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Commissioner of Wealth-tax, Bombay City-i, Bombay Vs. C. Rai - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth-tax Reference No. 29 of 1967
Judge
Reported in[1979]119ITR553(Bom)
ActsWealth Tax Act, 1957 - Sections 4(1) and 5(1)
AppellantCommissioner of Wealth-tax, Bombay City-i, Bombay
RespondentC. Rai
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateH.M. Jagtiani, Adv.
Excerpt:
direct taxation - exemption - sections 4 (1) and 5 (1) of wealth tax act, 1957 - whether tribunal erred in law in holding that 400 shares of 'colour chem ltd' transferred to name of assessee's wife were exempt under section 5 (1) (xx) read with section 4 (1) (a) - according to sections 4 (1) and 5 (1) intention of legislature was to prevent evasion or avoidance of tax by resorting to transfer of assets - any share held by assessee means shares possessed of or owned by or belonging to assessee - assessee entitled to exemption under section 5 (1) (xx) - shares transferred by assessee to his wife - assets belong to transferor himself - held, tribunal was justified in holding that 400 shares transferred to assessee's wife exempted under section 5 (1) (xx) read with section 4 (1) (a). - - .....tulzapurkar, j. 1. in this reference under s. 27(1) of the w. t. act, 1957, the appellate tribunal has referred the following question for our opinion : 'whether the tribunal erred in law in holding that the 400 shares of 'colour chem ltd.' transferred to the name of the assessee's wife were exempt under s. 5(1)(xx) read with section 4(1)(a)(i) of the wealth-tax act, 195 ?' 2. the facts giving rise to the question lie in a very narrow compass. the question relates to the wealth-tax assessment of the assessee, an individual, for the assessment years 1960-61 and 1961-62, the corresponding valuation dates being march 31, 1960, and march 31, 1961, respectively. the assessee was the holder of certain shares in a company called colour chem ltd., which admittedly was a company to which s. 45(d).....
Judgment:

Tulzapurkar, J.

1. In this reference under s. 27(1) of the W. T. Act, 1957, the Appellate Tribunal has referred the following question for our opinion :

'Whether the Tribunal erred in law in holding that the 400 shares of 'Colour Chem Ltd.' transferred to the name of the assessee's wife were exempt under s. 5(1)(xx) read with section 4(1)(a)(i) of the Wealth-tax Act, 195 ?'

2. The facts giving rise to the question lie in a very narrow compass. The question relates to the wealth-tax assessment of the assessee, an individual, for the assessment years 1960-61 and 1961-62, the corresponding valuation dates being March 31, 1960, and March 31, 1961, respectively. The assessee was the holder of certain shares in a company called Colour Chem Ltd., which admittedly was a company to which s. 45(d) of the W. T. Act applied. Out of his aforesaid shareholding the assessee gifted 400 shares to his wife on September 23, 1959, and the said shares were immediately transferred to her name in the share register of the company. The assessee had declared in an annexure to the return the value of the shares so transferred by him to his wife but he claimed that the value of those shares would be exempt under the provisions of s. 5(1)(xx) of the W. T. Act. The WTO took the view that the exemption under s. 5(1)(xx) would be available to the assessee only if he had held the shares, that is to say, the shares had stood in his name as on the valuation dates. The shares having been transferred and having been held by the assessee's wife in her name in the share register of the company on the valuation dates, it could not be said that the shares were 'held by the assessee' in order to justify the claim for exemption. The WTO, therefore, added the value of these shares, as on the respective valuation dates, to the net wealth of the assessee in accordance with the provisions of s. 4(1)(a)(i) of the Act; in other words, for the year 1960-61, he added an amount of Rs. 1,28,000 and for the year 1961-62, he added an amount of Rs. 1,45,000. The assessee carried the matter in appeal for both the years to the AAC. It was contended that the WTO's interpretation of the expression 'held by the assessee' occurring in s. 5(1)(xx) was not correct in view of the clear provisions of s. 4(1) and s. 2(m) of the Act, that the identity of the wife merged with that of the husband and that if for the purpose of s. 4(1)(a)(i) of the Act the transferred shares were regarded as 'belonging to the assessee', the fiction so created should be given the full effect, in all its necessary implications or corollaries and as such the benefit of exemption under s. 5(1)(xx) should be allowed to the assessee. The AAC accepted the contentions urged on behalf of the assessee and he directed that the additions of two sums, viz., Rs. 1,28,000 and Rs. 1,45,000, should be deleted from the respective assessments. The department being aggrieved by the AAC's order preferred appeals to the Tribunal and principally relying upon the decision of the Gujarat High Court in the case of CWT v. Harshad Rambhai Patel : [1964]54ITR740(Guj) , it was contended that the expression 'held by the assessee' occurring in s. 5(1)(xx) must mean shares standing in the name of the assessee in the company's register. Since in the instant case 400 shares did not stand in the name of the assessee but stood in the name of his wife in the company's register of shares, the said shares could not be regarded as having been 'held by the assessed's within the meaning of s. 5(1)(xx) and as such the exemption was not available to the assessee. The Tribunal, after considering the decision of the Gujarat High Court as also some other authorities, came to the conclusion that under s. 4(1)(i) the legislature clearly intended that the assets transferred by the assessee to his wife should be treated as assets belonging to the assessee, that is, as owned by the assessee with all its attributes and the legal fiction created must be carried to its logical conclusion and if it was so carried the assessee would be entitled to the exemption claimed. The Tribunal also took the view that there was a well-known principle of construction that the exemption provision should be construed liberally and in favour of the assessee provided no violence was caused to the clear language employed by the particular section. In the circumstances the Tribunal confirmed the AAC's order of deleting the amounts of Rs. 1,28,000 and Rs. 1,45,000 from the net wealth of the assessee as on the respective valuation dates. At the instance of the CWT, the question set out at the commencement of the judgment has been referred to us for out determination.

3. Mr. Joshi appearing for the revenue has referred us to the relevant provisions of the W. T. Act, particularly s. 2(m), 3, 4(1)(a)(i) and 5(1)(xx) thereof and has contended that the legal fiction which has been created under s. 4(1)(a)(i) should not be extended beyond its legitimate field and to court should not indulge in creating yet another legal fiction for the purpose of considering the question of exemption under s. 5 of the Act over and above the legal fiction created under s. 4 of the Act. He urged that the legal fiction created under s. 4(1) of the Act and had been created for the purpose of including within the net wealth of the assessee certain assets or certain items of property more specifically specified in that section and such legal fiction which was created for the purpose of inclusion should not be extended for the purpose of enabling an assessee to claim exemption under s. 5 of the Act. According to him s. 2(m) defined the expression 'net wealth' as meaning the amount by which the aggregate value of all 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 the Act, was in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than certain debts more particularly specified in that provision, that under s. 3 charge of wealth-tax wan on the net wealth of the assessee and under s. 4 value of certain assets which were deemed to belong to the assessee under certain circumstances mentioned therein was liable to be included in computing the net wealth of the assessee and all such assets which were deemed to be assets of the assessee have been specified in clause (a)(i) of the section, viz., (a) the value of assets which on the valuation date are held (i) by his wife to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live separately. According to Mr. Joshi, 400 shares of Colour Chem Ltd. which have been transferred by the assessee in the instant case to his wife on September 23, 1959, fell within the aforesaid provision and by reason of the fiction created by this provision such assets were to be regarded as belonging to the assessee for the purpose of including the value thereof in the net wealth computation of the assessee, while s. 5 dealt with exemption in respect of certain assets and under s. 5(1)(xx) it has been provided that the value of any shares held by the assessee in any company referred to in clause (d) of s. 45 is to be exempted, that it to say, not to be included in the net wealth of the assessee and he urged that the expression 'held by the assessee' occurring in s. 5(1)(xx) must mean shares standing in the name of the assessee in the company's register and the expression 'held by the assessed'cannot and does not mean 'belonging to or owned by the assessee.' Construing the provisions of s. 5(1)(xx) in the aforesaid manner, he urged that the valu of 400 shares in question, since these admittedly stood in the name of the assessee's wife in the company's register, could not be excluded from the net wealth computation of the assessee. In support of his said contention strong reliance was placed by him upon the decision of the Gujarat High Court in the case of CWT v. Harshad Rambhai Patel : [1964]54ITR740(Guj) . He pointed out that in that case the court was concerned with s. 5(1)(xvi) of the W. T. Act as it stood before the same was amended in 1963 where also the expression used in connection with National Savings Certificates and other securities was 'held by the assessee' and he pointed out that the Gujarat High Court while construing the expression made a distinction between the two expressions 'belonging to' and 'held by the assessee' and construed the latter expression to mean that the National Savings Certificates and other securities must stand in the name of the assessee and it was only then that exemption under s. 5(1)(xvi) could be claimed. He pointed out that the Gujarat High Court held in that case that the exemption under clause (xvi) was limited to those certificates which were held by the assessee at the relevant time, that is to say, those certificates which stood in the name of the assessee, and not in respect of certificates standing in the name of another person, his nominee, though the assessee had beneficial ownership in such certificates. He urged that the same expression occurs in s. 5(1)(xx) and as such the same construction should be place on that expression and it should be held that the exemption could not be claimed by the assessee in respect of 400 shares of Colour Chem Ltd., inasmuch as the said shares admittedly stood in the name of the assessee's wife in the share register of the company. Mr. Joshi also pointed out that ss. 4 and 5 of the W. T. Act have been amended by the Finance Act of 1975 so as to enable the assessee, who has transferred assets to his spouse, to claim exemption under s. 5 of the Act. He pointed out that sub-s. (3) of s. 4 was amended incorporating a new clause (b), which runs thus :

'4. (3) Where the value of any assets is to be included in the net wealth of an assessee in accordance with clause (a) of sub-section (1),-......

(b) the provisions of section 5 shall apply in relation to such assets as if such assets were assets belonging to the assessee.'

4. He further pointed out that the same Finance Act the words 'held by the assessee' have been deleted from s. 5(1)(xx). But, according to him, these amendments which were necessitated by the judicial decisions had been made effective from 1st April, 1975, onwards. Relying on these amendments that were made in the W. T. Act by the Finance Act, 1975, he urged that since the instant case was governed by the unamended provisions, the principles laid down by the Gujarat High Court in Harshad Rambhai Patel's case [1964] 54 ITR 740 should be applied to the facts of the case and the exemption claimed by the assessee in respect of the 400 shares should be negatived.

5. On the other hand, Mr. Jagtiani appearing for the assessee has contended that having regard to the scheme of the W. T. Act, particularly ss. 2(m), 3, 4(1)(a)(i) and 5(1)(xx), as these provisions stood prior to the amendments that were brought into force by Finance Act, 1975, it would appear clear that the exemption claimed by the assessee in the instant case would be available to him if the legal fiction under s. 4(1)(a) is merely carried to its logical conclusion. He urged that it was not necessary to extend the legal fiction beyond its legitimate filed as was sought to be suggested by Mr. Joshi for the revenue to enable the assessee to claim exemption under s. 5(1)(xx) and it was merely a case of carrying the legal fiction to its logical fiction to its logical end. He also disputed the construction that was sought to be placed by Mr. Joshi on the expression 'held by the assessee' occurring in s. 5(1)(xx) which expression, according to him, should mean 'belonging to' or 'owned by' the assessee and it was not necessary that the assets in question, particularly the shares herein, should have stood in the name of the assessee in the company's share register. In support of that contention reliance was placed upon the decision of the Madras High Court in the case of S. Naganathan v. CWT : [1975]101ITR287(Mad) .

6. In order to appreciate the rival submissions that were put before us it will be necessary to set out the relevant material provisions of the Wealth-tax Act as they stood prior to amendments mentioned by Mr. Joshi. The expression 'net wealth' has been defined in s. 2(m), which runs thus :

''net wealth' 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 owned by the assessee on the valuation date other than - ...... ' (then follows enumeration of certain specified debts).

7. The charging section is s. 3 and that section ran thus :

'3. Charge of wealth-tax. -Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the 1st 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.'

8. Section 4(1)(a)(i) of the Act reads as follows :

'4. Net wealth to include certain assets. -(1) In computing the net wealth of an individual, there shall be included, as belonging to him -

(a) the value of assets which on the valuation date are held - (i) by his wife to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live separately.'

9. Then comes the material provision which is to be found in s. 5(1)(xx) and it reads thus :

'5. Exemptions in respect of certain assets. -(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-......

(xx) the value of any shares held by the assessee in any company referred to in clause (d) of section 45, if on the relevant valuation date the provisions of this Act are not applicable to be company by reason of the provisions contained in that section.'

10. It will appear from material provisions which have been quoted above that under s. 3, which is the charging provision, the wealth-tax is charged for every assessment year in respect of the net wealth of an individual at the rate or rates specified in the schedule. Section 4 deals with assets which are required to be included in the net wealth of the assessee and it is obvious that this provision is intended to prevent any evasion or avoidance of tax by resorting to transfer and taking the property out of the provisions of the Act and that is why by legal fiction such transferred assets are deemed to be the assets belonging to the assessee for the purpose of computing the net wealth of the assessee. Then comes s. 5(1) which provides for certain exemptions to be made in respect of certain assets which are to be excluded while computing the net wealth of the assessee. Reading the provisions of ss. 4(1) and 5(1) of the Act it seems to us quite clear that the intention of the Legislature was unquestionable to prevent evasion or avoidance of tax by resorting to transfer of assets but the intention clearly was not to put the assessee in a worse position than when he had not transferred his assets as contemplated by s. 4(1). Mr. Joshi, s contention, however, suggests that the legal fiction had been created only for the purpose of inclusion of transferred assets in the computation of the wealth of the assessee and at the same time the legislation did not intend to grant any exemption to the assessee in respect of such transferred assets even when they properly fell within the provisions of s. 5(1) of the Act. Acceptance of such argument must lead to an inference that the Legislature intended to place an assessee in a worse position in respect of transferred assets than he would have been when he had not transferred the assets, which, in our view, could never have been the intention of the Legislature. Apart from this aspect of the matter the entire foundation of Mr. Joshi's contention rests upon a particular construction or interpretation which he has sought to place upon the the expression 'held by the assessee' occurring in s. 5(1) of the Act. He urged that when clause (xx) of s. 5(1) spoke of 'shares held by the assessee' in any company to which s. 45(d) applied what was intended by the Legislature was that such shares must be held by the assessee in his own name of the assessee in his own name in the company's register, that is to say, shares must stand in the name of the assessee in the company's register. It is only by placing such construction on the expression 'held by the assessee' occurring in clause (xx) of s. 5(1) that Mr. Joshi has contended before us that the assessee in the instant case could not claim exemption in respect of the 400 shares which admittedly stood in the name of his wife in the company's register and, according to him, the expression 'held by the assessee' could not be equated with the expression 'belonging to' or 'owned by the assessee' within the meaning of the former expression as used in s. 4(1)(a)(i) of the Act. It is true that the Gujarat High Court in the decision in Harshad Rambhai Patel's case : [1964]54ITR740(Guj) has placed such a construction on similar words occurring in clause (xvi) of s. 5(1) of the W. T. Act but, in our view, the dictionary meaning of the expression 'hold' clearly suggests that the expression means 'possessed of or owned by' and not the meaning which is sought to be given to that word by Mr. Joshi, namely 'standing in the name of'. In the Concise Oxford Dictionary the expression 'hold has been assigned the meaning 'posses, be the owner or holder or tenant of, (property, stocks, land) ' in other words, even in the context of stocks the dictionary meaning of the word 'hold' is 'possess' or 'be the owner or holder of' and not the person in whose name such stocks stand. Moreover, it appears to us that Mr. Joshi has been emboldened to put such a construction on the expression 'held by the assessee' occurring in clause (xx) of s. 5(1) because that expression occurs in the context of the particular asset - 'shares', but in s. 5 itself different types of properties and assets are referred to and in connection with such different types of properties and assets also the expression 'held' has been used in s. 5(1); for instance, s. 5(1)(i) refers to 'any property held by him' and in respect of such types of properties and assets, other then shares or scrips or securities the meaning that such properties must stand in the name of the assessee would be inappropriate. Moreover, on a reading of the other clauses of s. 5(1) it does appear to us that various expression like 'hold', 'belonging to', 'standing to the credit of' have been indiscriminately used. Having regard to these aspects which stare one while considering the provisions of s. 5(1) it will be difficult to accept Mr. Joshi's contention that the expression 'held by the assessee' occurring in clause (xx) of s. 5(1) should be interpreted to mean 'standing in the name of the assessee in the company's register' as suggested by him. The expression 'any share held by the assessee' should, according to the dictionary meaning, be interpreted as shares possessed of or owned by or belonging to the assessee. If such meaning is given to that expression, them obviously the 400 shares in question were held by the assessee in that sense and as such he would be entitled to exemption under s. 5(1)(xx) of the Act.

11. Apart from the question of construction of the expression involved in this case, the problem could be approached by having regard to the legal fiction, that has been created by s. 4(1) of the Act. We have already indicated above that under s. 4(1)(a)(i) the legal fiction is unquestionably introduced, inasmuch as, the said section provides that the value of assets which on the valuation date are held by the wife of the assessee to whom the assessee has transferred, such as, shares, shall be included in the computation of the net wealth of the assessee 'as belonging to him'. The expression 'as belonging to him' creates the legal fiction. In other words, though the shares have been transferred by the assessee to his wife and though they have been transferred to her name in the company's register, for the purpose of net wealth computation under s. 4(1)(a)(i), the value of such assets will have to be included in the computation as if the assets belonged to the transferor, Mr. Joshi's contention has been that this legal fiction is created only for the purpose of including certain transferred assets in the computation of net wealth of the assessee and the same should be confined to its legitimate field, namely, the field of inclusion and cannot be extended to the provisions of s. 5 which speaks of certain exemption. Relying on two decisions of this court, one in the case of Chidambaram Mulraj & Co. Pvt. Ltd. v. CIT : [1965]58ITR206(Bom) and the other in the case of Arvind Bhogilal v. CIT : [1976]105ITR764(Bom) , Mr. Joshi contended that it was well settled that the legal fiction is to be limited for the purpose for which it has been created and cannot be extended beyond that legitimate field. There is no dispute with regard to this principle on which Mr. Joshi has relied. But in the context of legal fiction there is yet another principle which is also well settled, namely, that such legal fiction must be given full effect, that is, it must be allowed to be worked out without allowing the mind to boggle and in this behalf we might usefully refer to Lord Asquith's famous dictum in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 . At page 132 of the report Lord Asquith observed thus :

If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited form doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The stature says that you must imagine a certain state of affairs; it does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.'

12. In other words, reconciling both the principles together it will appear clear that within the limit set by the purpose for which the legal fiction is created, the legal fiction must be allowed itself to be worked without allowing the mind to boggle, that is to say, you must also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it; inevitable corollaries flowing from the putative state of affairs which one is bidden to treat as real must be drawn and given effect to. If, in the instant case, therefore, the putative state of affairs as contemplated by legal fiction are to be treated as real, namely, that the transferred assets are to be treated as if belonging to the transfer or-assessed himself, then, carrying this legal fiction to its logical end its corollaries must be given effect to. One such corollary finds place in s, 5, which deals with exemption in respect of certain assets. As has been observed by Lord Asquith, there is nothing in s. 4 or s. 5 to suggest that the benefit under s. 5(1)(xx) should not be available to a case falling under s. 4(1)(a)(i) and, in the absence of any positive prohibition in that behalf, there is no reason why the exemption claimed by the assessee should not be allowed. In our view, it is not a case of legal fiction being extended beyond its legitimate filed nor extending it beyond the purpose for which it is created but it would be a case where we would be carrying the legal fiction to its legitimate logical conclusion by giving effect to a necessary corollary arising from the legal fiction. In other words, having regard to the provisions contained in ss. 2(m), 3, 4(1)(a)(i) and 5(1)(xx) it seems to us that to grant exemption sought by the assessee would be merely giving effect to the legal fiction created by s. 4(1) and not extending it beyond the purpose for which it is created or make it operate beyond its legitimate field.

13. In the view which we are taking above, we receive some support from the decision of the Madras High Court in the case of S. Naganathan v. CWT : [1975]101ITR287(Mad) on which reliance was placed by Mr. Jagtiani for the assessee. It was a case where the property had been transferred by the husband to the wife and the same was sought to be included in the net wealth of the husband under the provisions of s. 4(1)(a)(i) of the W. T. Act and the assessee had claimed exemption under s. 5(1)(iv) of the Act. It is true that the exemption contemplated by s. 5(1)(iv) is applicable to a case where the transfer related to a house 'belonging to' the assessee; in other words, the expression occurring in clause (iv) is 'belonging to' instead of the expression 'held by'. However, in the view which we have taken on the construction of the expression 'held by' the difference would not be of any consequence. The Madras High Court took the view that the exemption claimed was available to the assessee. In coming to that conclusion, the Madras High Court has expressed the view that there was nothing either in s. 4 or s. 5(1) of the Act to show an intention of Parliament either to limit the fiction created under s. 4(1) only for the purpose of including the value of the asset transferred in the net wealth of the transferor or exclude the application of s. 5(1)(iv) to case where the transfer related to a house belonging to the assessee. It also took the view that by this provision Parliament would not have intended that the transferor should be put under a worse position or shall be subjected to more liability than what he would have been if the transfer had not taken place. The words 'as belonging to that individual' have been used in s. 4(1)(a) not only for the purpose of uniformity of expression which is to be found in the other provisions of the Act such as ss. 2(m), 5(1)(iv), etc., but also with the intention of giving the benefit of s. 5(1)(iv) to those cases where s. 4(1)(a) is applicable. In terms the Madras High Court took the view that by granting the exemption claimed the court was not extending the fiction beyond the purpose for which it was created, but the court only gave effect to the fiction created and had not extended the same.

14. It is true that Mr. Joshi has brought to our notice the fact that by the Finance Act, 1975, some amendments have been made both in s. 4 as well as in s. 5 of the Act and these amendments have been brought into effect from 1st April, 1975. He pointed out that s. 4 was amended by incorporating additional clause (b) in sub-s. (3) in which it has been provided expressly thus : 'the provisions of section 5 shall apply in relation to such assets as if such assets were assets belonging to the assessee'. In other words, another fiction was created for the purpose of s. 5 by the legislation. It is also true that the expression 'held by the assessee' occurring in clause (xx) of s. 5(1) has been deleted by the amendment. But it is not possible to accept the contention of Mr. Joshi that merely because such amendments have been effected in the Act the position prior to that amendment must be regarded as being otherwise. As discussed above, it all depended upon the proper construction of the expression 'held by the assessee' occurring in clause (xx) of s. 5(1) and whether the legal fiction created under s. 4(1) could and should be worked out to its logical end and we have held that the expression 'held by the assessee' means 'belonging to' or 'owned by' the assessee and that to grant the exemption under s. 5(1)(xx) would merely amount to working out the legal fiction to its logical conclusion which is permissible. It is true that clause (b) which has been introduced in sub-s. (3) of s. 4 of the W. T. Act by the Finance Act, 1975, has created another legal fiction for the purpose of s. 5, but instances are not wanting where deeming provisions which create legal fiction are also introduced by way of abundant caution and, therefore, simply because these amendments have been effected in the W. T. Act by the Finance Act, 1975, it would not necessarily lead to an inference that the position prior to the amendment would be otherwise as suggested by Mr. Joshi.

15. Having regard to the above discussion, we are clearly of the view that the Tribunal was right in holding that the 400 shares of Colour Chem Ltd. transferred to the assessee's wife were exempt under s. 5(1)(xx) read with s. 4(1)(a)(i) of the W. T. Act 1957. The question is accordingly answered in the negative, in favour of the assessee.

16. Revenue will pay the costs of the reference to the assessee.


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