1979 (8) TMI 63 - HC - Wealth-tax

Summary

Issues:
Interpretation of the proviso to section 4(1)(a) of the Wealth-tax Act, 1957 regarding exclusion of assets from net wealth based on gift-tax chargeability.
Determining whether the proviso applies to assets transferred before or after the accounting year relevant to the assessment year 1964-65.
Clarifying whether the assessment year mentioned in the proviso refers to the Gift-tax Act or the Wealth-tax Act.

Analysis:
The case involved a question of law related to the interpretation of the proviso to section 4(1)(a) of the Wealth-tax Act, 1957. The assessee had made gifts to his wife before 31st March 1963 and claimed that the value of these assets should not be included in his net wealth for assessment years after 31st March 1964 if they were chargeable to gift-tax or not chargeable under section 5 of the Gift-tax Act. The Tribunal disagreed, stating that the proviso did not apply to assets transferred before the accounting year relevant to the assessment year 1964-65.

The proviso in question aimed to prevent double taxation of donors from the assessment year 1964-65 onwards. It exempted assets from inclusion in the net wealth if the transfer was chargeable to gift-tax or not chargeable under section 5 of the Gift-tax Act for any assessment year commencing after 31st March 1964. The wording of the proviso indicated that it did not apply to gifts made before the assessment year mentioned.

The court analyzed the language of the proviso and concluded that the assessment year referred to in the proviso was under the Gift-tax Act, not the Wealth-tax Act. The conditions for exclusion of assets under the proviso were specific: the transfer must occur during the accounting year relevant to the gift-tax assessment year 1964-65 and subsequent years, and the assets transferred must be chargeable to tax under the Gift-tax Act or not chargeable under section 5 of that Act.

The court also noted that the proviso was later amended by the Finance (No. 2) Act, 1971, changing the time frame for exemption. The presence of a comma in the proviso's wording, as argued by the assessee's counsel, did not alter the court's interpretation that the assessment year mentioned referred to the Gift-tax Act. The court's view aligned with decisions from the Calcutta, Punjab, and Kerala High Courts, while disagreeing with the Andhra Pradesh High Court's interpretation.

In conclusion, the court answered the question in the affirmative, affirming that the proviso applied to the assessment year under the Gift-tax Act and not the Wealth-tax Act.