1974 (8) TMI 13 - HC - Wealth-tax

Summary

Issues Involved:
1. Powers of the Tribunal under Section 35 of the Wealth-tax Act.
2. Retrospective application of the amendment to Section 5(1)(viii) of the Wealth-tax Act.
3. Definition and scope of "jewellery" under the Wealth-tax Act.
4. Whether there was an error apparent from the record in granting exemption for jewellery.

Detailed Analysis:

1. Powers of the Tribunal under Section 35 of the Wealth-tax Act:
The Tribunal's powers under Section 35 of the Wealth-tax Act were scrutinized to determine whether it could rectify its previous order exempting jewellery from the net wealth of the assessee. The Tribunal believed that due to the retrospective amendment of Section 5(1)(viii) by the Finance (No. 2) Act of 1971, which excluded jewellery from the exempted category, there was an error apparent on the record. The Tribunal decided to post the appeal for further hearing to determine whether the articles in question amounted to jewellery.

2. Retrospective Application of the Amendment to Section 5(1)(viii):
The amendment to Section 5(1)(viii) by the Finance (No. 2) Act of 1971 added the words "but not including jewellery" with retrospective effect from April 1, 1963. The assessee argued that this retrospective amendment could not affect completed assessments. The learned Advocate-General contended that the amendment's retrospective effect raised serious questions about its extent and the definition of "jewellery." The revenue argued that all assessments are subject to revision, appeal, and rectification, and the Tribunal must consider the state of law on the date of the order sought to be rectified.

3. Definition and Scope of "Jewellery":
The amendment introduced by the Finance (No. 2) Act of 1971 also added an inclusive definition of "jewellery" effective from April 1, 1972. This definition included ornaments made of precious metals, whether or not containing precious stones. The Tribunal needed to determine whether the articles in question fell under this definition. The learned Advocate-General argued that the term "jewellery" for assessments from April 1, 1963, onwards was debatable and could not be resolved without thorough examination.

4. Error Apparent from the Record:
The main question was whether the Tribunal was justified in holding that there was an error apparent from the record in granting exemption for jewellery. The learned Advocate-General argued that the amendment raised debatable questions and could not be considered an error apparent from the record. The revenue countered that the Tribunal must rectify the order if it was contrary to the state of law as on the date of the order. The court held that the question of the extent of retrospectivity and the definition of "jewellery" were highly debatable and could not be resolved through rectification powers under Section 35.

Conclusion:
The court concluded that the Tribunal was not justified in exercising its rectification power under Section 35 and reopening the appeal to determine the exemption of jewellery. The question referred to the court was answered in the negative and against the revenue. The Commissioner of Wealth-tax was ordered to pay costs to the assessee. The court granted a certificate of leave to appeal to the Supreme Court, considering the substantial question of law involved.