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Pramod Kumar JaIn Vs. Commissioner of Wealth-tax, Bombay City I - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth-tax Reference No. 6 of 1962
Judge
Reported in[1965]58ITR161(Bom); 1965MhLJ907
ActsWealth Tax Act, 1957 - Sections 2, 3 and 27(1)
AppellantPramod Kumar Jain
RespondentCommissioner of Wealth-tax, Bombay City I
Appellant AdvocateR.J. Kolah, Adv.
Respondent AdvocateG.N. Joshi, Adv.
Excerpt:
.....be imposed under act as it stands at the time of attraction of tax and not as it was on valuation date - rate as it stood on 01.04.1959 applicable to net wealth of assessee. - maharashtra scheduled castes, scheduled tribes, de-notified tribes (vimukta jatis), nomadic tribes, other backward classes and special backward category (regulation of issuance and verification of) caste certificate act (23 of 2001), sections 6 & 10: [s.b. mhase, a.p. deshpande & p.b. varale, jj] caste certificate petitioner seeking appointment against the post reserved for member of schedule tribe his caste certificate was invalidated subsequently held, his appointment would not be protected. the observations/directions issued by supreme court in para 36 of judgment in the case of state v millind reported..........march, 1959. by section 21 of the finance act of 1959 the wealth-tax act was amended altering the rate of wealth-tax in the schedule of the act. the amendment was made effective from the 1st of april, 1959. the result of this amendment was that the rate of wealth-tax, which was applicable to the net wealth of the assessee, was increased from 1/2% to 1%. the assessee's contention was that the amendment of the wealth-tax act increasing the rate of tax came into operation only from the 1st of april, 1959. the rate of tax on the date with reference to which his net wealth was to be computed, i.e., 31st march, 1959, was only 1/2%. according to the assessee, under the wealth-tax act, the rate of tax which is applicable is the rate of tax, which exists in the schedule of the wealth-tax act on.....
Judgment:

V.S. Desai, J.

1. The question, which has been referred to us under section 27(1) of the Wealth-tax Act, 1957, at the instance of the assessee, is as follow :

'Whether for the assessment year 1959-60 the net wealth of the assessee has rightly been charged at the rate of 1 ?'

2. The relevant valuation date for the computation of the net wealth of the assessee for the assessment year 1959-60 was the 31st March, 1959. By section 21 of the Finance Act of 1959 the Wealth-tax Act was amended altering the rate of wealth-tax in the schedule of the Act. The amendment was made effective from the 1st of April, 1959. The result of this amendment was that the rate of wealth-tax, which was applicable to the net wealth of the assessee, was increased from 1/2% to 1%. The assessee's contention was that the amendment of the Wealth-tax Act increasing the rate of tax came into operation only from the 1st of April, 1959. The rate of tax on the date with reference to which his net wealth was to be computed, i.e., 31st March, 1959, was only 1/2%. According to the assessee, under the Wealth-tax Act, the rate of tax which is applicable is the rate of tax, which exists in the schedule of the Wealth-tax Act on the relevant valuation date for the computation of the net wealth and, therefore, in the present case the rate that was applicable was the rate which existed in the schedule on 31st March, 1959. Since, on that date the rate was only 1/2%, that is, the rate which must be applied to the net wealth of the assessee as computed on the relevant valuation date, viz., 31st March, 1959.

3. In order to appreciate this contention of the assessee, we must consider section 3 of the Wealth-tax Act, which is the charging section. That section reads as follow :

'Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule.'

'Assessment year' under the Act means the year for which tax is chargeable under section 3 and, therefore, means every financial year commencing on and from the 1st of April, 1957. 'Net wealth' as defined in section 2(m) means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than certain specified kinds of debts and the amounts of certain taxes, penalties and interest. 'Valuation date' in relation to any year for which an assessment is to be made under this Act means the last day of the previous year as defined in clause (II) of section 2 of the Income-tax Act if an assessment were to be made under that Act for that year and if there were different previous years under the Income-tax Act for different sources of income, the last day of the last of such previous years. Under section 3, with which we are concerned and which is the charging section, wealth-tax is charged for every financial year. It is a tax on the net wealth as computed for that financial year and the rate of tax is at the rate, which is to be found in the schedule of the Act applicable to the computed quantum of the net wealth. The dispute in the case centres on the question as to what rate is to be applied to the net wealth in the present case. Is it the rate, which existed in the schedule to the Act on the date, which is the date for the computation of the net wealth of the assessee, or is it the rate, which is applicable to the financial year, for which the tax is to be levied on the net wealth

4. It is argued on behalf of the department that the tax being for the financial year, the rate of tax is that which is applicable to the financial year in question and it is that rate which must be applied to the net wealth. That the net wealth is computed with reference to the date, which is anterior to the commencement of the financial year for which the wealth-tax is levied, does not mean that a tax is attracted by the net wealth at any point of time earlier than the commencement of the financial year for which the tax is levied. The valuation date specified in the Act is only for the purpose of fixing the point of time with reference to which the net wealth which will attract the tax will be determined, but it is not the date for the attraction of tax. Tax is only attracted at the commencement of the financial year and at no point of time earlier than that. The tax is again attracted or charged in accordance with the provisions of the Act, which exist at the point of time of the attraction of the tax. Net wealth, no doubt, is computed with reference to an anterior point of time, but the computation takes place according to the provisions of the Act as they exist in the relevant financial year for which the tax is levied. The range of the net wealth, the deductions and exclusions, which will be permissible under the Act, are all according to the Act as it exists in the relevant financial year. It is argued that section 3 states that the tax is charged for every financial year subject to the other provisions contained in the Act. The provisions of the Act, which have to be borne in mind and considered for the purpose of charging the tax, are the provisions of the Act, which are there in the relevant financial year. The rates specified in the schedule, which will apply to the net wealth, will, therefore, be the rates, which are specified in the schedule in the given financial year in which the tax is charged.

5. In our opinion, the submission, which has been advanced on behalf of the department with regard to the interpretation of section 3 of the Wealth-tax Act appears to be correct. Although the net wealth is required to the ascertained as on a date anterior to the commencement of the financial year for which the tax is charged, the said date is only for the purpose of fixing the point of time with reference to which the quantum of wealth which will bear the tax is to be ascertained. What that quantum will be will have to be determined according to the provisions contained in the Act at the time when the determination of the quantum would become necessary for the assessment of the tax liability for the financial year in question. The provisions of the Act, which will determine the quantum of net wealth will not be the provisions, which existed on the date which is the date with reference to which the net wealth is to be computed, but the provisions, which are applicable during the period of assessment for which the tax is levied. Under section 3 the unit of period for which the tax is levied is the unit for the financial year. The valuation date, which is the date with reference to which the net wealth is to be computed, is the last day of the previous year. In the present case, the valuation date was the 31st of March, 1959, but it is possible, according to the accounting year chosen by the assessee, that it could be a date much anterior to the commencement of the financial year for which the tax is levied. For instance, where the calendar year is the accounting year of the assessee, it would be the 31st of December or where the assessee has any other accounting year, like the Samvat years, the valuation date may be some time in October or November of the earlier year. Net wealth for the purposes of the wealth-tax Act will, no doubt, have to be determined with reference to these various dates in the case of various assesses, but the determination does not take place on those dates but in the financial year in which the tax liability is attracted by the net wealth. Nor is the tax attracted by the net wealth on those particular dates. If the law changes during the interval between the valuation dates and the date when the tax is actually attracted, which is at the commencement of the financial year for which the tax is charged, the tax that will be attracted will be in accordance with the provisions of the Wealth-tax Act as it stands at the time of the attraction of the tax and not as it was on the valuation date.

6. In our opinion, therefore, in the present case the rate that was applicable to the net wealth of the assessee for the assessment year 1959-60 was the rate which was to be found in the schedule of the Act as it stood on the 1st of April, 1959.

7. Mr. Kolah, learned counsel for the assessee, has pressed upon us a different construction of section 3 of the Wealth-tax Act. He has argued that on the language of section 3, the tax is charged on the wealth at the rate or rates, which are specified in the schedule on the corresponding valuation date, with reference to which the net wealth is computed. The learned counsel has argued that the scheme of the Wealth-tax Act is different from the Income-tax Act. Under the Income-tax Act, the charging section only brings in the chargeability of the income of tax. The charge is actually imposed by the Finance Act, which is required to be passed for the purpose of the imposition of the tax. Under the Income-tax Act, therefore; although the income of the previous year is liable to charge, the actual charging or imposition of the tax is only when the rates are declared by the Finance Act. Even after the introduction of section 67B of the Indian Income-tax Act, whereby in the absence of the Finance Act being passed the rates under the earlier Finance Act are made to prevail, the position is not altered because the application of the rates under the earlier Act also does not come in unless the Finance Act is not passed on or before the 1st of April of the year in question and consequently there is no charge of income-tax even according to the rates of the earlier Finance Act until the 1st of April of the year, which is necessarily after the last date of the accounting year in which the income liable to income-tax is earned. That is, however, not so under the Wealth-tax Act. The entire machinery has been provided in the Act itself. The rates at which the tax is to be charged are not required to be brought in by another Act as in the case of income-tax, but they are in the Wealth-tax Act itself. The entire machinery, not only for bringing in the chargeability of the net wealth to wealth-tax but also for the charging of the tax, is contained in the Act itself.

8. Mr. Kolah has argued that this difference in the schemes of the two Acts has got to be borne in mind in interpreting the charging section in the Act before us. According to him, the charging section has provided that a tax will be charged on the net wealth on the corresponding valuation date at the rate to be found in the schedule of the Act. Although this taxation is for every financial year, the tax is charged on the net wealth on the date, which is the valuation date for the net wealth. The charging being on the date of the valuation, the rate at which the charge will be made must obviously be the rate, which exists on the date of charging, viz., on the date of valuation. His argument is that such a construction must be put on section 3 because of the expression 'on the corresponding valuation date'. Following the words 'in respect of the net wealth' occurring in the said section, Mr. Kolah argues that if the charging was not intended to take place on the net wealth on the valuation date itself, those words, viz., 'on the corresponding valuation date', were thoroughly redundant and not required to be used at all. The argument of the learned counsel is that 'net wealth' as defined in the Act means net wealth as computed on the valuation date and 'valuation date' is an expression which can only be understood with reference to the year of assessment for which the tax is levied, being the last day of the previous year relevant to the assessment year. The use of the word 'net wealth', therefore, was sufficient to mean net wealth as computed on the corresponding valuation date. The expression 'on the corresponding valuation date', therefore, must have connection with the words 'shall be charged' and 'at the rate or rates specified in the schedule' as occurring in the section and the meaning of the section, therefore, is that the tax, which is charged under this section, is charged on the valuation date on the net wealth as computed with reference to that date, and at the rate or rates as existed in the schedule on the date of charging. Now, the words 'on the corresponding valuation date' do appear to create some difficulty but we do not think that they have been used for the purpose and object as contended by Mr. Kolah. The tax charged by the section is tax for every financial year commencing from the 1st day of April, 1957. The subject-matter of the tax is the net wealth as it exists at certain specific point of time referred to as the valuation date with reference to each financial year for which the tax is charged. The subject-matter of tax, therefore, which is expressed by the expression 'net wealth' is not a fixed or constant amount which is determined once and for all years of taxation, but a varying amount, which is capable of being different for different years of taxation. What is intended to be taxed in each financial year is the net wealth for that year, that is, the net wealth as computed on the valuation date in relation to that year. The charging section, which is a permanent provision providing for the charging of the tax for all financial years for which the Wealth-tax Act will be on the statute book has brought out that intention by specifying that in each financial year the tax will be charged in respect of the net wealth on the corresponding valuation date. In our opinion, it is for this reason that the words 'on the corresponding valuation date' have been incorporated in the section after the words 'in respect of the net wealth'. We do not think that it is intended by section 3 of the Wealth-tax Act that the wealth-tax for any financial year should be actually charged at any point of time anterior to the commencement of the said year. If we were to accept the interpretation which is canvassed before us on behalf of the assessee, it may lead to some curious results. Thus, for instance, for the first year for which the Act applied, viz., the financial year 1957-58, no wealth-tax could be charged on the net wealth of the assessee. The valuation date for the 1st of April, 1957, when the Act came into force. If Mr. Kolah's interpretation of section 3 is accepted that the tax is actually charged on the valuation date at the rate which is to be found in the schedule as applicable on that date there will be no charge to tax because there was no rate in the schedule of the Wealth-tax Act, which was applicable on that date. The entire Wealth-tax Act along with its schedule and the rates specified therein came into operation only on the 1st of April, 1957. Although, therefore, the charging section of the Wealth-tax Act says that the tax will be charged for the financial year commencing from the 1st of April, 1957, there will actually be no wealth-tax charged. Again, if the legislature decides that from a certain financial year onwards the wealth-tax should be abolished either completely or partially or that it should be amended so as to increase the burden or grant relief against it, the provision will not take effect in spite of the said intention of the legislature for at least a period of one year, because if the interpretation, which Mr. Kolah seeks to put upon the section is accepted, on the valuation date itself the net wealth gets computed under the provisions of the Act as it existed at that time and the tax at the rate applicable on that date also gets attached to it. We do not think that the meaning which Mr. Kolah wants to give to the language of section 3 is the meaning which was intended by the legislature.

9. Mr. Kolah has argued that curious and anomalous results will follow from the proper construction of the section is no reason for the court to abandon such a construction. It may be true that where the provision of the statute is so clear as to leave no doubt as to what its meaning and construction is, the mere circumstance that giving the section its proper meaning and effect is likely to lead to certain anomalous or curious results would not be a considerations for the court to reject that construction. The defect in such cases will have to be cured by the legislature. That is, however, so where the position is such that the meaning of what the legislature has said is clear and unambiguous and the section leads only to one construction and to no other. That, however, is not the position in the present case. In the first place the construction, which Mr. Kolah has sought to put on section 3 does not appear to be the true and proper construction such as the language employed in the section. Assuming that the construction such as he has put on the section is one of the possible constructions, there is, in our opinion, a much better and a more reasonable construction, which the language of section 3 is quite capable of yielding to. There can be no doubt whatsoever that, when there are two possible constructions even when both are equally possible, though such is not the position in the present case, if one of the constructions leads to curious and anomalous results and tends to defeat what the legislature has intended, while the other produces no such results and is quite consistent with the scheme of the Act and the manifest intention of the legislature, it is the latter one that will have to be preferred.

10. In order to emphasize his arguments that the scheme under the Wealth-tax Act is different from the scheme under the Indian Income-tax Act and that the difference between the two schemes has got to be borne in mind in interpreting the charging section in the Wealth-tax Act, Mr. Kolah has invited our attention to Commissioner of Wealth-tax v. Standard Mills Co. Ltd. and Chhatturam Horilram Limited v. Commissioner of Income-tax, where the scheme of the Income-tax Act with reference to the chargeability to tax under the Act and the imposition of the tax or the attraction of the tax liability have been considered. We do not wish to make any detailed reference to those cases because we are in agreement with Mr. Kolah that there is undoubtedly a difference in the scheme of the two Acts. The charging section of the Wealth-tax Act, however, has got to be interpreted on its own language and in view of the scheme under the Wealth-tax Act and in giving our construction and interpretation to the said section, we have properly borne in mind the difference in the schemes of the two Acts, to which Mr. Kolah has invited our attention.

12. In the result, therefore, our answer to the question which has been referred to us is in the affirmative. The assessee will pay the costs of the department.

13. Question answered in the affirmative.


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