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

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth Tax Ref No. 6 of 1962
Judge
Reported inAIR1966Bom166; (1965)67BOMLR659; ILR1965Bom1054
ActsWealth Tax Act, 1957 - Sections 3
AppellantPramod Kumar Jain
RespondentCommissioner of Wealth-tax, Bombay City I, Bombay
Appellant AdvocateR.J. Kolah and ;P. Ramaswami, Advs.
Respondent AdvocateG.N. Joshi and ;R.J. Joshi, Advs.
Excerpt:
wealth-tax act (xxvii of 1957), section 3 - whether valuation date is date for attraction of tax.;under section 3 of the wealth-tax act, 1957, the unit of period for which the tax is levied is the unit of the financial year.;the provisions of the act which determine the tax liability are not 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. - .....made effective from the 1st of april 1959. the result oft his amendment was that the rate of the rate wealth tax. which was applicable to the net wealth of the assesee was increased from 1/2 per cent to 1 per cent. that assessee' contention was that the amendment of the wealth tax act in creasing the rate o the tax come into operationally form the 1st of the april 1959. the rate of tax on the date with reference to the which his net wealth was to be reference to which computed i.e. 31st the march 1959, was only 1/2 per cent. according to the which is applicable to the rate of tax which exists in the schedule of the wealth tax act on the relevant valuation of the date for the computation sent case the rate that the applicable was the rate. which existed in the schedule of 31st march.....
Judgment:

Desai, J.

(1) The question, which has been referred to us under S. 72 (1) of the Wealth Tax Act, 1957 at the instances of the assess, is as follows.

'Weather for the assessment, year 1959 - 60 the net wealth for the asses has rightly been charged at the rate of 1 per cent.'

(2) The relevant Valuation date for the computation of the net wealth of the assessee for the assessment years 1959 - 60 was the 31st March 1959. By S. 21 of the Finance Act of 1959 the Wealth Tax Act was amended altering the rate of the wealth tax in the schedule of the Act. The amendment as made effective from the 1st of April 1959. The result oft his amendment was that the rate of the rate wealth tax. Which was applicable to the net wealth of the assesee was increased from 1/2 per cent to 1 per cent. That assessee' contention was that the amendment of the wealth Tax Act in creasing the rate o the tax come into operationally form the 1st of the April 1959. The rate of tax on the date with reference to the which his net wealth was to be reference to which computed i.e. 31st the March 1959, was only 1/2 per cent. According to the which is applicable to the rate of tax which exists in the schedule of the wealth Tax Act on the relevant valuation of the date for the computation sent case the rate that the applicable was the rate. Which existed in the Schedule of 31st March 1959 since on that date the rate of only 1/2 per cent, that is that rate which must be applied to the net wealth of the assesee as computed on the relevant valuation of the date viz., 31st March 1959.

(3) In order to appreciate this contention of the assessee ,we must consider S. 3 of the Wealth Tax act, which is the Charging section. That section reads as follows:

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

Assessment year' under the Act means the year for which tax is chargeable under S. 3 and therefore mean every financial year commencing on the and from the 1st of April 1957. 'Net wealth' as defined in S. 2 means the amount y which the aggregate value computed in accordance's with the provisions the Act of all the assets, wherever located, belonging to the assessee on the valuation date including assets required to the included in this net wealth as on that date under this Act, is in excess of the aggregate value of the all the debts owed by the assessee on the valuation of date of the than certain specified kinds of debts of and the amounts of certain taxes, penalties and interest. 'Valuation date' in relation to any years for which an assessment is to be made under this Act means the last day of the provisos year as defined in C1 [11] of S. 2 of the Income - tax Act it an assessment were under to be made the act for that years and if there were different previous years under the income tax act for different sources of income, the last day of the last of the such previous years. Under S. 3 with the which we are concerned and which is the charged section wealth tax in charred for every financial yea. It is a tax on the net wealth as computed for the financial year and the rate of tax is the which is to be found in the schedule of the Act applicable to the computed quantum of the net wealth. The dispute in the is case centers on the question as to what rate is the applied to the net wealth in the present case. It is 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 the tax is that which is applicable to the financial year in question and it is that the which must be applied to the net wealth. That the net wealth is computed with the references to the date which is anterior to the commencement to the financial year for which the wealth tax is finance levied, does not for mean that the tax is attached by the net - wealth at any point of the time earlier then the commencement of the financial years for which the tax is levied. The valuation of the specified in the Act is only for the purpose of fixing the point of time with the reference to which the net wealth which will attract the tax and will be determined, of but is not the date for the attraction of the tax. Tax is only attracted at commencement of the financial years and at no point of time earlier in then that The tax is again attached or charged in accordance with the provisions of the Act, which exist at the point of time of the but the tax Net - wealth no doubt, it computed with reference to an anterior point of time but the computation takes places according to the provisions of the act as they exist in the relevant financial year net wealth the deductions and exclusions, which will be permissible under the act are all according to the act all the according to the act as it the that exists and relevant financial year. It is argued that S. 3 states that the tax is other provisions contained in this Act. The provisions of the Act, which have to be borne in mind and considered for the purposes of charging the tax are the provisions of the year. The rates specified in the schedule which the rates which respected the in given financial years in which the tax its charged.

(5) In Our opinion, the submission which has been advanced on behalf of the Department with regard to the interpretation of S. 3 of the wealth Tax Act appears to be correct. Although the net wealth is required to be ascertained as on a date of the anterior to the commencement oft financial year for which the tax is charge the said that the is only for the purpose of fixing the point to time with reference of which the quantum of wealth which will bear the tax is to be ascertained. What that quantum will be will have to determined according to the provisions contained in Act at the time when the determination of quantum would become necessary for the assessment of the tax liability for the financial years in question. The provisions of the act which will determine the quantum of the net wealth will not be wealth his to be computed by the provisions which are applicable during the period of assessment of the which the tax is levied. Under S. 3 the unit of the period for the levied is financial years. 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 is to be computed is the was 31st March 1959, but it impossible according to the year chosen assess that it could be a date much anterior to the commencement of the financial year for which the tax is levied. For instances where the after the calendar year is the account in year of the assessee. It would be the 31st the December or where the assessee has any the valuation of date may be some item in October or November of the earlier year. Net wealth for the purposes the wealth Tax act will not bout have to be determined with referenced to these various dates in the case finance year in which the tax liability of attached by the net wealth on Nor is the tax attracted by the net wealth on those particular dates. If the law changes during the internal between the valuation dates and the which charged the tax that will be attached will be in the accordance's the with the provisions of the Wealth Tax Act is the stands at the time oft attrition of the act 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 oft assesse for the assessment 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 S. 3 of the Wealth Tax Act. He has argued that on the languages of S. 3, the tax is charged on the net wealth at the rate of the rates which are specified in the schedule on the corresponding valuation of 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 fro m the Income - tax act. Under the income - tax Act the charging section only brings in the charge ability of the income to tax. The charge is actually imposed by the finance act, which is required to the passed for the purpose of the imposition of tax. Under the income -tax act therefore although the income of the previous year assailable to charge, the actual charging of imposition of the tax is only when the rates are declared by the Finance Act. Even after the introduction of S. 67B oft India income-Tax whereby the absences oft Finance Act being passed the rates underrate earlier Finance Act are made prevail the position is not under altered because to the application of the rate under the earlier finance act are made prevail the position is not altered because act application of the rate under the act also does not come in unless the Finance act is not passed on or before the 1st of April of year in the question and consequently there is no charge in income - tax even according to the rates of earlier finance act until to the 1st of April of the year which is necessarily after the last income liable to income - tax eared. That is however not so under the wealth Tax Act. The entire machinery has been provided in the act itself. The rate of at which the tax is to be brought in by another act as inter case of Income- tax and but the y in wealth Tax Act itself. The entire machinery not only for bringing in the charge ability of net wealth to wealth tax but also for the charring of the tax is contained in the Act itself.

(8) Mr. Kolah has argued that this difference in the schemes of two Act has got to 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 that a tax will be charged on the net 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 date the rate of the at which the charge will be make must obviously to be the rate which exists on the date of charging viz., on the date of the valuation His argument is that such a construction must be put on S. 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 date itself the those words viz., 'on the corresponding valuation date' were thoroughly and not required to be used at all. The argument of the learned counsel is that net wealth as defined learned counsel act means net wealth as computed on the valuation date and 'Valuation date' is an expression which can only be understood with the 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 words 'net wealth' therefore was sufficient to mean net wealth as computed on the corresponding valuation the date' shall be charged as occurring in the section and the meaning of the section, therefore it that the tax, which is charged under the valuation of the date on the net wealth as computed with references to that the date and at the rate of rates as existed in the schedule on the date of charging. Now, the words 'on the corresponding valuation dated appear to create some difficulty but we do not think that the they have even used for the purpose and object as contended by Mr. Kolah. The tax charged by the section is a 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 to time referred to as the valuation date with reference to each finical year for which the tax is charged. The subject - matter of tax there're the which is expressed by the expression 'net wealth' is not a fixed or constants amount which is determined once of all years of taxation. What is intend to be taxed in each financial year is the end for wealth for the year that is the net wealth is computed on the valuation of date in relation to that year. The charging section, which is permanent provision providing for the charging of the tax for all financial years for which the net wealth Tax Act will be on the statute book has brought out then intention by specifying that the in each financial year will be charged in respect of net wealth on the corresponding valuation date. In our opinion it is for this reason that the words 'on the corresponding valuation have been incorporated in the section after the words 'in respect of the net wealth' we do not think that it is intended by S. 3 of the wealth Tax Act that the wealth tax for any financial year should be actually charged at any point of the time anterior to the commencement of the said year. If we were to the accept the interpretation which is canvassed before on behalf of assess it may lad to some curious result. Thus, for instance for the first years 1957-58 on wealth of the asesee. The valuation date for the first years would in the case of every asessee be anterior to the 1st of April 1957 when the Act come into the force If Mr. Kolah's interpretation of S. 3 in accepted that the tax is actually charged on the valuation of tax acutely charred schedule as applicable on that date there will been schedule charge to the wealth tax act. Wealth Tax act along with its schedule and the rates specified therein came into operation only on the 1st 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 that from a certain financial years onwards the wealth tax should be abolished either completely or partially or that is should be amended as increase the burden or grant itself relief against the increase the will not take effect in spite of the said intention of the legislation for at least a period of one year, because of if the interpretation, which Mr. Kolah seeks to put upon the section is accepted on the valuation date itself the net wealth as gets computed under the provisions of the Act is as it existed at that time of and the tax at the rate of a applicable on that the date the also gets attached to it. We do net think that the meaning which Mr. Kolah wants to give to the language of S. 3 of the meaning which was intended by the legislature.

(9) Mr. Kolah has argued that curious and anomalous result 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 issue clear leave no doubt, as to what its meaning and construction is the mere circumstances and construction is the mere section its proper meaning and effect is likely to lead to certain anomalous or curious results would not be a considerate for the courts to reject would not be consideration. The defect in such he cases will have to be cured by the legislature. That is now ever so where the position issue that the meaning of what the legislature is 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 S. 3 does not appear to be the true and proper construction even on the language employed in the section Assuming the construction such as he has put on the section is one possible constructions, there asset opinion, a mush betters and a more reasonable construction, which the languages of S. 3 is the quite capable of veiling to. There can be no doubt whatsoever of that , when there're two possible constructions even when both are equally possible constructs that even when both the are equally possible constrictions even when both are equally possible though such is not the position in the present though such his not present case. If one of the construction leads in curious and anomalous results and tends to defeat what the legislature has intended while the other produces on such results and is quite consistent with the scheme of the Act of 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 schedule under the Indian Income - Tax schemes has got to borne in mind in interpreting the charging section in the wealth Tax act, Mr. Kolah has invited out attention to commissioners Wealth Tax, Bombay v. Standard Mills co. Ltd. : [1963]50ITR267(Bom) and Chatturam Horiram Limited v. Commissioner of the Income - tax, B & O : [1955]27ITR709(SC) Where is the scheme of the Income - Tax act with reference to the charge ability to tax under the act and the imposition of the tax of the attraction of the tax liability have been considered. We do not wish to makes any detailed references of the with Mr. Kolah that there is undoubtedly a differences in the scheme of two Acts. The charging section of the wealth Tax Act, however, has got to be interpreted on its own languages and in view of the scheme under the Wealth and Tax Act and in giving out construction had interpretation in to said section we have property borne in mind the difference in the scheme of the two Act, to which Mr. Kolah has invited out attention.

(11) In the result therefore our answer to the question which has been referred to us is in the affirmative. The assessees will pay the costs of the department.

(12) Answer in the affirmative.


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