CWT vs Michel Postel

1. The only question that arises for decision in these appeals is whether the High Court was justified in rejecting the application of the department to call for a statement of case from the Tribunal along with the question of law :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provision in respect of additional super-tax under Section 23A of the Indian Income-tax Act, 1922/Section 104 of the Income-tax Act, 1961, should be deducted in computing the break-up value of the shares of Franco Indian Pharmaceutical Pvt. Ltd. for purposes of the wealth-tax assessments of the assessee for the assessment years 1960-61, 1961-62 and 1962-63?

2. The Tribunal declined to submit that question and the High Court dismissed the application of the department to call upon the Tribunal to submit that question for its opinion along with the statement of case.

3. In these appeals we are concerned with the valuation of the assessee's wealth during the years ending March 31, 1960, March 31, 1961, and March 31, 1962. One of the points contested by the department related to the computation of the value of the shares held by the assessee in two companies, viz., Franco Indian Manufacturers Pvt. Ltd. and Franco Indian Pharmaceutical Pvt. Ltd. To both these companies, Section 23A of the Indian Income-tax Act, 1922, or its corresponding provision in the 1961 Act could be applied if the conditions prescribed therein are satisfied. It was found by the Tribunal that the provision was applied during the assessment year 1961-62. For the assessment year 1960-61 tax under Section 23A was paid under a settlement. In calculating the break-up value of the shares in these companies, the assessee wanted the additional super-tax leviable under Section 23A of the Indian Income-tax Act, 1922, or leviable under Section 104 of the Income-tax Act, 1961, to be deducted in addition to the deduction of other liabilities. The Wealth-tax Officer rejected that claim. In appeal, the Appellate Assistant Commissioner allowed the deductions. The Tribunal upheld the decision of the Appellate Assistant Commissioner.

4. From the facts set out above, it is quite clear that the question of law formulated by the department did arise for consideration. The Tribunal erred in opining that its finding that the additional tax payable under Section 23A is deductible, is a finding of fact. Hence, the Tribunal was wrong in refusing to refer that question for the opinion of the High Court under Section 27(1) of the Act. The High Court also erred in not calling upon the Tribunal to refer that question for its opinion along with a statement of case.

5. There is hardly any doubt that the question set out above did arise from the order of the Tribunal and that question is a question of law.

6. For the reasons mentioned above, we allow these appeals, set aside the order of the High Court and remit the cases back to the High Court to dispose of the same in accordance with law, in the light of the observations made above. No costs.