1992 (3) TMI 5 - SC - Wealth-tax

Spouses are governed by the portuguese civil code - Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that each of the spouses married under the Portuguese Civil Code is entitled to deduction under section 5 of the Wealth-tax Act, 1957, separately

Summary

Issues:
1. Assessment of movable properties under Wealth-tax Act for married couple under Portuguese Civil Code.
2. Interpretation of "association of persons" under Wealth-tax Act.
3. Application of exemptions under section 5 of the Wealth-tax Act to married individuals in Goa governed by community of property system.

Analysis:
The appeals before the Supreme Court involved the assessment of movable properties under the Wealth-tax Act for a married couple married under the Portuguese Civil Code. The Wealth-tax Officer had calculated the value of the movable properties, including shares in limited companies, deposits in banks, and loans to the husband's company, as belonging to the husband and wife collectively. The net wealth of the communion was determined, and fifty percent of it was considered as the net wealth of the husband. The Tribunal initially allowed the appeals of the assessee, leading to the Department's application under section 27(1) of the Act. The High Court of Bombay decided in favor of the assessee, prompting the Department to approach the Supreme Court under article 136. The Supreme Court granted leave after considering the arguments from both parties (Appeals Nos. 1596 to 1598 of 1980).

In another set of appeals, the Wealth-tax Officer had passed assessment orders against the wife for the assessment years 1972-73 and 1973-74. The Appellate Assistant Commissioner allowed the appeals based on the judgment in the case of the husband pronounced by the High Court. The Tribunal upheld the appellate order, rejecting the Department's applications under sections 27(1) and 27(3) before the High Court. The Department then approached the Supreme Court under article 136, leading to the consolidation of all appeals for a common order.

The main legal question referred to the High Court was whether each spouse married under the Portuguese Civil Code is entitled to a deduction under section 5 of the Wealth-tax Act separately. The High Court analyzed the provisions of the law and various decisions under the Income-tax Act to determine the concept of "association of persons." It held that the communal property resulting from marriage under the Portuguese Civil Code did not establish an association of persons for wealth tax purposes. The High Court also considered a Department instruction from 1975 stating that married individuals in Goa governed by community property system should be assessed separately for wealth tax purposes and granted exemptions individually.

During the Supreme Court hearing, it was noted that the Department consistently intended for spouses in Goa to be treated as individuals and granted exemptions accordingly. The Court emphasized the importance of following Department circulars and found no justification for the officers' deviation from them. Consequently, all appeals were dismissed with no order as to costs.

In conclusion, the Supreme Court upheld the High Court's decision, emphasizing that the communal property resulting from marriage under the Portuguese Civil Code did not create an association of persons for wealth tax assessment purposes. The Court also highlighted the significance of following Department instructions and treating married individuals in Goa as separate entities for wealth tax assessment and exemption purposes.