(Order of the Court was
delivered by R. Jayasimha Babu, J.)
The question referred is,
Whether on the facts and in the circumstances of the case, the Appellate
Tribunal is right in law in holding that the immovable properties held as
business assets cannot form part of the subject matter of wealth-tax?
The assessment years are 1985-85 to 1988-89.
2. The assets referred to in the question are admittedly assets which
fall within the scope of Section 40 (3) of the Finance Act 1983. The ground
on which the assessee contend that the value of the assets should not be taken
into account for determining the assessee's liability is that these assets are
held by the assessee as stock-in-trade. The assets are land and buildings.
3. This Court in the case of Commissioner of Wealth Tax vs.
Varadharaja Theatres Pvt. Ltd. [(2001) 250 I.T.R. 523] held that the
exemption granted to cinema houses with effect from 1.4.1989 by the Finance
Act 1988 while computing the wealth of the closely held companies, which are
subject to wealth tax, was not retrospective and that it would take effect
only from 1st April 1989. This Court in that case dissented from the view to
the contrary that had been taken by the Karnataka High Court in the case of
Commissioner of Wealth Tax vs. Prakashi Talkies Pvt. Ltd. (1993) 202 I.T.R.
121.
4. Subsequently, this Court in the case of CWT v. Vummidi Bangaru
Chetty (P) Ltd. (2002) 254 I.T.R. 332, held that the value of filigree
silver and silverware, held by the assessee therein as stock in trade were
assessable to wealth tax for the assessment years 1984-85 to 19 88-89. More
recently, this Court in the case of CWT v. Reliance Motor Company Ltd.
reported in (2003) 260 I.T.R. 571, held that for the assessment year 1984-85
the value of the motor cars which form part of the stock in trade of the
assessee was not exempt from wealth tax.
5. The view taken in all the aforementioned cases is that the
amendment effected to Section 40 of the Finance Act, 1983 by the Finance Act
of 1988 is only prospective and not retrospective.
6. Learned counsel for the assessee here, despite those decisions,
sought to contend that the value of the stock in trade was not includible in
the net wealth, by placing reliance on a decision of Rajasthan High Court in
the case of CIT vs. Jodhan Real Estate Development Co. P. Ltd., (2003) 259
ITR 79. That judgment, inter alia, placed reliance on the decision of the
Karnataka High Court, which has been dissented from by his Court in the case
of Varadharaja Theatres.
7. With respect, we are unable to subscribe to the view taken in that
case of Jodhan, wherein it was held that the value of the cinema house could
not be included in thenet wealth of the assessee even prior to 0.04.1989, even
though 'cinema house' was specifically included in the exempted class of
building only after the amendment effected by the Finance Act, 1988.
8. The test to be applied for deciding as to whether a later
amendment should be given retrospective effect, despite a legislative
declaration specifying a prospective date as the date from which the amendment
is to come into force, is as to whether without the aid of the subsequent
amendment the unamended provision is capable of being so construed as to take
within it's ambit the subsequent amendment.
9. Applying that test it is not possible for us to hold that stock in
trade which is not excluded from wealth-tax in Section 40 of the Finance Act,
1983, is nevertheless to be regarded as having been excluded. No part of that
section is capable of being given such a construction.
10. The decision of the Supreme Court in the case of Allied Motors
(P) Ltd., vs. CIT, reported in (1997) 224 ITR 677, on which also the
assessee's counsel placed reliance does not support the view that in all cases
of unintended hardship the later dment should be regarded as forming part of
the originally enacted law. In that case the Court while considering Section
43B of the Act and the amendment effected thereto by the Finance Act, 1987,
which inter alia inserted a new proviso as also an explanation held that as
the explanation was given retrospective effect, the proviso was also required
to be given that effect, in order to place a reasonable construction on the
section as amended.
11. The Court in that case held that,
a proviso which is inserted to
remedy the unintended consequence to make the provision workable, a proviso
which supplies an obvious omission in the section to give the section a
reasonable interpretation, requires to be treated as retrospective in
operation, so that a reasonable interpretation can be given to the section as
a whole
.
12. The non exclusion of stock in trade from the ambit of levy of
wealth tax cannot per se be regarded as an 'obvious omission', nor is giving
it immunity from levy of wealth tax necessary for reasonably interpreting the
unamended provision.
13. We do not therefore see any good reason to depart from the view
taken by this Court in the earlier decision that the Finance Act, 19 88 which
amended portions of Finance Act, 1983, and extended the exemption from wealth
tax, inter alia, to the value of cinema house and the value of stock in trade,
is not retrospective.
14. The question is answered in favour of the revenue and against the
assessee.
Index : Yes
Website : Yes
gp
Copies to
1. The Assistant Registrar,
Income Tax Appellate Tribunal,
Rajaji Bhavan, III Floor,
Besant Nagar,
Madras 90.
2. The Secretary,
Central Board of Revenue,
New Delhi.
3. The Commissioner of Wealth Tax,
Tamilnadu IV,
Madras
4. The Commissioner of
Wealth Tax (Appeals VI),
Madras.
5. The Assistant Commissioner
of Wealth Tax,
Company Circle IV (1),
Madras.
6. The Deputy Commissioner of
Wealth Tax,
Range IV,
Madras.
?In the High Court of Judicature at Madras
%Dated: 30/12/2003
Coram
The Hon'ble Mr. Justice R. Jayasimha Babu
and
The Hon'ble Mr. Justice S.R. Singharavelu
Writ Appeal No. 1322 of 1997
1. The Council of the Institute
of Chartered Accountants of India
P.B. No: 7100,
Indraprastha Marg,
New Delhi - 110 002.
2. The President,
The Institute of Chartered
Accountants of India,
P.B. No: 7100,
Indraprastha Marg,
New Delhi - 110 002.
3. The Chairman,
Disciplinary Committee of
the Institute of Chartered
Accountants of India,
P.B. No: 7100,
Indraprastha Marg,
New Delhi - 110 002.
4. The Secretary,
The Institute of Chartered
Accountants of India,
P.B. No: 7100,
Indraprastha Marg,
New Delhi - 110 002. ... Appellants
-Vs-
1. R. Ayyavoo
2. Tamil Nadu State Transport
Corporation (Kumbakonam
Division I) Ltd.
Railway Station Road,
Kumbakonam - 612 001. **
3. Joint Secretary to the
Government of Tamil Nadu,
Transport Department,
Office of the Commissioner &
Secretary to Government,
Fort St. George,
Madras - 9. ... Respondents
(** 2nd respondent name had been
amended as per order of the
Court dated 21.11.2001 made
in C.M.P. No: 5725 of 2001)
Appeal under clause 15 of the Letters Patent Appeal against the order
of a learned single Judge of this Court made in W.P. No: 11434 of 1 987
dated 04.03.1997.
!For appellants : Mr. S. Sampath Kumar,
Senior Counsel for
M/s. Sampathkumar Associates
^For 1st resp. : Mr. M. Vellaisamy
For 2nd resp. : Mr. John for
M/s.Ramasubramaniam Asst.
For 3rd resp. : Mrs. N.G.R. Kalaiselvi,
Special Govt. Pleader
:J U D G M E N T
(Judgment of the Court was
delivered by R. Jayasimha Babu, J.)
We are rather surprised at the order under appeal by which the
Institute of Chartered Accountants has been prevented from taking disciplinary
proceedings against auditors whose alleged failure to perform their duties had
resulted in loss of several millions of rupees to the Transport Corporation
owned by the State.
2. A complaint in that regard was made by the Joint Secretary to the
State Government which owns all the shares in the Corporation. That complaint
names all the persons who were responsible for the misconduct. The persons so
named were internal auditor, as also the statutory auditors. It sets out the
nature of the omissions committed by them namely their failure to verify the
cash, their failure to verify the records, etc. as a result of which the
defalcation that had occurred was not brought to light. Had the internal
auditors and statutory auditors been diligent, such defalcation would not have
occurred and as a result of their proper scrutiny had they brought the facts
to light at the earliest instance, proper remedial action could have been
taken.
3. This complaint, by its very nature, is a serious complaint. It
refers to the failure on the part of the auditors to perform their
professional duties. The complaint was made to the professional body which is
concerned with the maintenance of high standard among its members. After
scrutiny of the complaint the Council was of the prima facie view that the
matter required a closer examination and enquiry by the disciplinary
committee. Even before that step could be taken by the Council, the writ
petitioner, who was the internal auditor, approached the Court by filing a
writ petition. The writ petition remained pending in this Court for ten years
and came to be heard in the year 1997. By the order under appeal, the
proceedings initiated against the petitioner, which was in reality, yet to be
gone into by the disciplinary committee, were quashed. We see no
justification whatsoever for the order so made.
4. The Chartered Accountants Act 1949 is an Act which is intended to
regulate the profession of Chartered Accountants. The Chartered Accountants
play a vital role in monitering finances of and ensuring financial discipline
in businesses more particularly of companies registered under the Companies
Act. They are the watchdogs for the shareholders of the Companies and it is
on their responsible discharge of their duties that the shareholders' interest
are adequately protected. If those professionals fail to perform their duties
in the manner required of them, such failure would not be merely a case of
serious misconduct on the part of a professional but a lso prejudices the
trust which the society has reposed in those professionals with regard to the
competent discharge of the duties entrusted to them. In this case, the monies
defalcated are from Corporation owned by the State. The funds are clearly
public funds. That de falcation was made possible by reason of the failure on
the part of the professional Chartered Accountants to perform their functions
in the manner that was required of them. An enquiry into their conduct with a
view to take appropriate disciplinary action was warranted not only to ensure
that their misconduct did not tarnish the image of the profession of Chartered
Accountants in general, but also to protect public who had reposed confidence
in their professional competence and had employed them for the purpose of
performing auditing and various other functions which a Chartered Accountant
is required to do under the provisions of the Act.
5. The action taken by the Council on the report of the disciplinary
committee is required to be brought to the notice of the High Court which
would scrutinise the record to make sure that the professional Chartered
Accountant has not been unfairly or improperly treated. There are sufficient
safeguards under the provisions of the Act. This Court, which is the ultimate
guardian of the profession of the Chartered Accountants, in matters of their
discipline, should not at the very threshold prevent the Council from
enquiring into a complaint properly made by a responsible senior officer of
the State Government.
6. We set aside the order under appeal and dismiss the writ petition.
The writ appeal is allowed.
gp
1. Tamil Nadu State Transport
Corporation (Kumbakonam
Division I) Ltd.
Railway Station Road,
Kumbakonam - 612 001. **
2. Joint Secretary to the
Government of Tamil Nadu,
Transport Department,
Office of the Commissioner &
Secretary to Government,
Fort St. George,
Madras - 9.