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Banarsi Dass Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberWealth-tax Reference No. 355 of 1963
Judge
Reported in[1970]76ITR104(All)
ActsWealth Tax Act, 1957 - Sections 3
AppellantBanarsi Dass
RespondentCommissioner of Wealth-tax
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateShanti Bhushan, Adv. General and ;R.R. Misra, Adv.
Excerpt:
- - this would be anomalous .we must apply the well-known principle of interpretation of taxing statutes that any ambiguity in it must be resolved in favour of the taxpayer and that no tax liability should be attached unless the law is clear. the learned advocate-general pointed out that upon this interpretation the item would escape assessment to wealth-tax in the hands of the transferor as well as the transferee, that may be so......the wealth-tax act, 1957, that parliament intended to permit double taxation. under the circumstances, the expression 'on the corresponding valuation date', appearing in section 3 of the act, may be interpreted in the sense 'throughout the day corresponding to the valuation date'. 12. in the instant case the assessee did not own the sum of rs. 1,07,892throughout the day corresponding to the valuation date (november 8, 1958).although the assessee was the owner of the money in the early part of theday, the assessee ceased to be the owner towards the end of the valuationdate. consequently, the sum of rs. 1,07,892 ought to be excluded from thenet wealth of the assessee for the assessment year 1959-60. 13. our answer to the question referred to the court is, therefore, in the negative, and in.....
Judgment:

V.G. Oak, C.J.

1. This is a reference under the Wealth-tax Act, 1957 (hereafter referred to as 'the Act'). The assessee is a Hindu undivided family. The assessment year is 1959-60. The corresponding valuation date was November 8, 1958.

2. Sri Banarsi Das was the karta of the assessee family. On November 8, 1958 (the valuation date), between 6 p.m. and 8 p.m. he gave directions tothe munim of Messrs, Bhagwati Prasad and Company that capital amounting to Rs. 1,07,892 invested by the assessee in the firm should be divided amongst the members of the Hindu undivided family. In accordance with that direction, the munim made entries after 8 p.m. When the Wealth-tax Officer took up assessment of wealth-tax against the Hindu undivided family, the question arose whether the sum of Rs. 1,07,892 ought to be included in the net wealth of the assessee. The assessee contended that, in view of the distribution of the amount amongst members of the assessee family on the valuation date, that amount ought to be excluded from the net wealth of the assessee. This contention was not accepted by the Wealth-tax Officer. He held that the sum of Rs. 1,07,892 formed part of the net wealth of the assessee on the valuation date. The assessee was assessed to wealth-tax accordingly. This view was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal.

3. At the instance of the assessee, the Tribunal has referred the following question of law to this court:

'Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,07,892 was rightly included in the total wealth of the assessee for the assessment year 1959-60 ?'

4. Section w of the Act is the charging provision. Section 3 of the Act states:

'... there shall be charged for every financial year ... 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.'

5. The question for consideration in the instant case is whether the sum of Rs. 1,07,892 formed part of the net wealth of the assessee on November 8, 1958.

6. The Appellate Assistant Commissioner observed :

'The entries regarding the division of the capital are said to have been passed by the munim on the same day after 8 p.m. I am not sure if the entries regarding the division of capital were in fact made on November 8, 1958, but I will assume for the present that the appellant's statement in this regard is correct.'

7. The Appellate Tribunal gave no indication that it was not prepared to accept the finding of fact recorded by the Appellate Assistant Commissioner. We may, therefore, proceed on the footing that some time between 8 p.m. and midnight the sum of Rs. 1,07,892 was distributed among members of the assessee family on November 8, 1958.

8. The learned Advocate-General pointed out that the assessee was the owner of the sum of money for the greater part of the valuation date. Onthe other hand, Mr. Gulati appearing for the assessee, pointed out that the assessee was not the owner of the money during the last moment of the day corresponding to the valuation date.

9. A similar case came before this court in Dwarka Nath v. Commissioner of Wealth-tax, [1966] 62 I.T.R. 304. In that case a Hindu undivided family had invested 3 lakhs of rupees in a firm. On the valuation date this sum of Rs. 3,00,000 was distributed among various coparceners by necessary entries in the account books. It was held by this court that the sum of Rs. 3,00,000 was not liable to be included in the net wealth of the family for purposes of levy of wealth-tax. Desai C.J. observed at page 307 :

'... if an asset changes hands twice or thrice on the valuation date, its value will be included in the net wealth of two or three assessees. This would be anomalous ... We must apply the well-known principle of interpretation of taxing statutes that any ambiguity in it must be resolved in favour of the taxpayer and that no tax liability should be attached unless the law is clear.'

10. Under the Income-tax Act, the same income, cannot ordinarily be assessed in the hands of two different persons (see the decision of the Supreme Court in Lalji Haridas v. Income-tax Officer, [1961] 43 I.T.R. 387 (S.C.)). There is a similar presumption under the Wealth-tax Act, 1957. Under Section 3 of the Act, wealth-tax is assessed in respect of the net wealth of a person. There is a presumption that two different entities should not be subjected to wealth-tax in respect of the same item of property.

11. The material words of Section 3 are: 'net wealth on the corresponding valuation date'. Upon a literal interpretation of the phrase, it may be possible to say that the sum of Rs. 1,07,892 formed part of the net wealth of the assessee on the corresponding valuation date. But, in order to avoid the anomaly of double taxation, it is necessary to give a modified meaning to the expression 'on the corresponding valuation date'. A reasonable interpretation of the phrase 'on the corresponding valuation date' would be 'throughout the day corresponding to the valuation date'. Such an interpretation would avoid double taxation. The learned Advocate-General pointed out that upon this interpretation the item would escape assessment to wealth-tax in the hands of the transferor as well as the transferee, That may be so. But, as pointed out by Desai C.J., any ambiguity in a taxing statute must be resolved in favour of the taxpayer, and no tax liability should be attached unless the law is clear. There is no indication in the Wealth-tax Act, 1957, that Parliament intended to permit double taxation. Under the circumstances, the expression 'on the corresponding valuation date', appearing in Section 3 of the Act, may be interpreted in the sense 'throughout the day corresponding to the valuation date'.

12. In the instant case the assessee did not own the sum of Rs. 1,07,892throughout the day corresponding to the valuation date (November 8, 1958).Although the assessee was the owner of the money in the early part of theday, the assessee ceased to be the owner towards the end of the valuationdate. Consequently, the sum of Rs. 1,07,892 ought to be excluded from thenet wealth of the assessee for the assessment year 1959-60.

13. Our answer to the question referred to the court is, therefore, in the negative, and in favour of the assessee. The Commissioner of Wealth-tax shall pay the assessee Rs. 200 as costs of this reference.


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