1987 (1) TMI 141 - AT - Wealth-tax

Summary

Issues:
1. Exemption under section 5(1)(iv) of the Wealth-tax Act for a gift received by the assessee.
2. Deduction claimed by the assessee in respect of the gift received from her husband.
3. Interpretation of provisions of section 4(1)(a)(i) of the Wealth-tax Act regarding inclusion of assets transferred without adequate consideration.

Analysis:
1. The appeal pertains to the assessment year 1980-81 where the assessee received a gift of Rs. 1 lakh from her husband for constructing a house. The assessee claimed exemption under section 5(1)(iv) of the Wealth-tax Act for the gifted amount. The WTO rejected the claim, stating that since the assessee had already received exemption for the gifted amount, further deduction was not allowable. The AAC, however, allowed the deduction, noting that the husband had included the gift amount in his wealth and was paying tax on it, hence exemption should be available to the assessee. The tribunal held that the value of the residential house to be included in the husband's case was Rs. 1 lakh, resulting in a deduction for the assessee of only Rs. 44,890 under section 5(1)(iv), leading to a partial allowance of the revenue's appeal.

2. The assessee claimed a deduction of Rs. 1 lakh in respect of the gift received from her husband, which was included in his wealth-tax assessment. The AAC allowed the deduction, considering that the husband had included the gift amount in his wealth and was not claiming exemption under section 5(1)(iv) due to the higher cost of the building. The tribunal, however, held that the deduction in the hands of the assessee could only be Rs. 44,890 based on the value of the residential house, leading to the partial allowance of the revenue's appeal.

3. The interpretation of section 4(1)(a)(i) of the Wealth-tax Act was crucial in this case. The section mandates the inclusion of assets transferred without adequate consideration in the net wealth of the transferor. In this instance, the husband had gifted Rs. 1 lakh to the wife for constructing a house. The tribunal held that the value of the residential house to the extent of Rs. 1 lakh had to be included in the husband's wealth, as per the provisions of section 4(1)(a)(i). The tribunal emphasized that the wife could only claim a deduction of Rs. 44,890 under section 5(1)(iv) based on the value of the house, leading to the restoration of excess relief granted by the AAC. The tribunal clarified that the issue of relief in the husband's case was not before them and would require a separate remedy.