1973 (12) TMI 26 - HC - Wealth-tax

Court rules on jewellery exemption & tax deductions for assessment years 1962-65.

Commissioner Of Wealth-Tax, Gujarat I Versus Jayantilal Amritlal

The court held that jewellery, including gold ornaments, was not entitled to exemption under section 5(1)(viii) for assessment years 1963-64 and 1964-65 ... Taxing Statutes, Wealth Tax Act Issues Involved:1. Exemption of jewellery under section 5(1)(viii) of the Wealth-tax Act.2. Deduction of tax liabilities based on returns filed versus final assessments.Issue-wise Detailed Analysis:1. Exemption of Jewellery under Section 5(1)(viii) of the Wealth-tax Act:The primary issue was whether the jewellery held by the Hindu undivided family (HUF) was exempt under section 5(1)(viii) of the Wealth-tax Act for the assessment years 1962-63 to 1964-65. The assessee claimed that the jewellery, valued at Rs. 1,85,216, was meant for personal use by the ladies of the family and thus should be exempt. The Wealth-tax Officer (WTO) rejected this claim, limiting the exemption to Rs. 25,000 under section 5(1)(xv). The Tribunal, however, followed the Supreme Court decision in Commissioner of Wealth-tax v. Arundhati Balkrishna and held that the entire value of the jewellery was exempt as it was intended for personal use.The revenue argued that the amendment to section 5(1)(viii) by the Finance (No. 2) Act of 1971, which excluded jewellery from exemption effective April 1, 1963, should apply to assessment years 1963-64 and 1964-65. The assessee conceded this point but argued that the inclusion of gold ornaments in the definition of 'jewellery' under Explanation 1, effective April 1, 1972, should not apply retrospectively.The court noted that the amendment to section 5(1)(viii) was partly retrospective (excluding jewellery from April 1, 1963) and partly prospective (defining 'jewellery' from April 1, 1972). The court referred to the Supreme Court's decision in Commissioner of Wealth-tax v. Mrs. Arundhati Balkrishna, which held that jewellery intended for personal use was exempt under section 5(1)(viii). However, the court concluded that the natural meaning of 'jewellery' included ornaments, and the legislative intent was to exclude jewellery from exemption retrospectively from April 1, 1963.The court rejected the assessee's argument that the definition of 'jewellery' in Explanation 1 should apply retrospectively. The court emphasized that the dictionary meaning of 'jewellery' included ornaments and that the legislative intent was clear in excluding jewellery from exemption from April 1, 1963. Therefore, the jewellery, including gold ornaments, was not entitled to exemption under section 5(1)(viii) for assessment years 1963-64 and 1964-65 but was entitled to exemption for the assessment year 1962-63.2. Deduction of Tax Liabilities Based on Returns Filed Versus Final Assessments:The second issue was whether the deduction for tax liabilities should be based on the returns filed by the assessee or the tax finally determined on assessment. The WTO had rejected the assessee's claim for deduction of income-tax and wealth-tax liabilities, arguing that these liabilities did not arise until the assessments were made and demand notices were served.The Appellate Assistant Commissioner (AAC) allowed the deduction for tax liabilities for all relevant years, which was upheld by the Tribunal. The Tribunal followed the decisions in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax and H. H. Setu Parvati Bayi v. Commissioner of Wealth-tax, holding that the assessee was entitled to deduction based on the tax liabilities as finally determined.The court concluded that the assessee was entitled to deduction in respect of tax liabilities as finally determined on assessment, rather than based on the returns filed. This was consistent with the Tribunal's decision and the relevant case law.Conclusion:1. Jewellery, including gold ornaments, was not entitled to exemption under section 5(1)(viii) for assessment years 1963-64 and 1964-65 but was entitled to exemption for the assessment year 1962-63.2. The assessee was entitled to deduction in respect of tax liabilities as finally determined on assessment.