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Issues: Interpretation of section 4 of the Wealth-tax Act regarding inclusion of gifted assets in the net wealth of an individual.
In this judgment delivered by the High Court of Punjab and Haryana, the court analyzed the interpretation of section 4 of the Wealth-tax Act in relation to the inclusion of assets gifted by an individual to their spouse in the net wealth calculation. The case involved a gift of one lakh rupees made by the assessee to his wife in 1958, which was contested by the Wealth-tax Officer. The Appellate Assistant Commissioner of Wealth-tax allowed the appeal raised by the assessee, excluding the gifted amount from the total wealth. The Income-tax Appellate Tribunal upheld this decision, leading to a reference question on the correctness of excluding the amount from the net wealth. The court examined the relevant section 4 of the Act, emphasizing the proviso related to assets chargeable to gift-tax under the Gift-tax Act. The court noted that the proviso aimed to exempt assets donated during a specific period from wealth tax if they were already subject to gift tax at a higher rate. The court dismissed the significance of punctuation in interpreting the legislative provision and held that assets exempt from gift tax should not be considered part of the donor's wealth for wealth tax calculation purposes. The court referred to similar interpretations by the Calcutta High Court and the Madras High Court, supporting the exclusion of assets donated within the specified period from the donor's net wealth. The court agreed with these precedents and concluded that assets gifted between March 31, 1964, and April 1, 1972, should not be included in the donor's net wealth calculation permanently. As the gift in question was made in 1958, the court ruled that these assets could be rightfully included in the assessee's total assets for wealth tax computation. The judgment clarified the application of the law in this context and resolved the reference question in favor of excluding the gifted amount from the net wealth calculation, without imposing any costs.
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