COMMISSIONER OF WEALTH TAX Vs. HALL AND ANDERSON LTD

JUDGEMENT

(1.) THIS reference, under the WT Act, raises a short but by no means an easy point of law to be answered by this Court. The assessee is a limited company and up to the asst. yr. 1956-57, it was assessed to income-tax in respect of its previous year ending with the 31st March of each such year. Consequent on the assessee-company becoming a subsidiary to another company of Bombay, whose financial year was different from that of the assessee, the assessee-company applied to the ITO for permission to change the date of the closing of their accounts from 31st March, 1957, to the 30th June, 1957. By his order dt. 17th April, 1964, the ITO accepted the assessee's request on condition that the assessee was assessed for the asst. yr. 1958-59 in respect of its income, profits and gains for the fifteen months from the 1st April, 1956, to the 30th June, 1957. As the assessee accepted the condition, the income-tax assessment for 1958-59 was made in respect of the aforesaid period of fifteen months. In response to the notice under s. 14(2) of the WT Act for the asst. yr. 1957-58, the assessee contended that, as it had no previous year for the asst. yr. 1957-58, there was no "valuation date" for that year and no wealth-tax assessment could be made on the assessee for that year. The ITO while rejecting this contention observed:

(2.) (11) 'Previous year'means-- (i) in respect of any separate source of income, profits and gains-- (a) the 12 months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any day other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up: Provided that where in respect of a particular source of income, profits and gains, an assessee has once been assessed,..... he shall not, in respect of that source .... exercise the option given by this sub-clause so as to vary the meaning of the expression 'previous year'as then applicable to him except with the consent of the ITO and upon such conditions as the ITO may think fit to impose;...." Mr. S. Mukherjee, learned counsel for the Department, submitted that under s. 2(q) of the WT Act, the "valuation date" would be the end of the previous year for the purpose of assessment to income-tax. If an assessment for income-tax could have been made for the year 1957-58 such valuation date would be either the 31st March, 1957, or the 30th June, 1956. He submitted that the Tribunal was not right in holding that no assessment to wealth-tax could be made for the asst. yr. 1957-58 if the corresponding valuation date was the 30th June, 1956, which was earlier than the date on which the Act came into operation. He contended that under the charging section of the WT Act, assessment to wealth-tax is to be made in respect of every financial year commencing from the 1st April, 1957. If the assessee's contention is accepted then there would be no assessment to wealth-tax for the asst. yr. 1957-58 and that would be contrary to the provisions of the charging section. Dr. D. Pal, learned counsel for the assessee, did not make any attempt to support the decision of the Tribunal that if the valuation date was the 30th June, 1956, then no assessment to wealth-tax could be made in respect of the asst. yr. 1957-58. Dr. Pal submitted that the Tribunal was in error in holding that there was any previous year for 1957-58 which ended on the 30th June, 1956. By the order of the ITO accepting the assessee's proposal to change the date of its closing of accounts from the 31st March, 1957, to the 30th June, 1957, on condition that the income for the entire period of 15 months were to be assessed for the asst. yr. 1958-59, there could not be any previous year for the asst. yr. 1957-58. The assessee has already been assessed to income-tax in respect of his income for the period 1st April, 1955, to 31st March, 1956, in the assessment year 1956-57, and if the income for the period 1st April, 1956, to 30th June, 1957, was to be assessed in the asst. yr. 1958-59, there could be no assessment to income-tax for the asst. yr. 1957-58. Dr. Pal, therefore, submitted that the AAC was right in holding that there was no previous year for income- tax purposes for 1957-58 tax year and, therefore, there could be no valuation date for the wealth- tax assessment for 1957-58. The provisions of s. 2(11) of the IT Act, 1922, were considered by the Supreme Court in Esthuri Aswathaiah vs. CIT (1966) 60 ITR 411 (SC), and the Supreme Court held, inter alia: