1963 (9) TMI 83 - HC - Wealth-tax

Summary

Issues Involved:
1. Interpretation of "held by the assessee" under Section 5(1)(xvi) of the Wealth-tax Act.
2. Inclusion of assets in the net wealth of the assessee.
3. Exemption eligibility for National Savings Certificates and Treasury Savings Certificates.

Detailed Analysis:

1. Interpretation of "held by the assessee" under Section 5(1)(xvi) of the Wealth-tax Act:
The primary issue revolves around the interpretation of the phrase "held by the assessee" as mentioned in Section 5(1)(xvi) of the Wealth-tax Act. The court had to determine whether this phrase includes only those certificates that are in the name of the assessee or also those in the names of nominees but beneficially owned by the assessee.

The Wealth-tax Officer (WTO) and the Appellate Assistant Commissioner (AAC) held that "held by the assessee" refers strictly to certificates in the name of the assessee. The Tribunal, however, interpreted it more broadly to include certificates beneficially owned by the assessee, even if they were in the names of nominees.

The court concluded that the legislature intentionally used "held by the assessee" to mean certificates registered in the name of the assessee, not those merely beneficially owned. The court emphasized that the legislature's use of different expressions ("belonging to" vs. "held by") in different sections indicates a purposeful distinction. Therefore, the court held that the phrase "held by the assessee" applies only to certificates in the name of the assessee.

2. Inclusion of assets in the net wealth of the assessee:
The court examined the definitions of "net wealth" and "assets" under Sections 2(m) and 2(e) of the Wealth-tax Act. It was clear that any property belonging to the assessee on the valuation date is includible in the net wealth. The court affirmed that beneficial ownership is sufficient for inclusion in the net wealth, even if the property is in another's name.

However, for the specific purpose of exemption under Section 5(1)(xvi), the court held that only certificates "held by the assessee" (i.e., in the assessee's name) qualify for exemption. This interpretation aligns with the legislative intent to restrict the exemption to certificates formally registered in the assessee's name.

3. Exemption eligibility for National Savings Certificates and Treasury Savings Certificates:
The assessees claimed exemption for various National Savings Certificates and Treasury Savings Certificates, some of which were in their names and others in the names of nominees. The WTO granted partial exemptions for certificates in the names of the assessees but denied exemptions for those in nominees' names.

The AAC upheld the WTO's decision, rejecting the assessees' contention that all certificates beneficially owned by them should be exempt. The Tribunal reversed this decision, granting exemption for all certificates, regardless of registration.

The court ultimately sided with the WTO and AAC, ruling that only certificates in the names of the assessees qualify for exemption under Section 5(1)(xvi). The court emphasized that the legislative intent was to limit exemptions to certificates formally held by the assessee, as indicated by the specific language used in the statute.

Conclusion:
The court answered the reference question in the negative, holding that assets representing savings certificates not in the name of the assessee but beneficially owned by them are not exempt from wealth-tax under Section 5(1)(xvi). The assessees were ordered to pay the costs of the reference to the Commissioner of Wealth-tax.