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Commissioner of Wealth-tax Vs. Smt. Hashmatunnisa Begum - Court Judgment

SooperKanoon Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 15 of 1973
Judge
Reported in[1977]108ITR98(AP)
ActsWealth Tax Act, 1957 - Sections 4(1); Gift Tax Act, 1958 - Sections 5; Wealth Tax (Amendment) Act, 1964
AppellantCommissioner of Wealth-tax
RespondentSmt. Hashmatunnisa Begum
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateY.V. Anjaneyulu and ;P.V. Raghavendra Rao, Advs.
Excerpt:
direct taxation - wealth tax- section 4 (1) of wealth tax act, 1957, section 5 of gift tax act, 1958 and wealth tax (amendment) act, 1964 - appeal against assessment of net wealth of assessee - assessee claimed exemption of value of gifts to his wives prior to 01.04.1964 - proviso to section 4 (1) (a) provides that gifts given under section 5 prior to 31.03.1964 cannot be included while computing net wealth of individual - held, assessee entitled for exemption. - .....to exclude, under the proviso to section 4(1)(a) of the wealth-tax act, 1957, the value of the assets gifted to his wives in the wealth-tax assessment for the assessment year 1967-68 ?' 2. the facts leading to this reference are these. the assessee, nawab zahir yar jung, filed return of his wealth for the assessment year 1967-68 on november 18, 1967, in the status of individual. he showed a wealth of rs. 10,08,588 in his return. he died on december 16, 1968, and the assessment proceedings were continued in the names of his legal representatives. the wealth-tax officer computed the net wealth of the assessee at rs. 10,46,338 and made an assessment accordingly on january 9, 1969. it was claimed on behalf of the assessee by his legal representatives, at the time of hearing before the.....
Judgment:

Obul Reddi, C.J.

1. The question referred to us for our decision under Section 27(1) of the Wealth-tax Act is :

'Whether, on the facts and in the circumstances of the case, the assessee was entitled to exclude, under the proviso to Section 4(1)(a) of the Wealth-tax Act, 1957, the value of the assets gifted to his wives in the wealth-tax assessment for the assessment year 1967-68 ?'

2. The facts leading to this reference are these. The assessee, Nawab Zahir Yar Jung, filed return of his wealth for the assessment year 1967-68 on November 18, 1967, in the status of individual. He showed a wealth of Rs. 10,08,588 in his return. He died on December 16, 1968, and the assessment proceedings were continued in the names of his legal representatives. The Wealth-tax Officer computed the net wealth of the assessee at Rs. 10,46,338 and made an assessment accordingly on January 9, 1969. It was claimed on behalf of the assessee by his legal representatives, at the time of hearing before the assessing authority that the value of the gifts of immovable properties made by the assessee to his wives prior to April 1, 1964, should be excluded from the computation in view of the proviso to Section 4(1)(a). The total of such gifts came to Rs. 1,96,950. This plea of the assessee was rejected on the ground that the proviso would save only inclusion of such of the gifts as were made in the year relevant to the assessment year 1964-65 and the subsequent years and that the proviso did not apply to gifts made earlier to 31st March, 1964. On appeal, the Appellate Assistant Commissioner agreed with the view expressed by theWealth-tax Officer and dismissed the appeal. On further appeal, the Income-tax Appellate Tribunal differed from the view expressed by the lower authorities and held that the intention of Parliament was to exclude from the net wealth of an assessee the assets transferred by an assessee to his spouse, whether gift-tax is chargeable or whether the transfer is exempt under the Gift-tax Act. In that view, it held that the assessee is entitled to the deletion of the addition of Rs. 1,02,608 in respect of the transfer of assets gifted by him to his wives and allowed the appeal.

3. Mr. Rama Rao, the learned counsel for the revenue, contended that, having regard to the subsequent amendment to the proviso to Section 4(1)(a), it cannot be said that Parliament intended to exempt gifts of assets made prior to 31st March, 1964, and that the Tribunal erred in laying great emphasis on punctuation, i.e., comma, occurring before the words' for any assessment year commencing after 31st day of March, 1964'. According to him, those words will only qualify the gift-tax assessments and not the wealth-tax assessments. We may, therefore, read the proviso as it stood prior to its amendment and see whether the words ' for any assessment year commencing after the 31st day of March, 1964' refer to the assessments to be made under the Wealth-tax Act. The proviso reads :

'Provided that where the transfer of such assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958, or is not chargeable under Section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual.'

4. The object of Clauses (i) to (iv) of Section 4(1)(a) is to check evasion of wealth-tax by individuals by the device adopted by them by transferring their property, either in whole or in part, to their spouse or minor children as specified in Clauses (i) to (iv). The taxing net is, therefore, spread so as to cover transfer of properties by individuals in respect of transfers referred to in Clauses (i) to (iv). This proviso was inserted by the Wealth-tax (Amendment) Act, 1964, and came into force from and inclusive of assessment year 1964-65. By the Finance (No. 2) Act of 1971, the operation of this proviso is limited up to the assessment year 1971-72 by adding, after the words '31st day of March, 1964 ', the words 'but before the 1st day of April, 1972 '. It must be stated that the proviso has not been happily worded and that has given room to the construction which learned counsel for the revenue sought to put upon the proviso. The question here is whether the transferred asset under Clauses (i) to (iv) of Section 4(1)(a) can be included in the net wealth of the individual in view of the proviso. The proviso was introduced to give wealth-tax exemption and that exemption is limited to the period referred to in the proviso. Weare of the view that, in cases of transfer of assets or part thereof, whether chargeable to gift-tax under the Gift-tax Act, 1958, or not chargeable under Section 5 of the Act, such assets cannot be included while computing the net wealth of an individual. The words ' for any assessment year commencing after the 31st day of March, 1964 ' are referable to the assessment to be made under the Wealth-tax Act. They render the provisions of Section 4(1 )(a) inoperative irrespective of the fact whether the transferred asset was chargeable to gift-tax or not chargeable to gift-tax. The proviso specifies the period of exemption up to 31st March, 1964. Irrespective of the year of the gifts when the assets were gifted, they will not be included in the computation of the net wealth of the individual till the assessment year 1964-65. We are, therefore, of the view that the intention of Parliament was to exempt transfers made under Clauses (i) to (iv)of Section 4(1)(a) from being computed in the net wealth of the individual up to the wealth-tax assessment year commencing after 31st day of March, 1964. We, therefore, uphold the view expressed by the Tribunal and answer the question in the affirmative and in favour of the assessee with costs.


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