own itt the Indian A/11mini11m case. The ex!'lanation in s. 40 of ih~ Income-tax Act, 1961, which s. 4 of the Am~ndment Act adopts for the purpose of that 'ection defines wealth tax to include, illler alia, besides wealth tax chargeable under the Indian Wealth Tax Act, 1957, "any tax of a similar character chargeable under any Jaw in force in any coun~ry outside India. [4710-E; 4720-G] (3) But, unlike the Wealth-tax in India the municipal property tax in ~apan is a local tax imposed on certain specified properties by the city! town <;r v1lla.~e in which the. property is located. The Indian. Wealth. Tax 1.s, a national. tax chargeable on the net wealth of the person with certatn sµecmed exempt10ns. The difference in the manner of determination of the taxable basis of the proper- 468 SUPREME COURT REPORTS [1975) 3 S.C.R .. lie; aml the r.t'.es of ta1rntion emphasize the basic difference between :lr: two taxes notwi1h>ianding ce:tain points of similarity. [473H-474Bl · ( 4) The facts also disclosed that the assets b~longing lo the appellant:; were used by them in their business during the relevant prev10us years andalso that the payment of tax under the Japanese law was incidental to th~ carr; mg on of the business of the assessee. [473A-B1 A CIVIL APPELLATE JUR
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