1. The following question has been referred to us under s. 27(1) of the W.T. Act :
'Whether the provisions of section 35 of the Wealth-tax Act could not be invoked to apply the amended provisions of section 5(1)(viii) of the said Act on the ground that such amended provisions of section 5(1)(viii) involve a debatable question of law ?'
2. The assessee owned jewellery, valued at different figures. as on the valuation dates relevant for the assessment years 1962-63 to 1968-69. These amounts were included in the original wealth-tax assessment and, on a representation filed by the assessee on November 11, 1970, the Commissioner of Wealth-tax, following a decision of the Supreme Court in CWT V. Arundhati Balkrishna : 77ITR505(SC) , deleted the inclusion of the value of the jewellery in the respective assessments for the years 1962-63 to 1968-69.
3. Section 5(1)(viii) was amended with retrospective effect by s. 32 of the Finance (No. 2) Act, 1971, excluding jewellery from the purview of the exemption under s. 5(1)(viii) of the W.T. Act. The successor-Commissioner passed a rectification order under s. 35 of the W.T. Act for the relevant years, directing the inclusion in the respective wealth-tax assessments, proceeding on the basis, that the statutory amendment created an apparent error in the refund order passed earlier. The assessee appealed to the Tribunal and the Tribunal held, following a decision of the Bombay High Court in J. N. shah v J. M. Bhatia : 94ITR519(Bom) , that the applicability of the amended provision was a debatable point and that, therefore, the order of the Commissioner was not amenable to the rectification jurisdiction under s. 35. The correctness of this conclusion of the Tribunal is the subject-matter of the reference in the present case.
4. The history of the relevant provision granting exemption in respect of jewellery has been considered in CWT v. Arti Goenka : 121ITR632(Mad) . Originally s. 5(1)(viii) provided for exemption in respect of furniture, household utensils, wearing apparel, provisions and other articles intended for personal or household use of the assessee, and gave an exemption in respect of jewellery belonging to the assessee, subject to maximum of a sum of Rs. 25,000 in value. This provision as in force then was considered in CWT V. Arundhati Balkrishna : 70ITR203(Guj) . The question which arose before the Gujarat High Court in that case was whether the jewellery of the assessee in that case was exempt under s. 5(1)(viii). The assessee's case was that they were articles of personal use and their value should not be taken into consideration for ascertaining her net wealth as contemplated by s. 5(1)(viii). The Gujarat High Court accepted this contention and pointed out that clause (xv) of s. 5(1) dealt with jewellery, which belonged to the assessee, while under clause (viii) the test was, whether the articles were intended for the personal use of the assessee. While jewellery owned by the assessee, but not held for personal use, would come within the scope of s. 5(1)(xv), s. 5(1)(viii) was taken to have granted exemption in respect of jewellery intended for personal use. This decision was affirmed by the Supreme Court in CWT v. Arundhati Balkrishna : 77ITR505(SC) .
5. Amendments came to be made by the Finance (No.2) Act, 1971, in order to take away the effect of this decision of the Supreme Court. The amendments were that the words 'articles intended for the personal or household use of the assessee' were to be followed by the words 'but not including jewellery'. The insertion was with effect from April 1, 1963. The result of the amendment was that the assessee would not be eligible for exemption in respect of jewellery intended for personal use of the assessee. Section 5(1)(xv) had already been deleted by the Finance Act, 1963. So the result was that any jewellery, which belonged to the assessee, whether intended for personal use or not, was excluded from the exemption, and brought within the scope of taxation.
6. The Tribunal has proceeded on the basis that there was no apparent error in the order of the Commissioner and for this purpose has relied on the decision of the Bombay High Court in J. M. Shah v. J. M. Bhatia : 94ITR519(Bom) . That decision came to be considered by us in CWT v. Kamala Ganapati Subramaniam : 127ITR175(Mad) . There also the question referred to this court related to the applicability of s. 35 read with s. 5 for the assessment years 1968-69 and 1969-70. We took the view that there was no question of any debatable error in a case of this kind. The fact that the articles under consideration fell within the category of jewellery was not in dispute in that case. It was pointed out that the retrospective effect granted to the provision would render the particular order amenable to the rectification under s. 35. With this decision of the Bombay High Court, we were unable to agree. The reasons for our disagreement are found at p. 184 of 127 ITR. The result is that the problem before us is covered by the decision reported in : 127ITR175(Mad) .
7. In the present case there can be no question of debatable error. We are dealing with the assessments from 1962-63 onwards, in all of which the value of the jewellery was added in the assessments. There was no appeal. The assessee moved the Commissioner after the decision of the Supreme Court was rendered in CWT v. Arundhati Balkrishna : 77ITR505(SC) . In fact, it was stated before the Additional Commissioner, who passed the order, that the jewellery in question were all intended for the personal use of the assessee's family and that in accordance with the decision of the Supreme Court referred to above, they were exempted under s. 5(1)(viii). It was this submission which was accepted by the Commissioner.
8. When the retrospective amendment was made, so as to sterilise the affect of the decision in : 77ITR505(SC) , the Commissioner sought to apply the new provision and restore in the assessments the value of the articles on the basis of the admitted materials. Therefore, there is no question of a debate on the facts of the present case as to whether there was jewellery. The order was thus capable of rectification under s. 35 by the Commissioner.
9. The learned counsel for the assessee then contended that at any rate with reference to the assessment years 1962-63 and 1963-64, the amended provisions would not apply as the retrospective operation is only from April 1, 1963. His submission was that we have to look into the statutory provision as on the valuation date, and that as on March 31, 1963, the amended provision not being in the statute, the assessee would be eligible for the exemption. As far as the valuation date March 31, 1962 relevant for the tax year 1962-63 is concerned, it is clearly well outside the amended provision as the amended provision came into force only on April 1, 1963. The order for 1962-63 is thus not capable of rectification. The assessee would be entitled to succeed with reference to the value of the jewellery added or restored in the assessment for the year 1962-63.
10. For the assessment year 1963-64, the assessee's claim was that the amended provision was not in force as on the valuation date. This claim cannot be accepted. Section 2(q) of the W.T. Act defines 'valuation date' as follows :
''Valuation date', in relation to any year for which an assessment is to be made under the Act, means the last day of the previous year as defined in section 3 of the Income-tax Act, if an assessment were to be made under that Act for that year.'
11. The valuation date is thus linked to the previous year as defined in the I.T. Act. The well-settled principle under the I.T. Act is that the law applicable to any assessment is the law on the opening day of the relevant assessment year, unless any particular provision enacted later has been given a retrospective operation from the said opening day. We see no reason Why the same principle should not apply to the assessments under the W.T. Act also. In fact, if the learned counsel for the assessee were right then with reference to the valuation date falling in the year April 1, 1956, to March 31, 1957, there would be no assessment to wealth-tax at all as the valuation date for the assessment year 1957-58 would be outside the operation of the Act itself. The Act, it may be remembered, was brought into force on April 1, 1957. This cannot be a proper interpretation of the provisions of the W.T. Act. We consider that just as in the I.T. Act the law relating to the assessment to the assessment is the law in force as on the first date of April of the assessment year, similarly under the W.T. Act, the law in force as on the first day of the assessment year would be the law which would regulate the computation of wealth as on the valuation date. In this view it is not possible to accept the assessee's submission that the year 1963-64 also is not capable of rectification.
12. In the result, the question referred to us is answered as follows :
13. The provision of s. 35 of W.T. Act could be invoked to apply the provisions of s. 5(1)(viii) as amended for the assessment years 1963-64 to 1968-69.
14. There will be no order as to costs.