1. This petition has been filed by the assess under Art. 226 of the Constitution of India, against the Gift Tax Officer, with a prayer to issue a writ of certiorari or any other appropriate write or direction to call for records and to quash the Gift Tax Assessment dated 31-12-1964.
2. The facts leading to the filing of this Writ Petition are staged below:
The petitioner gifted Rs. 1,15,000/- to his four sons on 4-1-1963. Under Section 3(1) of the Income-tax Act, the previous year in the case of the petitioner was determined as 1-10-1962 to 30-9-1963. According to the rates specified in the schedule of the Gift Tax Act, which was in force on 4-1-1963, the Gift Tax that was payable in respect of the above gift worked out to Rs. 5,400/-. the Finance Act of 1964 which came into force with effect from 1-4-1964, varied the rates of gift tax by amending the schedule. In accordance with the rates specified in the schedule and which came into force with effect from 1-4-1964, the Gift-Tax that was payable in respect of the above gift worked out to Rs. 21,400/-. The Gift-Tax Officer accordingly completed the Gift-Tax Assessment by computing the Gift-Tax at Rs. 21,400/-.
3. Aggrieved by the above assessment, the Petitoner submitted before us, this writ petitions under Art, 226 of the Constitution of India, for issuing appropriate directions etc. The petitioner's counsel submitted before us that the liability to pay Gift Tax in respect of the gifts, crystallised on 4-1-1963, on which date the gift was made and it was at the rtes specified in the schedule in force on that date, the Gift-Tax that was payable on the gift, should have been calculated. Inviting our attention to Section 29 of the Gift-Tax Act, the learned Counsel for the Petitoner submitted that the Act makes a donor liable for the payment of Gift-Tax in respect of the gifts made by him and under Section 18 of the said Act, Gift-Tax calculated at the rates specified in the Schedule, if deposited in the treasury within 15 days, from the date of the gift, he would be given credit to the amount so paid plus 10% of the amount so paid. On the date of gift and also on the last day of the fortnight, within which he could have deposited, the gift-tax in the treasury, the gift-tax at rates specified in the schedule worked out to Rs. 5,400/- only. the petitioner should know as to what amount of gift-tax he has to pay in respect of the gifts he has made, so that he could adjust his financial maters accordingly. The learned counsel further invited our attention to the similar wording of the charging section of the Wealth Tax Act and submitted that under the Wealth Tax Act, the courts have held that the liability to pay wealth tax crystallised on the valuation date and not on the first date of the assessment year. On that analogy, in the gift tax matters, it was submitted that the gift-tax liability crystallised on the date of gift and not on the commencing date of the assessment year following the previous year.
4. In support of that argument, the learned counsel relied upon the decisions in Commr. Wealth Tax v. Muthu Krishna Ammal. : 72ITR801(SC) , H. H. Setu Parvati Bayi v. Commr. of Wealth Tax : 69ITR864(SC) .
5. As against this argument, the learned counsel Sri Anantababu, the learned counsel Sri Anantababu, appearing for the Gift Tax Officer, contended that under the charging section i.e., Section 3 of the Gift Tax, the Gift Tax was made payable in respect of gifts made in the previous year at the rates specified in the schedule as in force on the first day of the assessment year. Under the scheme of the taxing statues, tax is levied at the rates prevailing on the assessment year in respect of transactions of gift etc. made in the previous year. In support of the above arguments, the learned counsel relied upon the decisions in Pramod Kumar Jain v. Commr. of Wealth Tax, Bombay City : AIR1966Bom166 ; Commr of Income-tax, West Bengal v. Istmiah Steam Ship Lines : 20ITR572(SC) . It was further submitted by the learned counsel that the argument now advanced by the learned counsel for the petitioner was advanced on behalf of the assessee inn : AIR1966Bom166 and it was repelled by the Bombay High Court. In regard to Section 18 the learned Counsel Sri Anantababu, appearing for the Gift Tax officer, submitted that the payment made thereunder has nothing of do with the final tax computation. Section 18 is only relevant to the amount of rebate i.e. 10% that is to be given credit to the assessee if he deposited the gift tax calculated by him within 15 days from the date of Gift.
6. There is no force in the argument advanced by the learned counsel appearing for the petitioner. Under Sec. 3, gift-tax is charged for every assessment year in respect of the gift made in the previous year, at the rates specified in he schedule. In the instant case gifts were made on 4-1-1963 which date fell in he previous year form 1-10-1962 to 30-9-1963 relevant to the assessment year 1964-65. On a plain reading of the charging section, it is clear that the gifts made in the previous year are chargeable to tax at the rates specified in the schedule in force at the commencement of the relevant assessment year. In : 20ITR572(SC) the assessee claimed for the assessment year 1941-41, 1942-43 and 1943-44 that its unabsorbed depreciation at the end of 1938-39 should be deemed to be a part of the depreciation allowance for 1939-40 and should be allowed to be further carried forward under Section 10(2) (vi) of the Indian Income-tax Act 1922. The Supreme Court upholding the view of the Income-tax Appellate Tribunal held that unabsorbed depreciation at the end of 1938-39 could not be carried forward in view of the amendment of the section. the Supreme Court, observed that in Income-tax matters, the law that is to be applied is the law in force in the assessment year unless otherwise stated or implied, and not the law in force in the accounting year.
In : AIR1966Bom166 , the dispute was whether the rate, which existed in the schedule to the Act on the valuation date, which is the day for the computation of the net wealth of the assessee or the rate which is applicable to the assessment year for tax is to be levied on the net wealth. Mir. Kolah, appearing for the assessee in that case argued that under Section 3, tax was chargeable on the net wealth at the rate or rates specified in the schedule on the corresponding valuation date, with reference to which the net wealth in computed. The scheme of computation of tax envisaged in the provisions of Income-tax Act and the Wealth Tax Act are different and the charging of wealth being on the date of valuation, the rate at which the charge would be made must obviously be the rate which existed on the date of charging viz., on the date of valuation. This argument was repelled by that court, with the following observations:----
'Wealth tax is levied for the financial year and the tax is attracted at the commencement of the financial year and at no point of time earlier than that. The fact that net wealth is computed with reference to a date anterior to the commencement of the financial year for which wealth tax is levied does not mean that the liability to wealth-tax arises at such earlier date. The rate of tax applicable is that which is in existence at the time of levy of tax. If the law changes during the interval between the valuation date and the date when the tax is actually attracted, tax will be levied in accordance with the provisions as they stand at the time of attraction of tax and not as it was on the valuation date.'
7. We will then briefly refer to the rulings relied upon by the assessee's counsel, In : 69ITR864(SC) , their Lordships of the Supreme Court held that;
'By virtue of Section 3 of the Wealth-tax Act. 1957 the liability to pay wealth tax becomes crystallised on the valuation date and not on the first day of the assessment year, though the tax is levied and becomes payable in the relevant assessment year. The wealth-tax liability of an assessee on the valuation date for the assessment year beginning on the 1st of April, following is a 'debt owed' within the meaning of Section 2(m) of the Act, and should be deducted from the estimated value of the assets as on the valuation date.'
The assessee relied upon the decision in : 72ITR801(SC) wherein the definition given to the word 'Assets' under the Wealth Tax Amendment Act 1964, come to be considered and contended that the amendment was intended to be a parliamentary exposition of the meaning of the original clause. That contention was rejected by their Lordships of the Supreme Court holding that no such intention appeared form the terms of the clause and further holding that even assuming that the exception in respect of interest in property which is available to an assesses for a period not exceeding six years form the date of the interest vests in the assessee is only to apply after the date of the amendment by the Wealth Tax (Amendment) Act, 1964, that clause has no application and the terms of the section must be interpreted as they stood at the valuation date which crystalised the charge of wealth tax for the appropriate assessment year.'
8. In view of these rulings the learned counsel contended that as in the Wealth Tax Act, the liability to pay gift tax crystallised on the date of the gifts and therefore, the rates of tax which sere specified in the schedule, which was in force on the date of the gift, wee applicable.
9. The above said two ruling relied upon by the learned counsel do not relate to the computation of tax. Under the Wealth Tax Act, although the net wealth is to be determined on the valuation date, still the computation of tax is made according to rates that are in force on the commencing date of the assessment year following the provisos year. In the former decision relied upon by the assessee's counsel their Lordships of the Supreme Court were only dealing with the question as to when the wealth tax becomes a liability and allowable as deduction in the computation of net wealth. Both the rulings do not touch or relate to the computation of tax. Hence they are not relevant for the purpose of this case.
10. The decision cited by the counsel for the Gift-tax Officer makes it clear that although the gifts were made in he previous year, the tax that was to be calculated on these gifts, is at the rates specified in the schedule, which is in force on the first date of the assessment year following the previous year. In short, the tax is paid for the assessment year and not for the accounting year. We therefore, find no force in the petition filled by the assessee.
11. However since the tax liability has been suddenly increased from Rs. 5, 400/- to Rs. 21,400/- the assessee would be hard hit, if he is asked to pay immediately. Therefore, in the interests of justice, we are of the opinion that he should be given four months time for payment of gift tax of Rs. 21,400/- computed by the Gift-tax Officer, we accordingly direct. Subject to the above direction, we dismiss the writ petition with costs, Advocate's fee is Rs. 100/-.
12. Petition dismissed.