Tax exemption proviso construed by reference to Gift-tax assessment year; gifted shares remained includible in net wealth.

Interpretation of the proviso to section 4(1)(a) of the Wealth-tax Act turned on whether the relevant assessment year was the one under the Gift-tax Act or the Wealth-tax Act. The more reasonable construction was that the phrase "for any assessment year commencing after 31 March 1964" qualified the chargeability or exemption of the gift under the Gift-tax Act, supported by the proviso's wording and its parallel with section 33(1)(o) of the Estate Duty Act. The Article 14 challenge was rejected because Parliament could validly fix a commencement date for the exemption. The gifted shares were therefore includible in net wealth.

---

---

Issues: Whether the proviso to section 4(1)(a) of the Wealth-tax Act, 1957, as inserted by the Wealth-tax (Amendment) Act, 1964, referred to the assessment year under the Gift-tax Act, 1958, or the assessment year under the Wealth-tax Act, 1957, and whether the value of the gifted shares was liable to be included in the assessee's net wealth.

Analysis: The proviso was held to be capable of two constructions, but the more reasonable reading was that the words "for any assessment year commencing after the 31st day of March, 1964" qualified the chargeability or exemption of the gift under the Gift-tax Act. The text of the proviso, its linkage with chargeability and exemption under the Gift-tax Act, 1958, and the parallel language used in section 33(1)(o) of the Estate Duty Act, 1953, supported that reading. The Court also rejected the plea of discrimination, holding that Parliament was entitled to fix a date for the operation of the exemption and that a generally applicable temporal classification did not offend Article 14 of the Constitution of India.

Conclusion: The proviso referred to the assessment year under the Gift-tax Act, 1958, and not the assessment year under the Wealth-tax Act, 1957; the value of the gifted shares was therefore properly includible in the assessee's net wealth, and the answer was against the assessee.

Ratio Decidendi: Where the language of a tax exemption proviso links eligibility to gifts chargeable or not chargeable under the Gift-tax Act, the relevant assessment year is that under the Gift-tax Act, and not a separate assessment year under the Wealth-tax Act.

---