1986 (7) TMI 18 - HC - Wealth-tax

Court rules gold ornaments not exempt from wealth tax under section 5(1)(viii) of Wealth-tax Act, 1957.

Hanuman Mal Sekhani Versus Commissioner Of Wealth-Tax

Hanuman Mal Sekhani Versus Commissioner Of Wealth-Tax - [1987] 168 ITR 364, 57 CTR 185, 34 TAXMANN 21 Issues Involved:1. Applicability of section 4(1)(a)(i) of the Wealth-tax Act, 1957.2. Interpretation of section 5(1)(viii) of the Wealth-tax Act, 1957 regarding the exclusion of gold ornaments from net wealth.Issue-wise Detailed Analysis:1. Applicability of Section 4(1)(a)(i) of the Wealth-tax Act, 1957:The primary issue was whether the value of gold ornaments should be included in the net wealth of the assessee under section 4(1)(a)(i) of the Wealth-tax Act, 1957. The assessee claimed that the gold ornaments were gifted to his wife in 1949, prior to their marriage, and thus should not be included in his wealth. The Wealth-tax Officer rejected this claim, stating there was no evidence supporting the gift's existence before their marriage in 1957. The Tribunal concurred, holding that the gold ornaments were gifted around the time of the marriage and thus were includible in the net wealth of the assessee as per section 4(1)(a)(i).2. Interpretation of Section 5(1)(viii) of the Wealth-tax Act, 1957:The second issue was whether the gold ornaments could be excluded from the net wealth under section 5(1)(viii), which exempts articles intended for personal or household use. The assessee argued that the ornaments were used by his wife, a household member, and thus should be exempt. The Tribunal rejected this argument, stating that the ornaments were not intended for personal or household use of the assessee and were exclusively for his wife's use. The Tribunal also noted that the term 'household' in section 5(1)(viii) is distinct from 'personal,' and articles for personal use by the wife do not qualify as household articles.Historical Context and Judicial Precedents:The judgment referenced various precedents to interpret section 5(1)(viii). The Gujarat High Court in CWT v. Mrs. Arundhati Balkrishna [1968] held that jewellery intended for personal use could be exempt under section 5(1)(viii). However, the Patna High Court in Pandit Lakshmi Kant Jha v. CWT [1968] opined that jewellery should be dealt with under section 5(1)(xv), not section 5(1)(viii). The Supreme Court in Pandit Lakshmi Kant Jha v. CWT [1973] clarified that jewellery intended for personal use falls under section 5(1)(viii), but this exemption was removed retrospectively from April 1, 1963.Amendments and Explanation:The Finance (No. 2) Act of 1971 amended section 5(1)(viii) to exclude jewellery from the exemption, effective from April 1, 1963. Explanation 1, added prospectively from April 1, 1972, defined 'jewellery' to include ornaments made of precious metals, extending the term's scope.Judicial Consensus and Divergence:The judgment noted a split in judicial opinion. The Calcutta High Court in Aditya Vikram Birla [1978] and the Madhya Pradesh High Court in subsequent cases held that gold ornaments not studded with precious stones were not considered jewellery before the 1972 amendment. Conversely, the Gujarat and Allahabad High Courts held a broader definition of jewellery, including all gold ornaments.Conclusion:The court concluded that the gold ornaments were not intended for personal or household use of the assessee and thus were not exempt under section 5(1)(viii). It also held that the term 'jewellery' did not include gold ornaments not studded with precious stones before the 1972 amendment. Therefore, the court upheld the Tribunal's view and answered both questions in favor of the Revenue, affirming the inclusion of the gold ornaments in the assessee's net wealth.Final Judgment:Both questions were answered in the affirmative, favoring the Revenue and against the assessee. The court upheld that gold ornaments were not exempt from wealth-tax under section 5(1)(viii) and that the term 'jewellery' did not include unstudded gold ornaments before April 1, 1972. The parties were directed to bear their own costs.