Sethuraman, J.
1. This is a reference under Section 27(1) of the W.T. Act, 1957. The following questions have been referred to this court :
'(1) Whether, on the facts and in the circumstances of the case, it has been rightly held by the Appellate Tribunal that the ' loose diamonds ' owned by the assessee are exempt under Section 5(1)(viii) of the Wealth-tax Act, 1957 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal had valid materials to hold that the loose diamonds are articles intended for the personal use of the assessee? '
2. The assessee is a lady who submitted returns for the assessment years 1967-68, 1968-69 and 1969-70 under the W.T. Act. The value of the jewellery shown in the wealth-tax returns for the three assessment years under reference and the value of loose diamonds are as follows :
1967-68 1968-69 1969-70Rs. Rs. Rs.
(i) Gold ornaments13,30014,00017,100(ii) Jewellery86,70096,0001,09,700(iii) Loose diamonds3,20,000
3,50,000
3,80,000
4,20,000
4,60,000
5,06,800
3. The assessee claimed before the WTO that the value of the jewellery, gold ornaments and loose diamonds should not be taken into account in computing the net value, as they were exempt under Section 5(1)(viii) of the W.T. Act. The WTO negatived this plea following a decision of the Patna High Court in Pandit Lakshmi Kant Jha v. CWT : [1968]69ITR545(Patna) . On appeal, the AAC, following a decision of the Supreme Court in CWT v. Arundhati Balkrishna : [1970]77ITR505(SC) , held that the entire value of the jewellery, gold ornaments and loose diamonds was exempt under Section 5(1)(viii). The WTO appealed to the Tribunal and the Tribunal had to consider two questions, namely :
(1) Whether loose diamonds were articles intended for the personal use of the assessee and
(2) Whether they were exempt from wealth-tax under Section 5(1)(viii) of the Act
4. The Tribunal held that there was sufficient justification to hold that the loose diamonds were articles intended for the personal use of the assessee and that the value of gold ornaments and jewellery should not be included in the wealth-tax assessments of the assessee. However, there was a rectification of this order in so far as it related to gold ornaments and jewellery, and by the order dated 16th December, 1974, it was held that the value of gold ornaments and jewellery should be included in the wealth-tax assessments of the assessee for these assessment years. The CWT has obtained a reference of the questions, already extracted, to this court.
5. Section 5 of the W.T. Act, as it was in force prior to certain amendments made in the year 1971, so far as it is relevant to the present case, ran as follows:
' 5. (1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee--......
(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee;......
(xiii) any drawings, paintings, photographs, prints and any other heirloom not falling within Clause (xii) and not intended for sale, but not including jewellery;
(xiv) jewellery in the possession of any Ruler, not being his personal property, which has been recognised before the commencement of this Act by the Central Government as his heirloom or, where no such recognition exists, which the Board may, subject to any rules that may be made by the Central Government in this behalf, recognise as his heirloom at the time of his first assessment to wealth-tax under this Act;
(xv) jewellery belonging to the assessee, subject to a maximum of twenty-five thousand rupees in value;...... '
6. When these provisions were in force, in a reference before the Gujarat High Court in CWT v. Arundhati Balkrishna : [1968]70ITR203(Guj) , the question arose whether certain jewellery was exempt under the provisions of Section 5(1)(viii). The case of the assessee was that they were articles of her personal use and that their value should not be taken into consideration for ascertaining her net wealth. The Gujarat High Court held that the jewellery and ornaments were intended for the personal use of the assessee and were to be excluded under Section 5(1)(viii) in computing the net wealth of the assessee. It was pointed out that under Clause (xv) of Section 5(1), the only test which was required to be considered was the test of ownership, while under Clause (viii) the test to be considered was whether the articles in respect of which the exemption was claimed were intended for the personal use of the assessee. Since Section 5 provided for exemption from liability to wealth-tax if the assessee was in a position to point out that his or her case fell within any particular clause, the fact that under another clause the exemption could be claimed, only up to a particular amount in respect of the same property (reference is to Clause (xv)) would not stand in the way of the assessee.
7. The case was taken on appeal to the Supreme Court whose decision is reported in CWT v. Arundhati Balkrishna : [1970]77ITR505(SC) . By judgment dated 25th February, 1970, the Supreme Court held that Section 5(1)(xv) dealt with jewellery in general, whether intended for the personal use of theassessee or not, and that jewellery intended for the personal use of the assessee came within the scope of Section 5(1)(viii). Accordingly, the value of the jewellery intended for the personal use of the assessee was held to be exempt under Section 5(1)(viii).
8. After this judgment, Parliament made certain amendments to Section 5. In Finance (No. 2) Bill, 1971, in Chap. IV contained the amendments to W.T-Act. Clause 32 dealt with the amendment to Section 5. The amendment proposed to Section 5 of the W.T. Act was :
' (ii) in Clause (viii), after the words ' articles intended for the personal or household use of the assessee', the words ' but not including jewellery ' shall be inserted, and shall be deemed to have been inserted, with effect from the 1st day of April, 1963. '
9. There were two provisos and two Explanations added to the same provision by the same Clause in the Bill. The provisos as well as the Explanations were to come into force with effect from the first day of April, 1972, and the provisos and the Explanations are as follows :
' Provided that the furniture, utensils or other articles are neither made wholly or partly of, nor contain (whether by way of embedding, covering or otherwise), gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals :
Provided further that nothing in this clause shall operate to exclude from the net wealth of the assessee any conveyance or conveyances to the extent the value or the aggregate value thereof exceeds the sum of twenty-five thousand rupees.
Explanation 1.--For the purposes of this clause and Clause (xiii), ' jewellery ' includes-
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel :
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel.
Explanation 2.--For the purposes of this clause, ' conveyance ' means any motor car or other mechanically propelled vehicle, aircraft or boat. '
10. In the Notes on Clauses, the following explanation in regard to the introduction of these provisions was given :
' Clause 32 seeks to make certain amendments to Section 5 of the Wealth-tax Act, relating to exemption in respect of certain assets.
Under the amendment in Sub-clause (a)(i), jewellery will be excluded from the purview of the exemption in Clause (viii) of Section 5(1) retrospectively from 1st April, 1963. The amendment in Sub-clause (a)(ii) seeks to add two provisos and two Explanations to the said Clause (viii) with effect from 1st April, 1972. The first proviso seeks to exclude from the purview of Clause (viii) furniture, utensils and other articles which, though held for personal or household use of the assessee, are made of, or contain (whether by way of embedding, covering or otherwise), gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals. By virtue of the second proviso the exemption in respect of conveyances, i.e., motor cars or other mechanically propelled vehicles, aircraft or boats, will be available only to the extent their value does not exceed, in the aggregate, the sum of twenty-rive thousand rupees. Under the first Explanation, it is being made clear that for the purposes of the said Clause (viii) and also Clause (xiii) of Section 5(1) (relating to exemption from wealth-tax of heirlooms other than jewellery), the term ' jewellery ' will include-
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone and whether or not worked or sewn into any wearing apparel ; and
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel. The second Explanation defines the expression ' conveyance.' '
11. The provisions as given were ultimately passed into law. The amended provision of Section 5(1)(viii) runs as follows :
' (viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee, but not including jewellery. '
12. Section 5(1)(xiii) and (xiv) were left as they were. Clause (xv) was omitted so that the exemption with reference to jewellery owned by the assessee up to the ceiling of Rs. 25,000 was no longer being exempt. The intention of the Legislature was obviously to tax the value of the jewellery by removing even the limit provided in Clause (xv).
13. The question that arises in the present case is whether the exclusion of jewellery from the exemption envisaged in Clause (viii) would have the effect of excluding even the loose diamonds from the exemption. It is not now in dispute that the other gold ornaments and jewellery are no longer entitled to the exemption under Section 5(1)(viii) in view of the retrospective amendment made to that provision with effect from first of April, 1963. While the learned counsel for the revenue contended that even loose diamonds would come within the scope of ' jewellery ', the learned counsel for the assessee submitted that the loose diamonds would not form part ofthe jewellery, but would be ' other articles intended for the personal or household use of the assessee ' occurring in the provision.
14. We shall first examine whether the expression ' jewellery ' comprehends ' loose diamonds '. In Random House Dictionary (unabridged edition) at page 767, the meaning of the word 'jewellery' is given as under :
'1. a number of articles of gold, silver, precious stones, etc., for personal adornment.
2. any ornament for personal adornment, as a necklace, cufflinks, etc., including those of base metals, glass, plastic, or the like...... '
15. In Shorter Oxford English Dictionary, third edition, at page 1064, the meaning of the word, ' jewellery ' is given as under :
' Jewellers' work ; gems or ornaments made or sold by jewellers; jewels collectively, or as a form of adornment. '
16. According to the Shorter Oxford Dictionary, even ' gems ' would fall within the category of jewellery.
17. The question whether loose diamonds or loose stones come within the scope of jewellery has not been examined in any Indian case. There is, however, a decision of the Court of Appeal in In re Whitby, Public Trustee v. Whitby [1944] 1 Ch 210 on the point. In that case, a testator made a bequest of all the residue of his personal chattels as defined ins. 55(1 )(x) of the Administration of Estates Act, 1925. By a codicil dated 13th June, 1940, he excluded from the bequest ' all articles of jewellery and other chattels and effects......which were now deposited for safe custody' at a namedsafe deposit. The Public Trust took out summons to ascertain whether the unmounted diamonds passed in the bequest of personal chattels, and whether under the provision in the codicil, the articles excluded from the bequest were those deposited at the safe deposit at the date of the codicil or those deposited at the date of the testator's death. When the matter came up before Uthwatt J., as he then was, he held that the word ' jewellery ' in the definition of personal chattels did not include the unmounted stones. The contention urged before the Court of Appeal was that jewellery as defined in the Oxford Dictionary included ' jewellers' work ; gems or ornaments made or sold by jewellers ; jewels collectively or as a form of adornment'. The contention for the other side was that jewellery meant something made up to wear as an ornament and did not include unmounted diamonds which were kept in a safe and were incapable of being worn, and it was pointed out that it is the essence of jewellery that it should be made up to wear and there is difference between jewellery and jewels. In dealing with these contentions, Lord Greene, M.R. observed (p. 213) after referring to the meaning of ' jewellery ' in the Shorter Oxford Dictionary :
' From that definition it seems to me clear that in the ordinary use of English language the word ' jewellery ' would cover jewels collectively and gems sold by jewellers just as it covers jewels made up into articles of adornment such as a brooch. I cannot see any justification in this case for excluding from the meaning of the word that of jewels collectively or gems sold by jewellers. The word is wide enough to cover those things, and I see no justification for cutting it down. If the contrary view were taken, some curious results might follow, because a man might, as a hobby, collect cut stones and make some of them up into articles of adornment. Would the question what stones passed by gift of jewellery in his will depend on his having made them up into a brooch or a bracelet It seems to me that that would be to introduce a quite irrational distinction '.
18. The other Lord Justices agreed with him.
19. If the above passage is taken as a guide to the interpretation of the word ' jewels ' then even unset gems would fall within it so that the amended provision would apply to them, in the sense that they would stand excluded from the exemption. The learned counsel for the assessee, however, brought to our attention, the meaning of the word as given in ' Words and Phrases ', permanent edition (Vol. 32), in which it is stated, distinguishing gems from jewellery :
' Jewels are valuable stones set and prepared for wear, and differ from gems in that the latter are kept for curiosity only. '
20. In the same page it is mentioned also :
' The word ' jewellery' is generally used as including articles of personal adornment, and the word imports that the articles are of value in the community where they are used. A belt of cowry shells, a necklace of bears' claws, a head ornament of sharks' teeth, though possessing no value in themselves, are esteemed valuable in the communities where they are worn ; and we, therefore, constantly find them referred to in books written in English language...... '
21. The word ' jewellery ' appears to have developed a separate connotation in the United States. As our laws are based on the British model principally, we would prefer to follow and rest our conclusion in the way in which the word is understood in Great Britain, i.e., gems are also jewellery.
22. The Supreme Court has pointed out in CWT v. Arundhati Balkrishna : [1970]77ITR505(SC) , after referring to the several provisions in Section 5 of the W.T. Act in which the word ' jewellery ' occurs :
' From an analysis of the various provisions in Section 5, it appears to us that therein there are four provisions dealing with jewellery, viz.,
(1) jewellery intended for the personal use of the assessee--Section 5(1)(viii);
(2) jewellery that is heirloom--Section 5(1)(viii); (3) jewellery in the possession of any Ruler--Section 5(1)(xiv); and (4) jewellery in general--Section 5(1)(xv).'
23. The word would take its colour from the context in which it occurs. For instance, the expression 'jewellery' in order to describe what is in the possession of a Ruler, may not have the same connotation as in the other clauses of Section 5. Jewellery intended for personal use may, for instance, be different from jewellery kept as heirloom. In the context of Section 5(1)(viii) read with the omission of Section 5(1)(xv) it is clear that jewellery in its widest sense is intended to be excluded from the exemption.
24. We may now examine the contention whether it could be classified as things of personal use, coming within the scope of Section 5(1)(viii). With reference to this aspect there is a decision of the Supreme Court in H. H. Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) . In that case, the assessee was the erstwhile Ruler of Dholpur. The Ruler was a minor and his assets included large quantity of gold sovereigns, old silver rupee coins and silver bars, etc. The sovereigns, silver coins and silver bars were all sold at the suggestion of the Government of India during the minority of the Ruler for a net consideration of Rs. 20,78,257. The question which arose in the assessment of the Ruler was whether the assets sold were capital assets within the meaning of Section 2(4A) of the Indian I.T. Act, 1922. Section 2(4A) defined ' capital assets ' as meaning property of any kind held by an assessee whether or not connected with his business, profession or vocation. But the definition did not include ' personal effects ' that is to say, movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him. The contention urged on behalf of the assessee was that these articles had been used for the purpose of doing pooja on certain days and at the time of certain religious festivals and rituals in the family. The Supreme Court negatived the contention that they were not personal effects. In doing so, their Lordships approved the decision of the Bombay High Court in G. S. Poddar v. CWT : [1965]57ITR207(Bom) .
25. In Poddar's case, the assessee at the time of his appointment as a Justice of Peace was presented with a pair of gold caskets, gold tray, gold glasses, gold cup, saucer and spoons, photo frames, etc., as souvenirs by the dealers and brokers in cloth manufactured by the mills with whose business the assessee was connected. He kept these articles in glass show case for display in his drawing room. In his assessment for the assessment year 1959-60 under the W.T. Act, he claimed exemption in respect of these articles under Section 5(1)(viii). The Bombay High Court held that merely because the gold caskets were kept in the show case they did not become part of the furniture and the rest of the articles could not be considered to be householdutensils as the expression did not embrace within its sweep gold articles meant for ornamental use for special occasion. At page 212, the Bombay High Court considered the question as to whether these articles were intended for personal or household use. In dealing with this aspect it was observed (p. 212) :
' We think that the expression ' intended for the personal or household use ' would mean normally commonly or ordinarily intended for the personal or household use according to the ordinary ideas, habits, customs and notions of the class of society to which the assessee belongs or according to the well established habits, customs and traditions of the family of the assessee. The mere possibility, therefore, that the articles are capable of being put to a personal or household use would not be sufficient to treat them as intended for the personal or household use. Moreover the question whether the articles are intended for personal or household use has got to be considered with reference to the facts and circumstances as they exist at the time when the question has to be determined.'
26. On the facts of that case, it was held that when the assessee came into possession of those articles, he did not intend to put them to a personal or household use nor did he put them to any such use at any time thereafter, up to the relevant valuation date. It is this passage which, though not quoted, was summarised as follows by the Supreme Court in H.H. Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) :
' It was further held in that case that the expression ' intended for personal or household use ' did not mean capable of being intended for personal or household use. It meant normally, commonly or ordinarily intended for personal or household use. This, in our opinion, is the true concept for the expression ' personal use '.'
27. We have, therefore, to ascertain whether loose diamonds can normally, commonly or ordinarily be intended for personal use. The expression ' personal use ' would require that the article must be capable of being used as such by the person. It is too much to accept the contention that loose diamonds could be used as a personal effect. It was stated that they were intended to be used in ornaments. A mere declaration of such an intention cannot convert them into articles of personal use. Unless they are in a position to be worn, they would not be articles intended for personal use. This expression ' intended for personal use ' has been used in the statute only to provide for inclusion of items which are not in daily use. This intention has to be tested in the light of what a reasonable person will do, and cannot be examined in the light of individual preferences. We are unable, on the facts, to hold that loose diamonds can be taken as intended for personal use.
28. Even if the expression ' personal use ' is to be literally understood as comprehending individual proclivities, even then it would be necessary to show that there exists some article which is capable of such personal use. Their potential use is not the statutory criterion. The Act is to be applied year after year and the circumstances in each year will alone determine the point. Loose diamonds cannot, as seen already, be put on any person so that they can fit into the connotation of ' personal use ' at the relevant date. If any other meaning were to be given, it would lead to a curious result. If these loose diamonds had been set in some ornaments, then, even according to the assessee, they would not be exempt, as jewellery are excluded from exemption. Merely because they were kept loose they cannot be granted any exemption. To do so would run counter to the intendment of the statutory provision, which excludes jewellery from exemption wholly (i) by excluding the exemption under Section 5(1)(viii) and (ii) by deleting Clause (xv).
29. The result is that the questions are answered in the negative and in favour of the revenue. The CWT, Madras, would be entitled to his costs.' Counsel's fee Rs. 500.