COMMISSIONER OF WEALTH TAX Vs. GWALIOR RAYON SILK MFG WVG CO LIMITED NO 1
LAWS(MPH)-1980-8-5
HIGH COURT OF MADHYA PRADESH
Decided on August 28,1980

COMMISSIONER OF WEALTH-TAX Appellant
VERSUS
GWALIOR RAYON SILK MFG. (WVG.) CO. LTD. (NO. 1) Respondents


Referred Judgements :-

PEOPLE V. ARGUELLO [REFERRED TO]
BANCHHARAM MAJUMDAR V. ADYANATH BHATTACHARJEE [REFERRED TO]
KESORAM INDUSTRIES AND COTTON MILLS LIMITED VS. COMMISSIONER OF WEALTH TAX CENTRAL CALCUTTA [REFERRED TO]
COMMISSIONER OF WEALTH TAX M P VS. GWALIOR RAYON SILK MFG WVG CO LIMITED NO 2 [REFERRED TO]
KOTHARI TEXTILES LIMITED VS. COMMISSIONER OF WEALTH TAX [REFERRED TO]


JUDGEMENT

Shukla, J. - (1.)INCOME-tax Appellate Tribunal, Indore Bench, has referred under Section 27(1) of the W.T. Act some questions for our opinion.
(2.)BEFORE reproducing the questions, we may briefly narrate the material facts. The assessee, M/s. Gwalior Rayon Silk Mfg. (Wvg.) Company Ltd., Nagda, is a public limited company. Relevant assessment years are 1958-59 and 1959-60 for which valuation dates were 31st March, 1958, and 31st March, 1959, respectively. The assessee-company had claimed deduction of depreciation from the gross value of its fixed assets. It was contended that deduction of additional and initial depreciation on the fixed assets as allowed under the I.T. Act should be allowed for computing the taxable net wealth of the assessee also. It was not disputed that the deduction of normal depreciation from the value of fixed assets had been allowed by the AAC. For the revenue, the contention was that the assessee was not entitled to the deduction of normal depreciation as is allowed under the I.T. Rules, but such deduction could be allowed only on the basis of depreciation actually provided by it in its books of account.
Following the decision of the Madhya Pradesh High Court in MCC No. 309/1968 decided on 12-9-1974 (CWT v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. [1981] 131 ITR 148 (infra, Appendix) ) in respect of this very assessee, the Tribunal rejected the objections raised by the assessee as well as the revenue and confirmed deduction of normal depreciation from the value of the fixed assets.

The assessee had claimed deduction of arrears of dividend on cumulative preference shares amounting to Rs. 54,79,375 for assessment year 1958-59 and Rs. 49,22,434 for assessment year 1959-60. It was contended on behalf of the assessee before the Tribunal and also before the AAC that the preference shares being cumulative, the dividend at 6% per annum was payable by the assessee-company on the said shares whether profits were earned or not and hence the arrears of dividend on preference shares should be held to be deductible for arriving at the taxable net wealth of the assessee-company. The contention was rejected by the Appellate Tribunal on the basis of the decision of the Madras High Court in Kothari Textiles Ltd. v. CWT [1963] 48 ITR 816.

(3.)FOR the assessment year 1959-60, one more contention has been raised by the assessee. It was claimed that the assessee was entitled to a deduction of Rs. 6,32,832 for the purpose of working out the taxable wealth of the assessee-company. This claim represented the amount of managing agency commission short provided in the balance-sheet and claimed as deduction in the wealth-tax return filed before the WTO. This amount comprised of additional managing agency commission at 2.5%. It was contended by the assessee before the WTO and the AAC that this amount had not been shown in the balance-sheet of the relevant previous year because the approval of the Government on the proposal by the company for increasing the managing agency commission was received on July 11, 1959. However, it was operative with effect from April 1, 1957, and, therefore, irrespective of the fact that this amount was not shown in the balance-sheet, the company owed it as a debt in the assessment year in question and the same was liable to be deducted.
The WTO and the AAC rejected this contention, but the Appellate Tribunal accepted the claim advanced by the assessee and allowed the deduction as a debt.



Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.