1. Revenue's appeal against order dated 7-1-1981 of the A AC and the assessee's appeals against common order dated 19-1-1982 of the Commissioner (Appeals) were taken up together for hearing.
2. 1978-79 to 1980-81 are the assessment years concerned. March 31 immediately preceding each assessment year is the corresponding valuation date. Assessee is an individual. Facts of the three assessment years under consideration are somewhat similar; We, therefore, proceed to detail the facts pertaining to the assessment year 1978-79. only. The dispute relates to includibility of sums of Rs. 11,840, Rs. 39,453 and Rs. 52,335 respectively, for the three years.
3. Under the provisions of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 ('the CDS Act'), the assessee had been from year to year depositing certain amounts by way of compulsory deposits.
Accordingly, during the financial year 1977-78, the assessee freshly deposited sum totalling Rs. 11.840. Balance standing to assessee's credit in the CDS account is not known. Presumably, the WTO allowed benefit of exemption under Section 5(1) of the Wealth-tax Act, 1957 ('the Act') as regards the remaining portion of the said balance.
For the assessment year 1978-79 the WTO held the said fresh deposit to be the assessee's asset, of the nature of a deposit with a banking company covered by the Banking Regulation Act, 1949, but he declined to grant benefit of exemption under Clause (xxvi) of Section 5(1) of the reasoning that the said fresh deposit had been owned by the assessee up to the valuation date for a period of less than six months and that, therefore, the bar in Section 5(3)(b) came in the way of benefit of exemption. The WTO, however, gave no finding with reference to the provisions of the Explanation to Section 5(3), so far as computation of the said six months period was concerned.
4. For the assessment years 1979-80 and 1980-81, the WTO included in the computation of assessee's net wealth sums of Rs. 39,453 and Rs. 52,335 respectively, which reflected balances in the compulsory deposit account. In this regard, the WTO also mentioned that the Tribunal had in the assessee's own case relating to earlier assessment years upheld as per common judgment dated 11-6-1979 the WTO's finding as to includibility of the sum of fresh deposit under the said CDS Act in computation of assessee's net wealth.
5. The assessee carried the matters in first appeal. As for the assessment year 1978-79, the AAC accepted the assessee's contention to the effect that the assessee had by making fresh deposits as aforesaid, purchased an annuity which, in turn, was excluded from the ambit of the definition of the term 'asset' by reason of Section 2(e)(2)(ii) of the Act. For the assessment years 1979-80 and 1980-81, however, the learned AAC, relying on the Tribunal's common decision dated 11-6-1979 in the assessee's own case for the assessment years 1976-77 and 1977-78 turned down the aforesaid contention of the assessee and confirmed the WTO's finding.
6. It is under these circumstances that the revenue is in appeal as for the assessment year 1978-79 and the assessee is in appeal for the other two assessment years.
7. Learned departmental representative was asked as to which of the tests or ingredients, spelt out by the Supreme Court in CWT v. P.K.Banerjee [1980] 125 ITR 641 (cited by the assessee before us), could be said to have not been satisfied in the instant cases. We fear that no neat reply forthcame. Revenue merely relied on the aforesaid earlier orders, dated 11-6-1979, of the Tribunal in the assessee's own case.
Learned departmental representative emphasised that this Bench being of coordinate jurisdiction should feel bound to follow the said earlier precedent. In this connection, decision in the case of CIT v. L.G.Ramamurthy [1977] 110 ITR 453 (Mad.) was cited. Revenue also emphasised that three questions arising out of the said earlier judgments of the Tribunal already stood referred to their Lordships of the Delhi High Court and that if this Bench were inclined to take a view different from the view taken earlier, question would arise as to whether it would be in judicial propriety to refer the matter to the President for constitution of a larger Bench and whether such a course would be advisable when reference was already pending before the Delhi High Court as aforesaid.
8. On assessee's side, on the other hand, an elaborate argument was addressed in support of the contentions firstly, that the fresh deposits made by the assessee under Section 4(1) of the CDS Act, had altogether ceased to be the assessee's property before the valuation date, and secondly, that if the assessee was still held to own some kind of property as respects the said fresh deposits then that property being of the nature of annuity did not constitute an asset within the meaning of Section 2(e)(2)(ii). In fairness, the assessee drew our attention to Section 7A freshly inserted in the CDS Act by the Finance (No. 2) Act, 1980 with retrospective effect from 1-4-1975. But the assessee contended that the said new provision contained a legal fiction which did not, in any manner, impinge on the aforesaid two contentions of the assessee.
9. As suggested on the assessee's side, we first proceed to deal with the matter as if there existed no earlier judgment of the Tribunal adverse to the assessee.
10. In connection with the plea that the assessee on making fresh deposits under Section 4(1) of the CDS Act, ceased to own any property whatsoever, the assessee argued that he was not at liberty to withdraw and/ or utilise any portion of the amount so deposited during the said financial year 1977-78. We reject the said argument as of no weight.
The fact remains that on making deposit under Section 4(1), the assessee acquired under the provisions of the said Act certain rights, namely, to earn simple interest as provided in Section 7 of the CDS Act and the right to be repaid the entire amount of deposits made under Section 4(1) in five equal instalments starting from 1-4-1980 onwards.
Thus, the assessee's right to the amounts, which went into the deposits as aforesaid, came to be converted by reason of the statutory provisions of the CDS Act into a different right and that right certainly constituted property in the eye of law.
10A. Next, we proceed to examine whether the statutory right into which the amounts deposited under Section 4(1) of the CDS Act gets converted, is within the meaning of Section 2(e)(2)(ii) a right to any annuity, not being an annuity purchased by the assessee.
11. As indicated earlier, the said statutory right has two components, namely, (i) the right to earn simple interest at a rate equal to the bank deposit rate as provided in Section 7 of the CDS Act, and (ii) the right to be repaid the entire amount of initial deposits in live annual instalments as aforesaid. According to the decision in P.K. Banerjee's case (supra), in order to constitute an 'annuity' the payment to be made periodically should be a fixed or predetermined one and it should not be liable to variation depending upon or on any ground relating to the general income of the fund or estate which was charged for such payment. It is obvious that in the instant case, component by way of interest is directly relatabie to the amount of initial deposits.
Second component, on the other hand, involves nothing more than repayment of the initial deposits, repayment being spread over five years commencing from two years after the expiry of the year in which the initial deposits are made. We, therefore, have no hesitation in concluding that the statutory right in question is not a right to an annuity. Even if for arguments sake, it were to be held that the said statutory right is right to annuity, assessee's case would, in our opinion, be hit by the exception that such annuity should not have been purchased by the assessee. We are of the view that even when the assessee does not purchase the said right exactly out of his own volition, but under the compulsion of a statute, he and he alone, remains the purchaser of the said right. Thus, on this reasoning also, the property comprised by the said statutory right does not get excluded from the ambit of the term 'asset' as defined in Section 2(e)(2)(ii). The assessee fails. In the aforesaid reasoning, no assistance has been taken from the newly inserted provision in Section 7A of the CDS Act.
12. With reference to the said new Section 7A of the CDS Act, the assessee, with the aid of a number of rulings digested in volume I of Chaturvedi & Plthisaria's 'Income-tax Rulings' contended (0 that Section 7A contains a legal fiction ; (ii) that the said legal fiction purported to treat compulsory deposits as deposits with a banking company governed by the Banking Regulation Act for the purposes of exemption under Section 5 ; (HI) that as the legal fiction was not meant to be extended beyond its legitimate field, the said legal fiction could not be extended so far as to give the statutory right in question the character of an asset, if it was not otherwise an asset within the meaning of Section 2(e)(2)(ii). We see no force in the assessee's argument. The doctrine as to non-extension of legal fiction beyond its legitimate field does not imply that the legal fiction should be reduced to an absurdity so as to be of no meaning at all. In cases like the instant one, there would obviously arise no question of an assessee being allowed the benefit of exemption if the property, in respect of such exemption is intended to be allowed, is not an asset at all.
13. In the above view of the matter, we respectfully reaffirm the conclusion of the Tribunal which decided the assessee's case for earlier years. The assesses fails. In view of ceiling of Rs. 1,50,000 as fixed in Section 5(1 A), the assessee did not press for benefit under Section 5(1) on regards the assessment years 1979-80 and 1980-81.
An appeal relating to the assessment year 1978-79 involves an additional dispute. The assessee owned, on the relevant valuation date, two cars, whose written down value amounted to Rs. 47,127. The said value was included by the WTO in the computation of assessee's net wealth. The assessee's contention that the said assets were exempt under Clause (viii) of Section 5(1) was turned down by the WTO on the reasoning that the assessee had two cars, both of which had been used by the assessee for professional purposes and in respect of both of which, depreciation had been claimed and allowed in the income-tax assessment of the assessee for the assessment year 1978-79.
14. On appeal, the learned AAC relying on the Board's Circular No. 3D (WT)/1960 dated 1-4-1960 took the view that despite depreciation having been allowed in respect of the written down value of one of the cars in question, it continued to merit exemption. He, therefore, held one car having written down value of Rs. 28,004 to be exempt under Clause (viii). Following extract from the circular contained in the AAC's order is reproduced : The actual cost of the article should be taken, and from it should be deducted ordinary depreciation as per Income-tax Rules from the date of acquisition up to the valuation date. If, however, it is proved that the market value of the article is lower than the valuation thus arrived at, the market value may instead be adopted.
15. We are afraid, that we are not satisfied with the said Circular, that had any bearing on Clause (viii). The said extract, according to us, had a bearing only on the question of determination of market value, and the said extract, in the absence of express reference to Clause (viii) cannot, in our view, have the effect of almost deleting from the said provision the expression 'intended for the personal or household use of the assessee'. We cannot, therefore, sustain the AAC's finding.
16. During argument, the assessee also submitted that for the immediately preceding year and also for the two succeeding years, cars owned by the assessee had been held to be exempt under Clause (viii) by the WTO himself. There are two aspects. Learned departmental representative did not have the WTO's folder relating to those other assessment years and the assessee produced no evidentiary material to substantiate the said factual aspect. Further, it is not known as to whether in those three years, the assessee had or had not claimed and been allowed depreciation in the income-tax assessments in respect of the cars in question. Secondly, in any case, each assessment relating to a particular assessment year is an independent assessment and the questions arising therein, have to be disposed of according to the legal position as ascertained or found by the forum concerned. Absence of the word 'exclusively' in Clause (viii), according to us, makes no difference. An asset, which is a business asset, giving rise to a claim for depreciation can, according to us, not be said to be an asset 'intended for personal or household use'. It may be noted that there is no provision in the Wealth-tax Act corresponding to Section 38(2) of the Income-tax Act, contemplating cases of different partial users.
Thus, for purposes of Clause (viii), no splitting of an asset can be made to allow even a partial exemption. The revenue succeeds.
17. The revenue's appeal is allowed. The assessee's appeals are dismissed.