1. This appeal by the department relates to the assessment year 1976-77, for which the relevant valuation date was 31-12-1975.
2. The assessee is the executor appointed by Shri Vimalbhai N. Shah, who died on 19-10-1975. The assessee filed a return on 31-8-1976 declaring a deficit of wealth at Rs. 29,479. The WTO computed the total net wealth at Rs. 4,98,600. In the present appeal we are concerned only with two items of wealth. The first is Rs. 1,19,798 being the provident fund amount due from Metro Wood & Engg. Works (P.) Ltd. and Victoria Iron Works Co. Ltd. The second is Rs. 33,000 due as gratuity from the above two companies. The assessee claimed exemption with regard to these two amounts. The WTO disallowed the claim on the ground that these two amounts were received by the executor after the death of the testator and that they are, therefore, part of the net wealth of the assessee.
3. Before the AAC it was further contended by the assessee in support of the claim for exemption that the amount of provident fund was lying with the Provident Fund Commissioner under the Provident Fund Act, 1925 and that it is exempt from wealth-tax till the amount was collected. It was also pointed out that the amount was actually paid over to the executor from the provident fund only after the valuation date. On the same analogy, it was contended by the assessee that the gratuity was also quantified and received after the valuation date and that on the valuation date it was only a contingent asset and not includible in the net wealth. The AAC accepted these contentions. He was of the view that as the amounts were not received by the assessee on the relevant valuation date, they were only standing to the credit of the assessee on the relevant valuation date and as such qualified for exemption.
Aggrieved by this finding, the department has come up in appeal.
4. It is contended by the learned departmental representative that the date of actual realisation of the provident fund and gratuity amounts is not material, that what is important is that on the relevant valuation dates these amounts were standing to the credit of the present assessee, that the assessee is not entitled to claim the exemption under Clause (xvii) of Section 5(1) of the Wealth-tax Act, 1957 ('the Act'), because on the relevant valuation date the amount was not standing to the credit of a salaried employee in any provident fund maintained by his employer. In this connection he also relied upon the ruling of the Pune Bench of the Tribunal dated 24-3-1980 and reported in page 155 of the Trigest.
5. On the other hand it is contended by the learned representative of the assessee that the amounts will become part of the net wealth of the assessee, who is an executor, only when they become payable to him, that the amounts can be treated as having become payable only on the dates on which they were actually paid, that the provident fund was paid on 7-5-1976 and 6-11-1979 and the gratuity amount on 1-1-1976 that all these payments were subsequent to the valuation date of 31-12-1975 and that the executor cannot be equated with an heir of the original assessee. In this connection the learned representative of the assessee also relied upon the ruling of the Bombay High Court in the case of Bai Hamabai J.K. Mehta v. CIT  16 ITR 115, wherein it was held that where a beneficiary is assessed to tax under Section 9(1) of the 1922 Act, he is entitled to the benefit under Section 9(2) in the same capacity, namely, as the owner of the property.
6. The provident fund amount and the gratuity amount related to Shri Vimalbhai N. Shah, who died on 19-10-1975. The assessee before us is the executor of the estate of Shri Vimalbhai N. Shah. He becomes assessable under Section 19A of the Act. In the light of the decision of the Bombay High Court in the case of Jamnadas v. CWT  56 ITR 648, the executor could not have been assessed at all and Section 19A was introduced to get over this difficulty. Under Section 19A the executor or executors will be treated as an individual and the net wealth of the estate of the deceased person will be chargeable to tax in the hands of this individual. In the light of proviso (in) of Section 2(q) of the Act the valuation dates for the purpose of the assessment of the executor will be the valuation dates in respect of the deceased, if he were alive. Apart from the fiction created with regard to the valuation date, no other fiction has been created by the Act by which the assessment of the executor has to be treated as an assessment of the deceased person. The ruling of the Bombay High Court in the case of Bai Hamabai J.K. Mehta (supra) relied upon by the learned representative of the assessee relates to the assessment of a beneficiary under a trust under Section 9 of the 1922 Act and this in our view will not be applicable to the facts of the present case. As already stated, we are unable to find anything in Section 19A which requires the executor to be treated in the same manner as the deceased person, particularly with regard to the exemptions, which were available to the deceased person. Sub-section (6) of Section 19A states that any portion of the estate which has been distributed to, or applied to the benefit of, any specific legatee of the estate prior to that valuation date shall be excluded from the net wealth. This will indicate that the estate has to be assessed to the wealth-tax in the hands of the executor on the basis of the situation obtaining on the relevant valuation date. If there had been no appointment of an executor, the assets of the deceased person would have passed on directly to the legal heirs and it is clear that none of the exemptions available to the deceased person would have been available to the legal heirs, unless they are entitled to such exemptions under their own right. We do not see any reason why a different view should be taken with regard to the executor, more so when, as already stated there is no provision in the Act which says that the executor should be assessed in the same manner as the deceased person.
7. We may now consider whether the exemptions which were available to the deceased person are available in the case of the executor. The exemption with regard to the provident fund amount which is contained in Clause (xvii) of Section 5(1) provides that the amount standing to the credit of an assessee, being a salaried employee, in any provident fund maintained by his employer to which the Provident Funds Act, 1925 applies or which is a recognised provident fund within the meaning of Clause (38) of Section 2 of the Income-tax Act, shall be exempt from tax. In the commentaries on this provision at page 397 of the Three New Taxes by Sampath lyengar (1979 edition) it is stated that the expressions 'an assessee being salaried employee) and in any provident fund maintained by his employer' connote that the assessee whose provident fund moneys are exempt is one who is presently serving as an employee and that if the rules of the provident fund permit a person to continue his investment in the provident fund even after retirement, such person will not be entitled to the exemption. The con-tention of the learned departmental representative that Clause (xvii) will be attracted only as long as the assessee continues to be a salaried employee is, therefore, well taken. It is clear that the amounts in the provident fund will become payable to the estate of the employee as soon as that employee dies in service. The amount has, therefore, become due to the estate of the deceased person immediately on his death and will, therefore, be an asset includible in the net wealth as far as the executor is concerned. We are unable to accept the contention of the learned representative of the assessee that there will be some delay in the processing of the claim and that the amount can be treated as having become due to the estate only on the date of payment. With regard to the gratuity amount, our attention was not drawn to any provision by which exemption has been granted as regards the amount. If the deceased person had retired from service, the amount would have become payable to him at some stage and it would not have been exempt from wealth-tax even in his own hands. We, therefore, see no reason why the amount should be exempt from tax in the hands of the executor. With regard to this amount also, we are unable to accept the contention of the learned representative of the assessee that the amount can be treated as an asset only from the date of payment.
Nothing has been placed on record to show that, the amount would not have become payable to the estate of the deceased immediately on his death.
8. For the reasons stated above, we are of the opinion that the provident fund and gratuity amounts are includible in the net wealth of the assessee.