1980 (3) TMI 27 - HC - Wealth-tax

Summary

Issues:
1. Inclusion of shares gifted to minor children in the net wealth of the assessee for assessment years 1960-61, 1961-62, and 1962-63.
2. Interpretation of provisions of section 4(1)(a)(ii) of the Wealth Tax Act.

Detailed Analysis:
The judgment delivered by the Bombay High Court pertained to a reference made by the revenue regarding the assessment of wealth tax for the assessee in relation to the gifting of shares to minor children. The Wealth Tax Officer (WTO) had included the value of shares transferred to the minor children in the net wealth of the assessee based on the provisions of section 4(1)(a)(ii) of the Wealth Tax Act. The assessee appealed against this decision, leading to a series of appeals and ultimately the matter reaching the Tribunal. The Tribunal accepted the assessee's contention that the shares gifted to the minor children could not be considered as transferred by the assessee, as per the provisions of the Act at that time.

The crux of the issue revolved around the interpretation of section 4(1)(a)(ii) of the Wealth Tax Act. The section, as it stood during the relevant assessment years, required assets transferred to minor children without adequate consideration to be included in the net wealth of the transferor. The Tribunal's decision was based on the understanding that the provision applied only to direct transfers by the individual to the minor child. The Tribunal rejected the revenue's appeal, emphasizing that the unamended provision did not encompass indirect transfers, and the language of the section was clear in its scope.

The High Court analyzed the legislative intent behind the provision and the subsequent amendment that introduced the phrase "directly or indirectly." The Court concluded that the unamended provision explicitly required transfers to be made directly by the individual to the minor child, without ambiguity. The absence of the phrase "directly or indirectly" in the unamended provision indicated a specific legislative intent to include only direct transfers within its ambit. The Court dismissed the argument that the subsequent amendment should be viewed as clarificatory, emphasizing that the statutory provision clearly outlined the assets to be included in the net wealth of the assessee.

Ultimately, the High Court upheld the Tribunal's decision, ruling in favor of the assessee. The Court held that the shares gifted to the minor children could not be included in the net wealth of the assessee for the assessment years in question, as the unamended provision of section 4(1)(a)(ii) did not cover indirect transfers. The judgment favored the assessee, and the Court awarded costs of the reference to the assessee.