1. The facts giving rise to the above appeals are common. They were, therefore, heard together and are being disposed of by a combined order for the sake of convenience.
2. The appellants in the present case are related to each other.
Certain gifts have been made by them on 13-11-1974 to each other's children; That they are cross-gifts is not in dispute. The question for determination, however, is, whether such cross-gifts would be assessable in the hands of the donors in respect of the assessment year 1978-79. The chart showing the family tree and the relationship of the various persons involved in the present appeals is given herebelow for the sake of ready reference: Nautamlal Amritlal Harshadrai Amritlal Gajra Ben (wife) Bhadravati (wife) Haresh Ketan ChetanIndulal Lalit Kumar Chandrakant Rekha, Versha, PragnaPuspavati Hansaluxmi Nalini(wife) (wife) (wife) Jagriti Nishith, Nihar The gifts made by the appellants and their spouses out of the gifted sums given to them earlier and the gifts received by their children are listed herebelow in the form of a chart for appreciating the facts ;Name Gifts Donees Amounts Gifts Minor From made gifted recei- children whom ved in whose names received1 2 3 4 5 6 7Lalit Rs. 40,000 Meena Rs. 10,000 Rs. 10,000 Jagriti Chand-Kumar d/o rakant IndulalIndulal Rs. 40,000 Smita Rs. 10,000 Rs. 40,000 Sailesh Rekha Rs. 10,000 10,000 Chandra- Versha Rs. 10,000 Shashikant kant Pragna Rs. 10,000 10,000 Rs. 40,000 Nalin Harshadrai) Meena 10,000 LaChandra Rs. 40,000 Jagriti Rs. 20,000 NishithKant d/o Lalit 10,000 Harshad- Kumar Rs. 10,100 Niharrai Sailesh Rs, 10,000 10,000 Shashi-Harshadrai Rs. 20,000 Nishith Rs. 10,000 Rs. 70,000 Haresh 10,000 Lalit Nihar Rs. 10,000 Ketan 10,000/ Kumar Rs. 20,000 Chandrakant) Chetan 10,000 Smita 10,000 3. From the chart given above it will be immediately clear that the sums which can be called cross-gifts and the inclusion or otherwise of which is in dispute before us would be the following sums in respect of each of the appellants.Name of the Appellant Amount of cross-gifts to be considered in his caseLalit Kumar 10,000Indulal 40,000Chandrakant 20,000Harshadrai 20,000 4. The question of their includibility in the appellants' hands had come up for consideration of the Tribunal in respect of the assessment year 1975-76 when the gifts in question were made to begin with. Our learned brothers expressed the opinion that the amendment to Section 4(1)(a)(iii) of the Wealth-tax Act, 1957 ('the Act'), did not apply to the assessment year 1975-76 and, therefore, the cross-gifts made and listed above could not be included in the total wealth of the respective donors. Observations of our learned brothers, in this regard, may be noted here for the sake of ready reference: There is substantial force in the submission of Mr. Roy. The relevant provisions as it stood prior to 1-4-1976 took within its fold only transfers made by the assessee in favour of his spouse or minor children. Admittedly, there is no transfer by each of the assessees in favour of his minor children in this case. The transfers are made by each of the assessees in favour of their respective nephews. It is only in cases where there are cross gifts it has been held that there is an indirect transfer. When the word 'indirectly' is not there in the section as it stood prior to 1-4-1976 the cross gifts cannot be brought within the purview of Section 4(1)(a)(iii). It is only after 1-4-1976 such cross gifts will come within the mischief of Section 4(1)(a)(iii). The language is plain and no further elucidation is necessary. The decision of the Bombay High Court also supports the view taken though they were dealing with Section 4(1)(a)(ii). The Legislature was fully aware of the provisions of Section 16 of the Income-tax Act, 1922 and Section 64 of the Income-tax Act, 1961 where the words 'directly or indirectly' are used. When such words are omitted in Section 4(1)(a)(iii) it is abundantly clear that the omission was deliberate so as not to include cross gifts as in this case. When the Legislature felt the necessity of bringing the indirect transfers also into the fold of taxation net the section was amended by the addition of the words'directly or indirectly'. We have, therefore, no hesitation in holding that as the section stood the transfers in this case are not hit and, therefore, the gifts cannot be treated as a part of the wealth of each of the assessees.
5. The AAC has expressed the opinion that the aforesaid order of the Tribunal was rendered in the context of the law as obtained in respect of the assessment year 1975-76, but that it would not apply in respect of the assessment year 1978-79. While holding as above, she observed as follows: As the amendment has come into force with effect from 1-4-1976, it has added the words 'directly or indirectly' to Section 4(1)(a)(iii) of the Wealth-tax Act. Following the decision of the Tribunal as quoted by the authorised representative, the cross gifts will very much come within the mischief of Section 4(1)(a)(iii) of the Wealth-tax Act.
6. An alternative contention was raised before her that some of the children had become major in the meanwhile and the gifts made to them would not be included in the wealth of the donors in terms of Section 4(1)(a)(iii). She rejected the above contention of the assessee by pointing out that the evidence as to the alleged minors who had attained majority during the accounting year under consideration had not been placed on record and, therefore, she could not accept the assessee's contention that some minors had become major during the assessment year in question.
7. The assessee's learned counsel assails the aforesaid findings of the AAC. According to him, the provisions of Section 4(1)(a)(iii) could apply in respect of those cross-gifts only, which had been made on or after 1-4-1976 and inasmuch as the gifts in the present case have been made prior to 1-4-1976, the amended provisions of Sub-clause (iii) of Sub-section (1)(a) of Section 4 would not apply to the assessee's case.
8. The alternative contention is also pressed by the assessee and it is urged that the assessee had not been given an opportunity to prove the case of minors in question and that the AAC erred in not giving to the assessee a proper opportunity in this regard.
9. On behalf of the revenue, the aforesaid submissions are stoutly resisted and it is pointed out that for applying the provisions of Section 4(1)(c)(iii) what is material is not the date of gift but the position as on each valuation date. If on the given valuation date, the provisions were in force, inclusions indicated in Sub-clause (iii) of Clause (a) of Sub-section (1) of Section 4 would be met. In cases where the intention of the Legislature was not to include in the wealth of the assessee certain transactions which had taken place prior to a given date, the Legislature had made its intention clear in unambiguous terms as is the position in respect of cases governed by Sub-section (1A) of Section 4.
10. As regards the alternative plea of the assessee, the learned departmental representative submits that the assessee's plea was rightly rejected by the AAC in the absence of evidence and that the assessee could not now request for a further opportunity of leading evidence in this regard. All in all, therefore, according to the learned departmental representative, we should not interfere with the order of the AAC in respect of any of the appellants.
11 We have carefully examined the facts of the present case and the rival submissions. Section 4(1)(a)(iii), so far as it is relevant for our purpose reads as follows: In computing the net wealth of an individual, there shall be included, as belonging to that individual (iii) by a person... to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child ... or both, or A bare reading of the aforesaid clause will show that it is not stated in it that transfers made prior to a given date will be ignored while computing the net wealth of an assessee. The emphasis of the section appears to be in finding out whether the assets of the type mentioned in Sub-clause (iii) exist on the valuation date in question, and, if they exist, the inclusion of the said assets in the wealth of the assessee would be done, irrespective of the date when the transfer was effected.
12. Sub-section (1A) which deals with the properties converted by an individual into HUF property, in contrast to Sub-section (1) of Section 4, stipulates a date, namely, 31-12-1969, and in categorical terms states that the said sub-section would apply only to the conversions made on or after 31-12-1969. Any conversion, therefore, made prior to 31-12-1969 would not be covered by Sub-section (1A) of Section 4. If the intention of the Legislature was that any indirect transfers made by way of cross-gifts to minor children, prior to 1-4-1976, should be excluded from the inclusion in the net wealth of the transferor, it could easily have made provisions identical to that of Sub-section (1A). The very fact that the legislature did not choose to lay down such a date in Sub-clause (iii) of Clause (a) of Sub-section (1) of Section 4, goes to show that such indirect transfers, wherever made, would be includible in the net wealth of the assessee if on the given valuation date, the assets indirectly transferred to the minor children are held by them. This being so, we are unable to accept the assessee's contention in this regard. The order of the AAC, in our opinion, is correct on this position and we accordingly uphold it.
13. The alternative contention of the assessee, however, still remains.
According to the assessee some of the minor children had become major during the accounting period ending on the valuation date, and that, therefore, it could not be said that on the given valuation date, the indirectly transferred assets were being held by the minor children of the donors in question. This contention, in our opinion, goes to the root of the matter and it would be in the interest of substantial justice if the assessee is allowed to lead evidence in this regard. It is true that the assessee did not or could not lead evidence before the AAC on this point, but for that matter the assessee should not, in our opinion, be precluded from leading evidence even at this stage. We entertain the assessee's request in this regard and restore the matter back to the WTO who will verify for himself whether any of the children to whom the cross gifts had been made, while they were minor, had become major on the valuation 'dates in question. If there be any, the asset held by such child who has become major cannot be included in the wealth of the respective assessees in terms of Section 4(1)(a)(iii).
With these observations, we restore the matter back to the WTO.14. For statistical purposes, the appeals will be taken as partly allowed.