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1982 (11) TMI 1
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....xempt under one or the other provisions of s. 5 of the Act. The reference to a Full Bench has been necessitated by reason of the conflicting views expressed in Srinivasan v. CWT [1980] 123 ITR 464 (Mad) and CIT v. Rajam [1982] 133 ITR 75 (Mad) as well as CWT v. Satish [1982] 133 ITR 834 (Mad). 2. The facts in the Tax Cases may be briefly stated as follows: T. Cs. Nos. 369 to 371 of 1977: 3. The assessee in these cases is one K. S. Vaidyanathan. The relevant assessment years are 1971-72, 1972-73 and 1973-74. The wealth with which we are concerned in these cases consists of shares. The assessee returned wealth of Rs. 2,71,596 Rs. 2,54,161 and Rs. 1,66,791, respectively. He claimed liabilities of Rs. 2,12,767 Rs. 2,17,472 and Rs. 2,39,464 respectively which included overdrafts from various banks of Rs. 1,84,642 Rs. 1,86,598 and Rs. 1,98,774, respectively. The WTO found that the overdrafts were taken for the purpose of purchasing shares of new companies and since part of the shares to the extent of Rs. 1,50,000 would be exempt under s. 5(1)(xxiii) of the Act, only a proportionate loan by way of overdraft should be disallowed in relation to the exempted asset. Accordingly, he h....
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....hich is an exempted asset under section 5(1)(vi) up to a sum of Rs. 1,00,000 ?" T. Cs. Nos. 849 and 850 of 1977: 5. The assessee, in these cases, claimed a deduction of Rs. 83,335 and Rs. 75,720 representing debts due to the Life Insurance Corporation of India which was disallowed by the WTO as well as the AAC. But on appeal, the Tribunal allowed those deductions. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this court: Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Act, the debt representing the loan taken from the Life Insurance Corporation was deductible in full from the total wealth of the assessee though the debt is secured on the life insurance policy which is an exempted asset ?" T. Cs. Nos. 901, 902 and 903 of 1977 6. In these cases, a sum of Rs. 50,000 representing the mortgage loan on the house property for the assessment year 1966-67 Rs. 50,000 for the assessment year 1967-68 and Rs. 50,000 for the assessment year 1968-69 were disallowed by the WTO and the AAC. But on appeal by the assessee to the Tribunal, t....
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....eferred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case Rs. 69,716 Rs. 63,501 and Rs. 56,842 being the amounts due by the assessee to the Life Insurance Corporation of India are to be deducted from the aggregate value of the assets in computing his net taxable wealth for the assessment years 1972-73, 1973-74 and 1974-75?" T.C. No. 478 of 1978, T.C. No. 1603 of 1977 and T.C. Nos. 209 to 212 of 1978. 9. The facts and the question of law referred by the Tribunal for the opinion of this court are similar to the one or the other of the cases referred to above and, therefore, they are not stated again here. T.C. No. 1409 of 1977 : 10. The assessee in this case owned a house property which was partly let out and partly occupied as his dwelling house. The property was valued at Rs. 1,75,300. On this property, there was a mortgage loan to the extent of Rs. 19,000 for the assessment year 1972-73. The assessee claimed deduction of this amount. The WTO allowed a proportionate deduction. The assessee appealed. The AAC confirmed the order of the WTO. However, on further appeal to the Tribunal, the Tribu....
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....roperty in respect of which wealth-tax is not chargeable under the Act alone have to be excluded in making the necessary computation of net wealth under s. 2(m) of the Act. In other words, according to the learned counsel, s. 2(m) (ii) has to be worked out in the following manner : (1) If the debt is secured or is incurred in relation to any item of property which is wholly exempt from wealth-tax, then the entirety of the debt has to be excluded. (2) If the debt is secured on several items of properties on(, of which or some of which alone are exempted from wealth-tax, then the portion of the debt which is attributable to the particular item or items of properties exempted from wealth-tax could not be deducted in making the computation of the net wealth. As an illustration, the learned standing counsel referred to the various items of assets mentioned in s. 5(1A) of the Act under which in respect of those items, only assets to the a tune of Rs. 1,50,000 in all are excluded from being chargeable to wealth-tax. If the debt is secured on all or some of the items mentioned in s. 5(1A), only the portion of the debt relatable to Rs. 1,50,000 can be left out of reckoning and only the port....
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....an Rs. 1,00,000. Under s. 5(1)(iv), the value of the house to the extent of Rs. 1,00,000 is exempt from wealthtax. Supposing there is a debt to the extent of Rs. 50,000 charged on that asset, the assessee will not be entitled to take into reckoning the sum of Rs. 50,000 in arriving at his net wealth for the purpose of liability to wealth-tax inasmuch as it is secured oil an item of property which is totally exempt from Wealth-tax. If, on the other hand, the value of the house is above Rs. 1,00,000 and if the rule of apportionment is not followed, the assessee would be entitled to deduct the entire sum of Rs. 50,000 from the aggregate of his assets for arriving at his net wealth. In other words, the question of a particular debt being taken into account for arriving at the net wealth of an individual will depend upon the mere chance of the value of an asset. 15. On the other hand, the submission of Air. S. V. Subramaniam and Mr. Srinivasamoorthy appearing for different assessees in some of the tax cases is that the Act contemplates four types of cases. Firstly, property on which no wealth-tax is chargeable. Secondly, property included in the assets and not included in the net wea....
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....he assessees is that when a debt is secured on a property which is only partially exempt as in the, case of s. 5(1)(iv) property and s. 5(1 ) properties, since the value of the, property over the exemption limits included in the net wealth of the assessee, s. 2(m)(ii) is not applicable to such cases and the debts secured on those properties should be deducted in arriving at the net wealth of the assessee by the application of s. 2(m) of the Act. According to the learned counsel for the assessees, the working out of s. 2(m)(ii), as suggested by the learned standing counsel, cannot be done in the case of taxing statutes, as taxing statutes are to be, construed strictly and ill favour of the assessee. Further, the principle of casus omissus applies to s. 2(m)(ii) and the court is not obliged to supply what is not there in the statute and to do so will amount to legislation and not construction. 17. Before dealing with the contentions urged on both sides, it is necessary to set out some of the provisions of the Act which are relevant for our purpose. Section 2(e) defines "assets" as under : assets includes property of every description, movable or immovable, but does not....
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.... difference that has been made by the amendment is that the word "payable" has been replaced by the word chargeable Section 3, which is the charging section, states: " Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I. " Section 4(1) states that in computing the net wealth of an individual, there shall be included certain assets as belonging to the individual. It is unnecessary to reproduce s. 4 for the purpose of this case. Section 5(1) reads thus: 5(1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee . ...... (iv) one house or part of a house belonging to the assessee: Provided that, where the value of such house or part exceeds one hundred thousand rupees, the amount that....
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....r immovable, but does not include agricultural land, animal, etc. The net wealth of an individual is the amount, by which the aggregate value, computed in accordance with the provisions of the Act, of all the assets belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on the valuation date, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than the debts which are secured on or which have been incurred in relation to any property in respect of which wealth-tax is not chargeable under the, Act. The assessee is not liable to pay wealth-tax on certain assets mentioned in s. 5(1) of the Act and such assets shall not be included in the computation of net wealth. But the exclusion of the asset is in terms of the value of the assets as mentioned in the clauses themselves. For instance, in the case of one house or part of a house belonging to the assessee the amount that shall not be included in the net wealth of the assessee is. Rs. 1,00,000 only. The exclusion from the net wealth of the assessee, in respect of the following properties, viz., (1) agricultural land comprised in any....
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....word "charge" is used in s. 9(1)(iv) would mean payment and not security. 22. Hawkins J. in Direct Spanish Telegraph Co. v. Shepherd [1884] 13 OBD 202, held that the word "chargeable" has, as regards rates and taxes, substantially the same meaning as payable (vide Stroud's Judicial Dictionary, fourth edition, vol. 1, page 427). 23. In Veerappa Chettiar v. CIT [1959] 35 ITR 322 (Mad), Rajagopalan J. observed as follows (p. 338): "We are clearly of opinion that the word charge in the statutory expression 'annual charge' in section 9(1)(iv) of the 1922 Act connotes something more than a mere liability to pay something more than the annual payment ...... To same up, the charge in the context of section 9(1)(iv) means an annual payment charged upon the house property, just as capital charge means payment of capital nature charged upon the house property." 24. In CIT v. M. K. Kirtikar[1959] 36 ITR 360, S. R. Das C.J., speaking for the Supreme Court, observed as follows (p. 364) : "What is to be ascertained is the meaning of the word ' charge ' as used in the notification under consideration. It is clear that the primary object and purpose of the notification ....
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....rd ' chargeable ' is used in relation to an asset and the word ' payable ' in connection with the assessee. Any asset with reference to which wealth-tax is not payable stands outside the net wealth so that no wealth-tax can be charged on it and no tax is ' payable ' by an assessee on it. Section 5(1) brings within its fold two ways of granting exemptions. One is where wealth-tax is not payable by an assessee, and the other where the asset is to be, excluded in the, computation of ' net wealth '. In our opinion, the decision of the Allahabad High Court in Jiwan Lal Virmani v. CWT [1967] 66 ITR 338 is not based on any peculiar significance attached to the word 'payable' and would apply even to the provision as amended. The fact that the decision had to interpret cl. (vi) of s. 5(1) is not also material, because both sub-cl. (iv) as well as cl. (vi) are designed for the same purpose." 26. We are in agreement with the above observations of Sethuraman J. We do not, therefore, attach any importance to the argument of the learned counsel for the assessees based on the substitution of the word "chargeable" for the word "payable" by the Amendment A....
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....to effectuate the liability imposed by the charging section and to make the machinery workable (vide Sanjana v. Elphinstone Spinning and Weaving Mills, AIR 1971 SC 2039). In this case, s. 2(m) is not a charging section, but it is only a machinery section for the calculation of the net wealth of an assessee. In other words, it is a machinery section as opposed to s. 3 which is the charging section. In the circumstances, the rule of strict construction relied upon by the learned counsel for the assessees cannot be applied. Section 2(m)(ii) can only be interpreted in such a way is to make the machinery workable. 29. The next question for consideration is whether the principle of causus omissus applies in interpreting s. 2(m)(ii) or an interpretation as suggested by the learned counsel for the Revenue can he given to s. 2(m)(ii). The basic principle of interpretation is that if the statute is plain and free from any ambiguity, a bare reading of the statute would be sufficient and no interpretation would be called for. On the other hand, if the statute is ambiguous or its meaning uncertain, it would be the duty of the court to ascertain what the Legislature meant. There may be instan....
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....g clearly expressed by the language of the statute. In this case, the statute is given a literal interpretation. It is interpreted to mean exactly what it says. Only where the statute is of doubtful meaning can the court endeavour to determine the legislative intention from elements beyond the language of the statute. It may also make use of the various pertinent rules of construction in its efforts to ascertain the legislative intent in an ambiguous statute. The legislative intention is not found in these rules of construction but is revealed by them. They perform the function Of a microscope. The same is true with reference to the subject-matter of the statute, the purpose or object of its enactment, its effect and consequences, its occasion and necessity, and its logic-all of which are not sources of the legislative intent but aids to its discovery. In other words, the court resorts to these aids not for the legislative intent but simply to identify it. The language is the reservoir of the legislative intention. It must in some feeble manner, at least, reveal some intention otherwise, .Ls we will hereafter see, the statute will completely fall. For if the statute is without mean....
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....unfortunately expressed in such language that it leaves it quite as much open with regard to its form of expression, to the one interpretation as to the other ', the question arises, ' what is to be done ? We must try and get at the meaning of what was intended by considering the consequences of either construction. ' And if it appears that one of these constructions will do injustice, and the other will avoid that injustice, 'it is the bounden duty of the court to adopt the second, and not to adopt the first, of those constructions. However ' difficult, not to say impossible', it may be to put a perfectly logical construction upon a statute, L court of justice 'is bound to construe it, and as far as it can, to make it available for carrying out the objects of the Legislature, and for doing justice between parties. ' " 33. In R.M.D.C. v. Union of India, AIR 1957 SC 628, Venkatarama Ayyar J. stated the rule of interpretation of a statute thus (p. 631 ) : " Now, when a question arises as to the interpretation to be put on an enactment, what the court has to do is to ascertain 'the intent of them that make it ', and that must of cour....
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....ge is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears, a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give force and life to the intention of the Legislature. That was clearly laid down by the resolution of the judges in Heydon's case [1584] 3 Co. Rep. 7a, and it is the safest guide today. Good practical advice on the su....
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....tation, and it is the less justifiable when it is guesswork with what material the Legislature would, if it had discovered the have filled it in. If a gap is disclosed, the remedy lies in an amending Act." 36. However, Denning L.J. was not shaken by this criticism of Lord Simonds for he reapplied the same principle in Eddis v. Chichester Constable [1969] 2 Ch 345. 37. In M. Pentiah v. Veeramallappa, AIR 1961 SC 1107, Sarkar J. of the Supreme Court has quoted with approval the observation of Denning L.J. in Seaford Court Estates Ltd. v. Asher [1949] 2 All ER 155. The views expressed by Denning L.J. and accepted by Sarkar J. in the above case has received great support by the new approach adopted by Lord Diplock in Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850. In this case, Lord Diplock has dealt with what is called "purposive approach to statutory interpretation". According to Lord Diplock, the purposive approach would enjoin a judge to impute to Parliament an intention not to impose a prohibition inconsistent with the objects which the statute was designed to achieve, though the draftsman has omitted to incorporate in express words any referen....
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.... in, if necessary--so as to do what Parliament would have done, had they had the situation in mind." 41. The true and proper interpretation to be placed on s. 2(m)(ii) has to be made on the guidelines given above. It cannot be gainsaid that there is real difficulty in interpreting s.2(m)(ii). However, the fact that there is difficulty in interpreting s. 2(m)(ii) cannot make us sit with folded hands, to borrow the language of Denning L. J. and feel helpless in the matter of resolving the question that has cropped up for our adjudication. Notwithstanding the fact that the section is vague, it is our duty without altering the material of which the section is woven, to follow the purposive approach outlined by Lord Diplock in interpreting the section and in that process, if necessary, we could and should iron out the creases. 42. Wealth-tax is a tax on the net wealth of an individual. It is not tax on any particular asset of an individual. That is to say, the tax is not imposed on the components of the assets of the assessee, but it is imposed on the total assets which the assessee owns. This has been so held in Sudhir Chandra Nawn v. WTO [1968] 69 ITR 897 (SC). The same view has....
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.... speaks of debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under the Act. Taking the entire scheme of the chargeability of assets to wealth-tax, the true meaning that can be given to s. 2(m)(ii) can only be that the debts referred to therein shall only be debts which are secured on, or which have been incurred in relation to, any property which have not been taken into reckoning for the purpose of arriving at the net wealth. From this, it must necessarily follow that debts which are secured on, or which have been incurred in relation to, any property which had not been taken into reckoning for the purpose of arriving at the net wealth have to be excluded and debts which are secured on or, which have been incurred in relation to, any property which have been taken into account have to be deducted from the aggregate value of the assets. No doubt, s. 5(1) contemplates cases of assets which are entirely excluded from being included in the net wealth of an assessee. There is no difficulty at all in excluding debts which are solely secured on or which have been solely incurred in relation to any such as....
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....ument was advanced on behalf of the Revenue that the debt contemplated under s. 2(m)(ii) is indivisible, cannot be bifurcated and, therefore, it must be disallowed in whole even if it is secured on a partially exempted asset. This was not accepted by the Bench. The Bench observed as follows (p. 83): "We would avoid the pitfall of this theory about the non-divisibility of a debt. The quality of non-divisibility of a debt cannot be derived as matter of construction from the terms of s. 2(m)(ii). We would prefer to base our decision rather on the circumstance that a debt secured on property, which is neither wholly taxable nor wholly exempt, is not contemplated by the statute. In any case of such a debt, it cannot be asserted, in terms of s. 2(m)(ii), that it is secured on property on which wealth-tax is not chargeable at all." 45. For the same reason, the other extreme contention advanced on behalf of the assessee that when a debt is secured on an asset or assets, some of which are excluded and some included or an asset which is partially excluded in the computation of the net wealth, the entirety of the debt should be deducted from the aggregate value of the assets in ar....
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....es observed as follows (headnote): "Under section 3 of the Wealth-tax Act, 1957, wealth-tax is charged in respect of the net wealth of the assessee. According to the definition of 'net wealth' in section 2(m), it is the aggregate value of all assets required to be included in the assessee's net wealth minus the aggregate value of all the debts. But clause (ii) of section 2(m) provides that debts which have been incurred in relation to any asset in respect of which wealth-tax is not payable cannot be deducted. Similarly, debts Which are secured on assets in respect of which wealth-tax is not payable cannot also be deducted. " 47. We are conscious of the fact that in this case, the Gauhati High Court laid down that debts which are secured on agricultural land which are excluded from the definition of assets under s. 2(e) cannot be taken into account in the matter of computation. 48. The argument of the learned counsel for the assessees that inasmuch as s. 2(m)(ii) does not expressly provide for an apportionment of the debt as between a portion of the debt which is partially exempt and which is partially not exempt, or as between an asset which is totally ex....
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....ot be a ground for rejecting the claim either of the Revenue or of the assessee. Such an apportionment was sanctioned by courts in Wales v. Tilley [1942] 25 TC 136, Carter v. Wadman [1946] 28 TC 41 and Sadasivam v. Commissioner of Income-tax [1955] 28 ITR 435. In the present case apportionment of the compensation has to be made on a reasonable basis between the loss of the agency in the usual course of business and the restrictive covenant. The manner of such apportionment has perforce to be left to the assessing authorities. " 50. A contrary view has been taken by the Bench of this court in CIT v. Rajam [1982] 133 ITR 75. There the assessee lived in one-half of a house which was owned by her and let out the other half. The house had been mortgaged and a loan obtained. As on the valuation date, the house was worth Rs. 1,23,000 whereas the mortgage debt stood at Rs. 40,403. The wealth-tax assessment for the year 1971-72 was completed on the basis that the assessee was entitled to exemption under s. 5(1)(iv) of the W.T. Act, 1957, in respect of the one-half used exclusively for her residence, namely, in a sum of Rs. 61,500. Consequently, only one-half of the mortgage debt was allo....
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....of that case (p. 80): "As we have earlier indicated, the present case is not neatly drawn on simple, uncomplicated, facts. It is not the case of a debt about which we can say that it is secured on an exempted asset. At the same time, we cannot say that it is secured on a taxed asset. The truth is that the debt in question is secured on house property whose value is chargeable to tax as to one-half, and exempted from tax as to the other half. What, then, is its position in terms of the dichotomy in s. 2(m)(ii) ? The position is that it falls between two stools, as it were. It assumes an intermediate, or third, position. This position s. 2(m)(ii) does not clearly provide for at all, and apparently does not even envisage. It must be a case of casus omissus." 52. After rejecting the theory of divisibility, the Bench has observed thus (p. 83): We would prefer to base our decision rather on the circumstance that a debt secured on property, which is neither wholly taxable nor wholly exempt, is not contemplated by the statute. In any case of such debt, it cannot be asserted, in terms of s. 2(m)(ii), that it is secured on property on which wealth-tax is not chargeable a....
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....ses where the letter of the law need not be taken as conclusive in the matter of interpretation of enacted law. The learned author at page 137 has observed as follows: If the text contains omissions which make it logically imperfect, the reason is more often that the case in question has not occurred to the mind of the Legislature, than that there exists with respect to it a real intention which by inadvertence has not been expressed. What, then, is the rule of interpretation in such cases ? May the courts correct and supplement the defective sententia legis, as well as the defective litera legis ? The answer is that they may and must. If the letter of the law is logically defective, it must be made logically perfect, and it makes no difference in this respect whether the defect does or does not correspond to one in the sententia legis itself. Where there is a genuine and perfect intention lying behind the defective text, the courts must ascertain and give effect to it ; where there is none, they must ascertain and give effect to the intention which the legislature presumably would have had, if the ambiguity, inconsistency or omission had been called to m....
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....ation of s. 2(m)(ii) to hold that when a debt is charged oil a property which is only partially exempt from wealth-tax, then the entirely of the debt should be deducted in the computation of net wealth. 58. Rajam's case [1982] 133 ITR 75, has been followed by another Bench of this court in CWT v. Ch. Satish [1982] 133 ITR 834. That was a case where a debt was secured on several items of property one of which alone was exempt from wealth-tax. The Bench held (headnote): "Where, however, the debt is secured on two or more items, then the disallowance under s. 2(m)(ii) can apply only if all the items in question are found to be exempted assets. Where a debt is secured on several items of property, one of which alone is exempted from wealth-tax, then it cannot be said that all the properties on which the debt is secured are exempted from wealth-tax, and to such a situation s. 2(m)(ii) will not be applicable. Section 20(m)(ii) does not also provide for the apportionment of the debt as in part deductible and in part not deductible. For s. 2(m)(ii) to apply, the debt must be secured on properties with reference to all of which it could be said that wealth-tax is no....
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....stituted to reconsider two Division Bench rulings of this court on the interpretation of s. 2(m)(ii) of the Wealth-tax Act, 1957. The decisions are Rajam's case [1982] 133 ITR 75 (Mad) and Satish's case [1982] 133 ITR 834 (Mad). My learned brothers have expressed the view that the two cases are wrongly decided. I hold otherwise. I think they are correct decisions. I happened to Write the Bench judgments in both the cases. I regard my being member of this Full Bench as a welcome opportunity. I propose to utilize the opportunity to re-examine and not just to justify my earlier reasonings and postulates. 63. The crux of the decisions in Rajam and Satish [1982] 133 ITR 75 and [1982] 133 ITR 834 turned on the crucial words of section 2 (m)(ii) : "any property in respect of which wealth-tax is not chargeable under this Act. " 64. Some time previously, prior to April 1, 1965, to be exact, the language of this part s. 2(m)(ii) was slightly different, as under: "any asset in respect of which wealth-tax is not payable under this Act." 65. The language, under either version, might seem to be inappropriate, in one or two respects, to the central theme of the ....
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....s marginal note sums up the provision as "exemption in respect of certain assets". The section begins by saying that "wealth-tax shall not be payable in respect of the following assets" and proceeds to make mention of what those assets are in the several clauses that follow. As if this needed further elucidation, the section proceeds to declare that "such assets shall not be included in the net wealth of the assessee." Speaking in terms of assets being included in or excluded from the net wealth might be jarring to those to whom net wealth is everything and the rest nowhere. But once it is recognized that each and every asset of a taxpayer must be sized up separately for its market value and once it is also recognised that this process is a vital step in arriving at the aggregate value of all assets, then it becomes clear that in exemption provision has perforce to be enacted only in terms of each individual asset and its given value. Section 5(1), therefore, very rightly contains a detailed description of assets which are to be treated as exempted assets. The relevant clauses also indicate the quantum of exemption either by express provision or by necessary intendment. As respects....
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....h of the assessee" under this clause. 68. We can pause at this stage to take stock of the crucial provisions which make wealth-tax what it is under the scheme of the Act. First comes the idea of net wealth, a unique fiscal idea which the Supreme Court was inclined to place in the residuary topic of taxation under entry 97 of the Union List in the Seventh Schedule to the Constitution. Then we have the provision for the individualization of assets and the separate evaluation of cash item in terms of market value. Lastly, come the exemption provisions which again point to individual assets falling within certain descriptions, although the quantum of tax exemption is related to the amount representing the respective value, either wholly or subject to groupal or to an individual ceiling. It is in this statutory scheme that the words of s. 2(m)(ii) have got to be understood for what they mean. The provision, as it stood, both before and after April 1, 1965, has already been reproduced. I would make a montage of the provision and do a little bit of textual editing to make it read as under : " Any asset or property, in respect of which wealth-tax is not payable or chargeable, u....
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....-assets. The only practical significance, however, in excepting certain properties from the definition of assets and making them non-assets, is that it relieves the taxpayer as the taxing authorities concerned from the bother of having to determine their market value. For, when an item of property is a non-asset, the question Of going into its valuation does not arise. 70. Practically, the same result flows even in cases where an item of property is indubitably an asset, but gains exemption under s. 5(1) without any limitation on its value, and, therefore, by implication, tip to its full value. Examples of this kind of assets are: property of a charitable trust, commuted value of a pension, tools of an artisan Or a professional, scientific research apparatus, works of art for art's sake, 6 1/2% Gold Bonds, 1977, gallantry awards and the like. In these cases, it would be a sheer waste of time going into the market value of the assets, since whatever their value, the whole of it is exempt under the relevant clauses section 5(1). 71. We are then left with cases of the kind which this Full Bench is grappling with, namely, an asset which falls within the exemption clause in se....
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....his phrase intelligibly by forgetting the words which make up that phrase and making do with the forensic catch-phrase " exempted asset." The distinction between the two provisions must be patent. As respects a given asset, the question under s. 5(1) may well be:" Is this an exempted asset ? But as respects s. 2(m)(ii), we cannot properly direct the, inquiry by asking the same question Is the asset an exempted asset? or "is the property an excepted property?". To ask this kind of question would involve a misdirection. For, where a part only of the value of an asset is exempt under s. 5(1), it may be an exempted asset properly so called for purposes of s. 5(1), but it cannot be brought under s. 2(m)(ii) within the phrase "property in respect of which wealth-tax is not chargeable". For, this phrase must be understood as meaning "property in respect of which wealth-tax is not at all chargeable". "Not at all " is not a gloss. It is very much a part of the meaning. Section 2(m)(ii) divides the whole universe of discourse into a dichotomous division: (1) property in respect of which wealth-tax is chargeable ; and (2) property in respect of which wealth-tax is not chargeable. Category (1)....
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....any provision for partial abatement, or apportionment, of a debt under which part of it is deductible and part of it is not. 75. It is said that wherever a taxing statute is silent, then the courts must step in and make an apportionment. This might be so, if there is rule of law to that effect. But there is no such thing as a "principle" of apportionment as far as I am aware. Nor is it a special fiscal principle so fundamental in taxation that it demands application wherever the taxing Act is silent. 76. Reference has been made to apportionments of business expenditure between capital and revenue expenditure, personal and non-personal expenditure, in the realm of income-tax in the context of allowable deductions. It is pointed out that these principles of apportionment have had the blessings of courts. 77. It is quite true that apportionments between capital and revenue, and personal and non-personal expenditure-have the sanction both of income-tax usage and of court decisions. But that is no reason for assuming that the way for its introduction is wide open under s. 2(m)(ii) of the W.T. Act. Apportionment into tax of deductible expenditure and disallowable expenditure und....
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....d provisions as a whole. To change the musical metaphor, pursuit of a middle path does not prove that it is flanked by extremes always. In any case, where the path is chalked out clearly by the statute, we should not avoid it on any a priori theory of avoidance of extremes. 80. It is suggested that courts now-a-days must strike out on their own wherever the language of the statute leaves scope for "purposive" interpretation. It is claimed that a too literal adherence to the words of the parliamentary draftsman will tend to defeat the very intentions with which statutes, even tax statutes, are brought into being. Apportionment of debts, in this sense, is advanced as a desirable end product of interpretation of s. 2(m)(ii). 81. I have taught myself to regard statutory construction as an exercise in legal reasoning par excellence. Questions of construction are always questions of law, and are seldom regarded as anything else. If we were to consider the aim of statutory interpretation to be the ferreting out of the "intention of the law-giver, would we not be converting the whole process into a factual one in the extreme ? Parliamentary intention, like the state of the weather, m....
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....t is property in respect of which wealth-tax is not chargeable. An item of house property call be brought within the charge either because it is not used as the assessee's residence or to the extent that its value exceeds Rs. 1,00,000. In either case., it would be property of a kind about which nobody can confidently assert, without fear of contradiction, that it is property "in respect of which wealth-tax is not chargeable. it was again said : " As a general proposition it may be laid down that where a debt is and the security consists of several items of property, one of which alone is exempted from wealth-tax, then it cannot be said that all the properties on which the debt is secured are exempted from wealth-tax. " 84. These passages are consistent with the views I have elaborated upon in the foregoing paragraphs. I have said that there is a clear dichotomy, or, rather, two dichotomies, discernible in s. 2(m)(ii) of the W.T. Act, 1957. There is, first, the dichotomy between property which falls within s. 2(m)(ii) in the sense that the whole of its value is not chargeable to wealth-tax and all other properties. There is, next, the dichotomy between debts which....
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....he exempted value of the asset or property securing the debts. The Tribunal will have to work out the proportion in each case. The reference will be answered accordingly. As for the third category, no question at all arises for applying the principle of apportionment so as to segregate the allowable part of the debt from the disallowable part, since the properties on which the debts are secured are " Gold Bonds ", the whole of the value of which is not chargeable to wealth-tax under s. 5(1) of the Act. The disallowance of the entire debt by the WTO was, therefore, quite correct and it was rightly upheld by the Tribunal. The questions of law raised in these assessees' references are, therefore, answered against the assessees and in favour of the Department. 90. The assessees in the last two tax cases, namely, T.C. Nos. 410 and 423 of 1978, were not present in person or represented by learned counsel. Learned counsel for the assessees in the other cases as well as the learned standing counsel for the Department made oral application for leave to appeal to the Supreme Court in the rest of the cases covered by group and II above. This group of cases is concerned with th....