1993 (9) TMI 76 - HC - Wealth-tax

Summary

Issues:
Interpretation of section 4(1)(a)(ii) of the Wealth-tax Act, 1957 regarding inclusion of accrued interest to a minor son in the wealth of the assessee.

Detailed Analysis:
The case involved a dispute regarding the inclusion of interest accrued to a minor son in the wealth of the assessee under section 4(1)(a)(ii) of the Wealth-tax Act, 1957. The assessee had gifted an amount to his minor son, and interest had accrued on this amount. The contention was that the interest amount belonged to the minor son and should not be included in the wealth of the assessee. The Income-tax Appellate Tribunal held that only the gifted amount, and not the accretion to it, should be included in the wealth of the assessee. This interpretation was based on the principle that deeming provisions should be strictly construed, and no fiction should be extended beyond the clear wording of the law (Popatlal Bhikamchand v. CIT [1959] 36 ITR 577).

In a related case, CWT v. Kishanlal Bubna [1976] 103 ITR 56 (Bom), the court interpreted section 4(1)(a)(iii) and emphasized that the value of assets transferred should be determined based on the original assets, whether retained in the same form or converted. Similarly, in V. Vaidyasubramaniam v. CWT [1977] 108 ITR 538 (Mad), it was held that the value of assets transferred, even if converted, should be included in the net wealth. The principle was that the value of the transferred asset, not its accretions, should be considered.

Further, the court referred to P. R. Mukherjee v. CIT [1979] 116 ITR 554, where it was established that accretions like interest on gifted money should not be considered as assets transferred indirectly. The court emphasized that the income should directly arise from the transfer itself, not from subsequent accretions. This principle was reiterated in CIT v. Prem Bhai Parekh [1970] 77 ITR 27 and Smt. Mohini Thapar v. CIT [1972] 83 ITR 208, where the connection between the transfer of assets and the income was deemed proximate.

In conclusion, the court held that the interest accrued to the minor son could not be included in the net wealth of the assessee under section 4(1)(a)(ii) of the Wealth-tax Act, as the provision only mandated the inclusion of the assets transferred, not their accretions. The judgment favored the assessee and ruled against the Revenue, emphasizing a strict interpretation of the law without extending the fiction beyond its clear wording.

This detailed analysis highlights the key legal principles and precedents considered in the judgment, providing a comprehensive understanding of the court's decision on the issues involved.