1991 (5) TMI 43 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the Zamindari Abolition and Relief and Rehabilitation Bonds issued by the State Government of Uttar Pradesh qualify as "securities" under section 5(1)(xxii) of the Wealth-tax Act, 1957.

Issue-wise Detailed Analysis:

1. Definition and Inclusion of Bonds as "Securities" under Section 5(1)(xxii) of the Wealth-tax Act, 1957:
The primary issue is whether the Zamindari Abolition Compensation Bonds and Rehabilitation Bonds can be classified as "securities" under section 5(1)(xxii) of the Wealth-tax Act, 1957. The assessee, Smt. Janki Kishori Devi, contended that the value of these bonds should be exempted from her net wealth under this provision.

Appellate Assistant Commissioner's Decision:
The Appellate Assistant Commissioner held that the term "securities" in section 5(1)(xxii) refers to those voluntarily acquired by individuals as part of savings promotion encouraged by the Government. The Compensation Bonds and Rehabilitation Bonds were deemed merely deferred payments for assets acquired compulsorily by the Government, not aimed at promoting savings or obtained voluntarily by the holder. Consequently, these bonds were not considered "securities" exempt under section 5(1)(xxii).

Income-tax Appellate Tribunal's Decision:
Contrary to the Appellate Assistant Commissioner, the Income-tax Appellate Tribunal accepted the assessee's contention, holding that the Compensation Bonds and Rehabilitation Bonds are indeed "securities" of the Government of Uttar Pradesh within the meaning of section 5(1)(xxii) of the Wealth-tax Act. The Tribunal's decision led to the Department seeking a reference to the High Court.

High Court's Analysis:
The High Court examined the definitions of "Government security" under various statutes, notably the Indian Securities Act, 1920, and the Public Debt Act, 1944. The court noted that while the Indian Securities Act requires the security to be issued in respect of any loan contracted, the Public Debt Act defines it as a security created and issued by the Government for raising a public loan.

The court referred to the Government Securities Manual and various rules under the Public Debt Act and the U. P. Zamindari Abolition and Land Reforms Act, 1950, which indicated that the bonds in question are in the nature of promissory notes/bonds, a recognized form of Government securities. The bonds were issued by the Public Debt Office, Reserve Bank of India, Lucknow, and were negotiable.

The High Court also considered the Full Bench decision in Jagdambika Pratap Narain Singh v. CIT, which held that compensation bonds issued under the U. P. Act No. 1 of 1951 are covered by the definition of "Government security" in section 2(2) of the Public Debt Act, 1944.

Conclusion:
The High Court concluded that the Compensation Bonds and Rehabilitation Bonds are indeed "Government securities" within the meaning of section 5(1)(xxii) of the Wealth-tax Act. The court emphasized that if a taxing statute can be reasonably interpreted in two ways, the interpretation favorable to the assessee should be adopted, as opined by the Supreme Court in CIT v. Naga Hills Tea Co. Ltd.

Final Judgment:
The High Court answered the reference in the affirmative, in favor of the assessee and against the Revenue, affirming that the Zamindari Abolition Compensation Bonds and Rehabilitation Bonds issued by the State Government of Uttar Pradesh are covered by the term "security" under section 5(1)(xxii) of the Wealth-tax Act.