T. S. KRISHNA versus C. I. T. MADRAS

Citation: [1973] 2 S.C.R. 533 · Decided: 03-10-1972 · Supreme Court of India · Bench: P. JAGANMOHAN REDDY · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
T. S. KRISHNA 
v. 
C: I. T. MADRAS 
October 3, 1972 
53 3 
[P. 
JAGANMOHAN REDDY, l. D. DUA AND H. R. KHANNA, JJ.] 
IVeaith Tax Act read n·itli S. 
.51(iii) of the 
Jnco111t..· 
Tax Act-
Jlt'ht:t/zer Wealth Ta:c paid can be deducted as an e:cpel1di1ure ulloll'aftle 
11111/<·r S. 57(iiil of the /nconre Tax Ac·t, 1961. 
During the accounting period 1962-63, the assessee paid Wealth Tax 
oi Rs. 21.963/- in respect of the shares held by him and deducted this 
•ln1ount from his dividend income and interest as an expen.diturc alloY.'• 
aok under S. 57(iii) of the Income Tax Act. 1961. The l.T.O. rejected 
the ch1im on the ground that there was no connection between the pay-
n1cnt of Wealth Tax and the earning of dh,;den'd income and both. 
the Appellate Assistant Co1n1nissioner as well as the Tribunal confirmed 
the order of the I.T.O. 
The Hig;h Court. on a refcrcnL"e, also r~jected 
th.; 
~ontcntion of the assessCc. 
The appellant contended that the pre-
:i:r,:r' atiun of assets is incidental for ~,"..fning income and that the assets 
th~n1scl\.cs produce income. 
Therefore. payment of Wealth Tax \\'rut 
virtu;illv a condition for earning income and default in payment of such 
tax \\ill endanger the O\\•ncrship of the asset and will gr;idually destroy 
the vcrv source .of incon1c. 
Disn1issin~ the appeal. 
HELD :(i) The Income T"x (Amendment) Ordinance of July 15, 
1972 and the Income-Tax (Amendment) A<t of, 197'.?. )\ave provided 
for <lisallo,\'ing: the \Vcalth Tax p~id as an expenditure in respect of in· 
comes derived from other sources. 
I ii) Even aptlrt fron1 the an1enOo1cnt disallo,ving the deduction. the 
vcr~ nature of lhe income from .. dividends in respect of which dcductiort 
of \Vealth Tax is clain1c<l does not, bear ;.1ny 
relationship 
direct 
or 
in.:idcntal 10 the earni'1g of that income and cannot he h1iJ out or cx-
pc':lJed cxclusiv\.!ly for the purpose of making or earning such income 
"·ithin the n1caninJ? of Sub-clause (iii) of S. 57 of the Act. or unC~r 
th.: c0rrcsponding pr0'Visions of S. 
IO(:!)(XV) of the Jndinn Income Tax. 
Act 1911. (540 Fl 
Tn11·ancore Titaniu111 Prod11£'IS Lui. v. C.l.T. Kcrala: 60 l.T.R. ~77 and 
Indian Alu111inh1111 Co Ltd .. v. C.l.T.: 84 I.T.R. 735 referred to. 
The asscsscc therefore cannot treat the Wealth Tax pt.iJ as an ex-
penditure allo\\'i.lhlc u1u.lcr S. 57 (iii) of the · 1 ncon1c Tax Act J 961. 
CrvtL APPELLATE JURISDICTION: Civil Appeal No. 1671 of 
1969. 
Appeal 1'v certificate from the judgment and order 
dated 
September 27. 1967 of the Madras High Court in T. C. No. 219 
of 1965. 
H 
S. S1rami11atha11. D. P. Moha11thy and S. Gopttlkri.</11w11 for 
the appellant. 
B. D. Sharma and R. N. Sachthey for the respondent. 
534 
SUPREME COURT REPORTS 
[1973] 2 S.C.lt, 
The Judgment of the Court was delivered by 
A 
}AGANMOHAN REDDY, J. This appeal is by certificate against 
'the judgment. of the Madras High Court on a reference under 
s. 256(1) of the Income-tax Act, 1961, (hereinafter called the 
'Aci') answering the question referred to it by the Tribunal 
.against the assessee. 
B 
During the relevant accounting period 1962-63 the assessee 
paid wealth-tax of Rs. 21,963/- in respeot of the shares held by 
him and claimed to have this amount deducted from the dividend 
income and interest as an expenditure allowable under s. 57(iii) 
Qf the Act. 
The Income-tax Officer rejected the claim on the 
ground 'th~t there was no direct or immediate connection between 
the payment of the wealh-tax and the .earning of the 
dividend 
income. 
In the. S!!bsequem appeals against this order, bjoth the 
Appellate Assistant Commissione!' as well as the Tribunal con-
firmed the order of the Income-tax Officer. The High Court on 
a reference in that case as well as in others raising a similar 
question, while rejecting tlie contention of the assessee, observed 
that the wealth-tax was paid by him as the owner and on ilie 
value of the totality of his assets which has nothing to do with 
his making or earning income from such assets and that the pro-
duction of the income from the assets appeared to it to be wholly 
unconnected with the payment of wealth-tax. 
The Court drew 
support from the Kumbakonam Electric Supply Corporation Ltd. 
v. Commissioner of Income-tax, Madras('') and Travancore Tita-
nium Products Ltd. v. C.l.T. Kerala(2). The learned advocate 
who appeared for the assessee and who has also addressed his 
argument before us had contended before 

Excerpt shown. Read the full judgment & AI analysis in Lexace.