1. This set of two appeals which are filed by the revenue relate to the assessment years 1979-80 and 1980-81. The two common grounds which are relevant for our purpose read as follows: 1. On the facts and in the circumstances of the case, and in law the learned AAC erred in allowing exemption under Section 5(1)(iv) of the Wealth-tax Act, in assessee's case, as the assessee had neither any ownership right in the house nor did he have any legal right to its occupation. Further the gift was of cash and not of immovable property which was included under Section 4 of the Wealth-tax Act.
2. Without prejudice to the above, the AAC further erred in allowing the exemption to the extent of Rs. 71,465. Since exemption in the case of assessee's wife was allowed to the extent of Rs. 65,130, in the assessee's case, the same should have been allowed to the extent of Rs. 34,870 only making an aggregate exemption of Rs. 1 lakh only.
The assessee had gifted an amount of Rs. 71,468 to Mrs. Parinben, wife of the assessee, which amount she had utilised for constructing a house property. The assessee had shown the said amount in his hands in accordance with the provisions of Section 4(1)(a) of the Wealth-tax Act, 1957 ('the Act'). The assessee's claim; however, was that as the amount is utilised for conversion into a residential property, he was entitled to exemption under Section 5(1)(zV) of the Act. In this view of the matter, he had disclosed the value of the said asset as nil. The WTO observed that Parinben had constructed a residential property with the aid of the said gifted amount as well as her own funds. She had already claimed exemption under Section 5(1)(iv) which was duly allowed. He did not accept the assessee's claim that the impugned amount was exempt under Section 5(1)(iv) inasmuch as provisions of Section 4(1)(a) applied to the gifted property which was cash. In this view of the matter, he included the impugned amount in the hands of the assessee for both the years while determining the net wealth of the assessee.
2. Being aggrieved, the assessee carried the matter in appeal before the AAC and reiterated the same contentions as were made before the WTO and claimed that the impugned amount was exigible to exemption under Section 5(1)(iv). This contention found favour with the AAC who deleted the impugned amount for both the years under appeal.
3. The revenue challenging the decision of the AAC has come up in appeal before us. The assessee has filed written submissions and has not appeared in person. Shri Kathuria strongly relying on the decision of the Bombay High Court in case of CWT v. Kishanlal Bubna  103 ITR 56 contended that what was includible in the hands of the assessee under Section 4(1)(a), was the value of asset which had been actually transferred by the assessee although the form of asset had undergone a change since the date of transfer. Therefore, in the instant case, the cash value of gift was wholly includible in the hands of the assessee and the exemption under Section 5(1)(iv) was not admissible.
4. The assessee in the written submission has contended firstly that the exemption under Section 5(1)(iv) was allowed for the assessment years 1974-75 to 1978-79 in the orders passed under Section 16(1) of the Act. The dispute arose for the years under appeal in regard to the market value of the property and the WTO had allowed the exemption in the hands of the assessee's wife as claimed. It was next pointed out that though the legal right of the occupation of the house was that of the wife of the assessee, the property stood in the name of the assessee's wife. In accordance with Section 4(3)(b), exemption in respect of specified assets under Section 5 would apply in relation to the assets transferred which were liable to be included under Section 4. Therefore, in accordance with Section 4(3)(b) read with Section 5 the claim for exemption was tenable. It was also pointed out that according to the Explanation (c) to Section 4, it was not necessary that the transferred assets should be held by the transferee in the same form in which they were transferred. Therefore, if the amount is utilised for construction of property Section 4 will be applicable to the converted assets and the assessee will be entitled to exemption under Section 4(3)(b). In this view of the matter, the assessee was entitled to entire exemption as the value of the gift made which was converted into property was less than Rs. 1,00,000.
5. We have carefully considered the rival submissions. The short point which arises for our consideration and decision is whether a sum of Rs. 71,468 being the value of cash gift given by the assessee to his wife, is exempt under the provisions of Section 5(1)((V) as the said gift was utilised for construction of a property by the assessee's wife, Smt.
Parinben. As pointed out earlier, the assessee has placed reliance on the provisions of Sections 4(1)(a), 4(3)(b) and 5(1)(iv) in support of his contention that the value of the said gift is exempt from tax. In order to appreciate the assessee's contention we refer to the decision in Bubna's case (supra), in which the facts were that the assessee created two trusts and transferred two amounts of Rs. 25,101 and Rs. 21,201 to the trustees for the benefit of his two minor daughters. The trustees purchased shares out of the trust funds. The WTO took the view that the market value of the shares on the valuation date amounting to Rs. 75,610 was to be included in the net wealth of the assessee as transferor. The Tribunal held that the value of cash assets transferred to Rs. 46,302 (sic) should alone be included in the net wealth of the assessee. On a reference, while coming to the conclusion their Lordships have stated as follows: . . . Sub-clause (i) deals with the assets transferred to the spouse of an individual and there also reference is made to 'such assets have been transferred by the individual'. The use of the expression 'such assets' really indicates that it is the assets in the original form that are to be taken into account because those are the only assets which are transferred by the assessee as the transferor.
Identical language is used in Sub-clauses (ii) and (iii). We are concerned in the present case with Sub-clause (iii). It should not be overlooked that there is no article used before the word 'assets' in Clause (a) in the expression 'value of assets which on the valuation date or transferred'. The identification of 'such assets' is to be found from the language used in Sub-clause (iii). The assets which are contemplated in Clause (a) are the assets held by a person or association of persons to whom such assets have been transferred by the assessee in the manner indicated therein. The words 'such assets' really indicate and pinpoint the specific assets which have been transferred. That such was the intention is made very clear by the latter part of this section because it says 'whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise'.
The object of this latter part of the section is that regard is to be had to the valuation of the original assets irrespective of the fact whether the original assets are retained in the form in which they are transferred or they are converted into different types of assets. In either case, it is the value of the assets that are transferred that is to be determined as on the relevant valuation date. There can be no controversy as regards the value of the assets transferred when the assets so transferred are in the form of money.
In the present case, under the two trusts the trust is created for the cash amount of Rs. 46,302. Thus, the value of the assets like cash amount on the valuation date would remain the same unless devaluation of money has taken place by reducing the value of a rupee. Such a case does not arise in the present case. When the original assets transferred is cash in the form of rupees, then naturally irrespective of the fact whether the transferees like the trustees retain the same assets transferred in the form in which they were settled upon trust or invest them in other properties, still for the purposes of Section 4(1)(a)(iii) it is the value of the original assets that has to be taken into account and not the value of the assets into which it is converted. If the Legislature intended the value of the converted assets which came into existence after the original transfer, the appropriate language would have been used by the Legislature especially when under this section the property is deemed to be included in the net wealth of the assessee.
In the absence of clear and explicit provisions it is not possible for us to accept the contention of Mr. Joshi merely by reason of the fact that he emphasises the expression 'the value of assets which on the valuation date are held'. The value on the valuation date is to be determined of the original assets which are transferred, and, in our opinion, the provisions of Section 4(1)(a)(iii) have been correctly construed by the Tribunal.
The above observations make it clear that under Section 4(1)(a)(i) in the instant case the value of asset to be included is the cash amount of Rs. 71,468 to which the provisions of Section 4(1)(a) are admittedly applicable.
6. It has been stated by the assessee that in view of the provisions contained in Section 4(3)(b), the assessee was entitled to the exemption under Section 5(1)(iv). We shall, therefore, refer to the said provisions which read as follows: 4(3)(b) the provisions of Section 5 shall apply in relation to such assets as if such assets were assets belonging to the assessee.
This section to our mind has been introduced in order to give full effect to the fiction enacted in Section 4(1)(a). Under Section 4(1)(a), the value of the assets which on valuation dates are held by the spouse of an 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, are includible in computing the net wealth of an individual. Now when an asset is transferred by an individual, he ceases to be an owner thereof, and as such if an asset to which exemption under Section 5(1)(iv) was admissible such an assessee would lose the exemption as the property in question gifted would not belong to the assessee after the transfer. However, by fiction of law enacted in Section 4(1)(a), if the value of the asset transferred is includible in the hands of an individual, then the value of 'such asset' is includible in the hands of the individual. It is, therefore, necessary that the assets transferred must be entitled to or exigible to exemption under Section 5(1)(iv) at the time of transfer and in which case Section 4(3)(b) would protect the exemption admissible to an individual before transfer. In other words, Section 4(3)(b) would come into play only in respect of those assets in respect of which provisions of Section 5 are applicable 'before" the transfer was effected. The said provisions, as pointed out earlier, which are intended to give full effect to the fiction cannot be extended further to a case where the assets transferred are not exigible to exemption under Section 5. If this much is clear, then there is no difficulty in reaching the conclusion that the value of cash gift made by the assessee though includible under Section 4(1)(a) is not exigible to exemption under Section 5(1)(iv) as claimed by the assessee. The decision in Bubna's case (supra) fully governs the facts of the present case and as a consequence the value of cash gift as aforesaid was rightly included by the WTO for the assessment year under appeal and that the exemption was rightly denied by the WTO. The AAC, in our opinion, has clearly erred in coming to the conclusion that the assessee was entitled to exemption in respect of sum of Rs. 71,468.
7. We, accordingly, reverse the decision of the AAC and restore that of the WTO for both the years. In the view which we have taken it is not necessary to consider the alternative ground raised by the revenue in this appeal.