Court allows rectification under Wealth-tax Act for jewellery, emphasizing personal use exclusion.

The court held that the provisions of Section 35 of the Wealth-tax Act could be utilized to rectify the assessment orders for the years 1968-69 and 1969-70 due to the retrospective application of the amended provisions of Section 5(1)(viii), which excluded jewellery from exemption. The court determined that jewellery intended for personal use did not qualify for exemption under the amended law, emphasizing that the assessee's consistent classification of the items as jewellery precluded their exemption as "wearing apparel." The Tribunal was directed to rectify the AAC's order, with costs awarded to the Commissioner.

---

---

Issues Involved:
1. Applicability of Section 35 of the Wealth-tax Act for rectification.
2. Retrospective application of the amended provisions of Section 5(1)(viii) of the Wealth-tax Act.
3. Determination of whether jewellery intended for personal use qualifies for exemption.

Analysis:

1. Applicability of Section 35 of the Wealth-tax Act for Rectification:
The primary issue was whether the provisions of Section 35 of the Wealth-tax Act could be invoked to rectify the assessment orders for the years 1968-69 and 1969-70. The court noted that Section 35 provides the power for rectification of any order passed by the Appellate Assistant Commissioner (AAC) if it contains any mistake apparent from the record. The court emphasized that the amended provision excluding jewellery from exemption under Section 5(1)(viii) had retrospective effect from April 1, 1963. Therefore, jewellery stood excluded from the exemption for the assessment years under consideration, making the AAC's original order erroneous and subject to rectification under Section 35.

2. Retrospective Application of the Amended Provisions of Section 5(1)(viii):
The court examined the retrospective nature of the amendment to Section 5(1)(viii) of the Wealth-tax Act, which excluded jewellery from the list of exempted assets. The amendment was deemed to have come into force on April 1, 1963. The court relied on the Supreme Court's decision in M. K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd. [1958] 34 ITR 143, which held that a retrospective amendment must be read as part of the principal Act from the date specified, thereby making any order inconsistent with the amended provision a mistake apparent from the record. The court concluded that the AAC's order, which granted exemption to jewellery, was inconsistent with the amended provision and thus contained a mistake apparent from the record.

3. Determination of Whether Jewellery Intended for Personal Use Qualifies for Exemption:
The court addressed whether the jewellery in question, intended for personal use by the assessee, qualified for exemption under the amended Section 5(1)(viii). The assessee had claimed exemption based on the decision of the Gujarat High Court in CWT v. Mrs. Arundhati Balkrishna [1968] 70 ITR 203, which held that jewellery intended for personal use was exempt. However, the court noted that the amended provision explicitly excluded jewellery from exemption, irrespective of its intended use. The court rejected the assessee's contention that the items could be classified as "wearing apparel" and thus exempt under the amended law. The court emphasized that the assessee had consistently claimed exemption for these items as jewellery, and therefore, there was no debatable issue regarding their classification.

Conclusion:
The court concluded that the provisions of Section 35 of the Wealth-tax Act could be invoked to apply the amended provisions of Section 5(1)(viii) for the assessment years 1968-69 and 1969-70, as there was a mistake apparent from the record in the AAC's order. The Tribunal was directed to instruct the AAC to amend his order or to amend it themselves after following the proper procedure. The Commissioner was awarded costs, with counsel's fee set at Rs. 500.

---