COMMISSIONER OF WEALTH TAX Vs. GWALIOR RAYON SILK MFG WVG CO LIMITED NO 1

JUDGEMENT

(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.

(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.