Wealth-tax proviso applies by assessment year, so a pre-1964 gift chargeable to gift-tax remained includible in net wealth.

The proviso to section 4(1)(a) of the Wealth-tax Act, as amended in 1964, was construed to apply by reference to the assessment year for which the transfer was chargeable to gift-tax or exempt under section 5 of the Gift-tax Act, 1958, not merely by the date of the gift. A gift made before 31 March 1964 but chargeable to gift-tax could therefore be excluded from net wealth only if the relevant assessment year fell within the amended proviso; the Tribunal's contrary construction was rejected. The gift was included in the assessee's net wealth, and the reference was answered for the revenue.

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Issues: Whether, on a proper construction of the proviso to section 4(1)(a) of the Wealth-tax Act, 1957 as amended in 1964, a gift made before 31 March 1964 but chargeable to gift-tax could be excluded from the donor's net wealth for the assessment years 1964-65 and 1965-66.

Analysis: The proviso to section 4(1)(a) was held to govern transfers that were chargeable to gift-tax, or not chargeable under section 5 of the Gift-tax Act, 1958, for assessment years commencing after 31 March 1964. The expression "is chargeable" was read with the Gift-tax Act, 1958 and with the purpose of the amendment, so that the relevant date was the assessment year to which the gift-tax charge attached, not merely the date of the gift. The construction adopted by the Tribunal was rejected as inconsistent with the language, context, and object of the proviso.

Conclusion: The gift was included in computing the assessee's net wealth, and the reference was answered in favour of the revenue.

Ratio Decidendi: A proviso excluding transferred assets from net wealth applies according to the assessment year for which the transfer is chargeable or exempt under the Gift-tax Act, 1958, and not merely by reference to the date of the gift.

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