1974 (10) TMI 21 - HC - Wealth-tax

Interpretation of Wealth-tax Act proviso post-amendment aligns with Gift-tax Act, benefiting revenue.

The High Court interpreted the proviso to section 4(1)(a) of the Wealth-tax Act, as amended by the Wealth-tax (Amendment) Act, 1964. The court held that ... Gift Tax, Valuation Date Issues:Interpretation of section 4(1)(a) of the Wealth-tax Act as amended by the Wealth-tax (Amendment) Act, 1964.Exemption of gift amount under the proviso to section 4(1)(a) in the case of a gift made in 1959.Applicability of the proviso to a gift chargeable to gift-tax under the provisions of the Gift-tax Act, 1958.Correct interpretation of the proviso in relation to the assessment years commencing after 31st March, 1964.Analysis:The judgment pertains to a wealth-tax assessment for the years 1964-65 and 1965-66, involving a gift of Rs. 1,00,011 made by the assessee to her minor daughter in 1959. The Wealth-tax Officer included this amount in the net wealth of the assessee for the relevant years under section 4(1)(a)(iv) of the Wealth-tax Act, 1957. The assessee contended that the sum was exempt under the proviso to section 4(1)(a) introduced by Act 46 of 1964, as she had paid gift-tax with reference to the amount. The Tribunal held that as long as the gift was chargeable to or exempt from gift-tax, section 4(1)(a) would not apply. The Tribunal concluded that the exemption would operate from the assessment year commencing after 31st March, 1964, i.e., 1964-65, resulting in exclusion under section 4(1)(a).The main issue before the High Court was the interpretation of the proviso to section 4(1)(a) of the Wealth-tax Act as amended by the Wealth-tax (Amendment) Act, 1964. The court analyzed the wording of the proviso and the implications of the expression 'is chargeable' in conjunction with the provisions of the Gift-tax Act, 1958. The court concluded that the proviso exempted transfers of assets chargeable for any assessment year commencing after 31st March, 1964, or where the transfer was not chargeable under section 5 of the Act for any assessment year commencing after the same date. The court emphasized that the proviso aimed to eliminate certain transfers from the substantive part of section 4(1)(a) and held that the Tribunal's interpretation was incorrect.The court noted that the wording of the proviso was not ideal, but considering the provisions of the Gift-tax Act, 1958, and the purpose of the proviso, it was clear that the exemption applied to transfers chargeable after 31st March, 1964. The court's interpretation aligned with subsequent amendments, even though those were not directly relevant. Consequently, the court answered the referred question in the affirmative, in favor of the revenue. Each party was directed to bear its own costs, and the judgment was agreed upon by both judges, Sabyasachi Mukharji and A. K. Janah.