Skip to content


Smt. Malti Harshey Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 227 of 1973
Judge
Reported in(1979)13CTR(MP)164; [1980]121ITR676(MP); 1980MPLJ861
ActsWealth Tax Act, 1957 - Sections 4(1) and 5
AppellantSmt. Malti Harshey
RespondentCommissioner of Wealth-tax
Appellant AdvocateV.D. Dabir and ;A.L. Halwe, Advs.
Respondent AdvocateP.S. Khirwadkar, Adv.
Excerpt:
- - although the proviso is not very happily worded, the words 'is either chargeable to gift-tax or is not chargeable under section 5 'as used in the proviso make it clear that it has no application to a gift which was chargeable or was not chargeable in an assessment year prior to an assessment year commencing after 31st march, 1964. the use of the word 'is 'in our opinion, is a very strong indication to show that the words 'any assessment year commencing after the 31st day of march, 1964 'refer to the assessment year under the g. both these conditions are cumulative and if they are satisfied, the value of the assets cannot be included in the net wealth of the transferor under section 4(1)(a) of the w......in cases where, (i) the assets are transferred during the accounting year relevant to the gift-tax assessment year 1964-65 and subsequent years ; and (ii) the assets so transferred are chargeable to tax under the g.t. act or are not chargeable under section 5 of that act. both these conditions are cumulative and if they are satisfied, the value of the assets cannot be included in the net wealth of the transferor under section 4(1)(a) of the w.t. act. we may also point out that the words ' after the 31st day of march, 1964 ' in the proviso were substituted by the words ' after the 31st day of march, 1964, but before the 1st day of april, 1972' by the finance (no. 2) act, 1971, with effect from 1st april, 1972. the exemption granted by the proviso thus ceases to be applicable in.....
Judgment:

G. P. Singh, C.J.

1. This is a case stated by the Income-tax Appellate Tribunal under Section 27(1) of the W.T. Act, 1957, referring for our answer the following question of law :

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in interpreting the proviso to Section 4(1)(a) of the Wealth-tax Act, 1957, to mean that only transfer of assets or part thereof which is chargeable to gift-tax or is not chargeable under Section 5 of the Gift-tax Act for the assessment year 1964-65 onwards will be eligible for exclusion from the net wealth of an individual '

2. It is not necessary to state the facts in detail. Suffice it to say that the relevant assessment years are 1967-68, 1968-69 and 1969-70 for which the valuation dates are 31st March of 1967, 1968 and 1969, respectively.The assessee made certain gifts to his wife during the accounting years relevant for the assessment years 1960-61, 1961-62 and 1963-64. In other words, the gifts were all completed before 31st March, 1963. Relying on the proviso to Section 4(1)(a) of the Wealth-tax Act, the assessee claimed that the value of the assets transferred by the above gifts was not includible in the net wealth of the assessee for any assessment year commencing after 31st March, 1964, as the transfer of the assets was either chargeable to gift-tax under the Gift-tax Act, 1958, or not chargeable under Section 5 of that Act. The Tribunal negatived this contention on the reasoning that the proviso exempted from inclusion the value of such assets the transfer of which was chargeable to gift-tax or not chargeable under Section 5 of the Gift-tax Act for the assessment year 1964-65 and the proviso did not apply to the assets transferred before the accounting year relevant to the assessment year 1964-65.

3. Section 4(1)(a) and the proviso of the Wealth-tax Act as it stood at the relevant time, 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 that individual--

(a) the value of assets which on the valuation date are held--

(i) by the spouse of such individual 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 apart, or (ii) by a minor child, not being a married daughter of such individual, to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration, or

(iii) by a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both, or

(iv) by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer,

whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise :

Provided that where the transfer of such assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958, or is not chargeable under Section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual.'

4. The question for consideration is whether the words ' for any assessment year commencing after the 31st day of March, 1964 ', as used in the proviso, refer to the assessment year under the G.T. Act or the assessment year under the W.T. Act. The proviso was inserted in Section 4 of the W.T. Act by Section 4 of the W.T. (Amend.) Act, 1964. The object behind the proviso was to avoid double taxation of the donor from and inclusive of the assessment year 1964-65. The effect of the proviso is that from the assessment year 1964-65 the provisions of the G.T. Act supervene and render Section 4(1)(a) of the W.T. Act inoperative. Although the proviso is not very happily worded, the words ' is either chargeable to gift-tax or is not chargeable under Section 5 ' as used in the proviso make it clear that it has no application to a gift which was chargeable or was not chargeable in an assessment year prior to an assessment year commencing after 31st March, 1964. The use of the word ' is ', in our opinion, is a very strong indication to show that the words ' any assessment year commencing after the 31st day of March, 1964 ' refer to the assessment year under the G.T. Act and not under the W.T. Act. Under Section 4(1)(a) all transfers of assets to spouse or minor child without adequate consideration are includible in the net wealth of the assessee. The proviso provides an exception in cases where, (i) the assets are transferred during the accounting year relevant to the gift-tax assessment year 1964-65 and subsequent years ; and (ii) the assets so transferred are chargeable to tax under the G.T. Act or are not chargeable under Section 5 of that Act. Both these conditions are cumulative and if they are satisfied, the value of the assets cannot be included in the net wealth of the transferor under Section 4(1)(a) of the W.T. Act. We may also point out that the words ' after the 31st day of March, 1964 ' in the proviso were substituted by the words ' after the 31st day of March, 1964, but before the 1st day of April, 1972' by the Finance (No. 2) Act, 1971, with effect from 1st April, 1972. The exemption granted by the proviso thus ceases to be applicable in respect of gifts made after the accounting year relevant to the assessment year 1971-72. The learned counsel for the assessee sought support on the presence of the comma after the words ' Section 5 of that Act' and before the words ' for any assessment year ' and argued that the comma showed that the assessment year referred to in the proviso was the assessment year under the W.T. Act. We are unable to accept this argument. Punctuation marks, even if relevant, as aid to construction of modern Acts have no controlling effect. The inference drawn by us from the context and the language used in the proviso that the assessment year to which the proviso refers is the assessment year under the G.T. Act is not displaced by the comma relied upon by the learned counsel for the assessee. The view taken by us is shared by the Calcutta, Punjab and Kerala High Courts [See CWT v. Smt. Sarala Debi Birla : [1975]101ITR488(Cal) , CWT v.Seth Nand Lal Ganeriwala and M. G. Kollankulam v. CIT : [1978]115ITR160(Ker) ]. The Andhra Pradesh High Court in CWT v. Smt. Hashmatunnisa Begum : [1977]108ITR98(AP) took a contrary view. For the reasons already indicated and with great respect, we are unable to subscribe to the view taken by the Andhra Pradesh High Court.

5. The question referred is answered in the affirmative. There will be no order as to costs of this reference.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //