1978 (1) TMI 56 - HC - Wealth-tax

Summary

Issues Involved:
1. Interpretation of Section 5(1)(viii) of the Wealth-tax Act, 1957, before and after the amendment by Finance (No. 2) Act of 1971.
2. Inclusion of ornaments intended for personal use in the assessee's net wealth for the assessment year 1970-71.
3. Definition and scope of the term "jewellery" under the Wealth-tax Act, 1957.

Issue-wise Detailed Analysis:

1. Interpretation of Section 5(1)(viii) of the Wealth-tax Act, 1957, before and after the amendment by Finance (No. 2) Act of 1971:

The court examined the precise language of Section 5(1)(viii) as it stood before the amendment and after the amendment by the Finance (No. 2) Act, 1971. Before the amendment, Section 5(1)(viii) exempted "furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee" from wealth tax. Post-amendment, the section excluded "jewellery" from the exemption and added an Explanation defining "jewellery" to include ornaments made of precious metals and stones. The amendment was effective retrospectively from April 1, 1963, but the Explanation was effective prospectively from April 1, 1972.

2. Inclusion of ornaments intended for personal use in the assessee's net wealth for the assessment year 1970-71:

The assessee did not include jewellery intended for personal use in his net wealth, claiming exemption under the pre-amendment Section 5(1)(viii). The Wealth-tax Officer accepted this contention. However, the Additional Commissioner of Wealth-tax, exercising revision powers under Section 25(2), held that the ornaments were "jewellery" and should be included in the net wealth. The Tribunal, on appeal, differentiated between "jewellery" and "ornaments" and held that ornaments intended for personal use without precious stones were not includible in the net wealth for the assessment year 1970-71, as the Explanation defining "jewellery" was effective only from April 1, 1972.

3. Definition and scope of the term "jewellery" under the Wealth-tax Act, 1957:

The court analyzed the dictionary meanings of "jewellery" and "ornaments" and considered various judicial precedents. The Gujarat High Court in Commissioner of Wealth-tax v. Jayantilal Amratlal had held that the term "jewellery" included ornaments irrespective of the presence of precious stones and that the Explanation was merely clarificatory. However, the Orissa High Court in Commissioner of Wealth-tax v. Smt. Binapani Chakraborty held that gold ornaments without precious stones were not "jewellery" before the Explanation's prospective effect from April 1, 1972. The court agreed with the Orissa High Court's interpretation, emphasizing that the Explanation was introduced to extend the meaning of "jewellery" and was not redundant.

Conclusion:

The court concluded that ornaments not studded with precious or semi-precious stones and intended for personal use were not includible in the net wealth of the assessee for the assessment year 1970-71. The court answered the question in the affirmative and in favor of the assessee, with no order as to costs.