Wealth-tax paid by an assessee is not an admissible deduction in computing its income from dividends and interest under S.12 of the Indian IT Act, 1922. A donation made from the assessee's past savings is not entitled to rebate under S.15B of the Act.

K.L. ROY, J.

1. By this reference under S.66(1) of the Indian IT Act, 1922 (hereinafter referred to as the Act), the Tribunal has referred the following two questions of law to this Court :

"1. Whether, on the facts and in the circumstances of the case, the sum of RS.1,05,679 being the wealth-tax paid by the assessee, was an admissible deduction in computing the assessee's income under S.12 of the Indian IT Act, 1922 ? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to rebate in terms of S.15B of the Indian IT Act, 1922, in respect of the sum of RS.97,000 being the value of the shares donated by the assessee to Jaya Shree Charity Trust, a charitable institution to which S.15B applies ?"

2. The assessment year concerned in this reference is 1960-61, for which the relevant accounting year is the financial year ending on the 31st March, 1960. The assessee is an HUF. It derives income from dividends and interest on its investments, which is assessed under S.12 of the Act. The assessee claimed deduction of RS.1,05,679, being the wealth-tax paid by it during the accounting period on the value of its shares and other investments, as admissible expenditure in the computation of its income under S.12 of the Act. It also claimed a rebate under S.15B of the Act on the donation, in the form of gift of certain shares valued at RS.92,000 to Jaya Shree Charity Trust. The shares so gifted were admittedly acquired by the assessee out of its saving of the earlier yearS.There was also no dispute that Jaya Shree Charity Trust was an institution, the donations to which attracted the provision of S.15B. The ITO rejected both the claims of the assessee. He was of the opinion that wealth-tax was not an admissible deduction in computing the assessee's income under S.12. He also denied the rebate on the donation to Jaya Shree Charity Trust. The assessee's appeal to the AAC against the aforesaid order or assessment was infructuous as the AAC upheld the order of assessment. On further appeal to the Tribunal, the assessee claimed that the payment of wealth-tax was incurred solely for the purpose of making or earning the income under S.12 and was, as such, an allowable deduction under S.12(2). The Tribunal rejected its contention on the ground that wealth-tax fell on the assessee as the owner of assets and not as an incidence to the earning of income. It was a liability to which all owners of properties were exposed whether they earned income there-from or not. The Tribunal also rejected the assessee's claim for rebate under S.15B relying on the decision of this Court in CIT Vs. Samnugger Jute Factory Co. Limited (1953) 24 ITR 265 (Cal), where it had been held that a sum contributed to the Gandhi Memorial Fund, which was an institution to which donations were entitled to rebate under S.15B, was not entitled to rebate under that section as it was not contributed by the assessee from its earnings in the relevant previous year but was paid out of its savings of a year prior to the previous year. Accordingly, the Tribunal dismissed the assessee's appeal.

At the instance of the assessee the aforesaid questions of law have been referred to this Court by the Tribunal.

3. DR. Pal, the learned counsel for the assessee, attempted to distinguish the decision of the Supreme Court in Travancore Titanium Product Ltd. Vs. CIT (1966) 60 ITR 277 (SC) on the ground that there it had been held that wealth-tax paid on the net wealth of an assessee was not a permissible deduction under S.10(2)(xv) of the Act. DR. Pal contended that in that case the Supreme Court made a distinction between a person who carried on business and a person who was the owner of assets. He relied on the following passage at page 282 of the report for his contention :

"The position may, therefore, be summarised thus : the nature of the expenditure or outgoing must be adjudged in the light of accepted commercial practice and trading principles. The expendit