A.M. Moosa vs Commissioner of Income Tax

P.A. Mohammed, J.—These income tax references are coming before us for answer at the instance of the assessee. The assessment years are 1979-80 and 1980-81. The common questions of law referred to us for decision are as follows :

"1. Whether, on the facts and in the circumstances of the case, was the Tribunal justified in law and facts in denying the liability claimed towards the purchase-tax as debt owned u/s 2(m)(2) of the Wealth-tax Act, 1957 ?

Whether, on the facts and in the circumstances of the case, is not the decision of the Hon''ble Tribunal vitiated by a wrong appreciation of facts with regard to the observation that the final sales tax order was not available at the time when the decision for the assessment year 1978-79 was rendered ?

Whether, on the facts and in the circumstances of the case was not the Tribunal unjustified in not allowing the exemption claimed in respect of the Toyota Car u/s 5(1)(viii) ?

Whether, on the facts and circumstances of the case, the Hob''ble Tribunal was correct in law in holding that the industrial subsidy received by the assessee was a contingent liability and not an ascertained liability ?

Whether, on the facts and circumstances of the case has not the Tribunal erred in not considering the facts that the subsidy received goes to reduce the cost of assets and cannot increase the capital structure ?"

Question Nos. 1 and 2 relate to the claim towards purchase tax as debt and question Nos. 4 and 5 relate to the issue whether the industrial subsidy received by the assessee was a contingent liability. The third question relates to the exemption claimed in respect of a Toyota car.

The assessee is an exporter of marine products. He claimed a sum of Rs. 17,06,819 as the liability towards purchase tax payable on 31-3-1979 and Rs. 6,43,499 for the succeeding year ended on 31 -3-1980. It is pointed out that this question has now been covered by the decision of this Court in ITR No. 34 of 1989 dated 19-6-1996, in the case of the same assessee in respect of the assessment year 1978-79. However, the said decision will apply to the present case only in respect of the assessment year 1979-80. In other words, the first two questions can be answered in favour of the assessee insofar as they relate to the assessment year 1979-80.

As far as question Nos. 4 and 5 are concerned, the matter is covered by the decision of this Court in IT Reference No. 175 of 1987 dated 14-6- 1996. In the said decision, this Court declared that the receipt of the income by way of subsidy is not a liability at all. In that view of the matter, this Court declined to answer the question and confirmed the order of the Tribunal. Therefore, following the decision in ITR No. 175 of 1987, we declare that the subsidy received by the assessee is not a liability and it is really an income. That being so, question Nos. 4 and 5 can only be decided against the assessee.

The only question now remains to be considered is question No. 3, that is with regard to the claim of exemption in respect of the Toyota car u/s 5(1)(viii) of the Wealth-tax Act, 1957 (''the Act''). The WTO denied the exemption on the ground that the car in question is a business asset and, hence, exemption is not admissible. What can be excluded u/s 5(1)(viii) is only a motor car held as a personal asset from the net wealth. The car in question has not been used as a personal asset as envisaged in the above section and, therefore, the value of the car is taxable. The Commissioner (Appeals) agreed with the view of the assessing authority. The Tribunal has dealt with this aspect in paragraph 13 of the order after carefully considering the claim advanced by the assessee. We are also inclined to agree with the view taken by the Tribunal.

In this connection, it is pertinent to note that no depreciation had been claimed by the assessee in respect of this car. The case put forward by the revenue is that the car being one of foreign made, depreciation was not allowable under the law and, therefore, claim had not been made. Therefore, when the car has been treated as a business asset in the balance sheet it is difficult to treat the same as a personal asset u/s 5(1)(viii). That being the position, we do not find any illegality in the order passed by the Tribunal insofar as it relates to the disallowance of the claim in respect of the Toyota car. In the result, question Nos. 1 and 2 insofar as they relate to the assessment year 1979-80 are answered in the negative, that it to say, in favour of the assessee and against the revenue, and the answer in respect of the assessment year 1980-81 is declined. We decline to answer question Nos. 4 and 5 inasmuch as what is involved is not a liability but income. As far as question No. 3 is concerned, we answer the same holding that the Tribunal is justified in not allowing exemption in respect of the Toyota car. The question is, thus, decided against the assessee and in favour of the revenue.