1967 (10) TMI 12 - HC - Wealth-tax

Net wealth - computation - Whether the assessee was entitled to exemption u/s 5(1)(viii) in respect of ornaments and jewellery intended for the personal use of the assessee - Held yes

Summary

Issues Involved:
1. Whether the life interest of the assessee in the Ahmedabad trust and the two Bombay trusts constituted a right to an annuity and whether it was exempt from net wealth.
2. Whether the assessee was entitled to exemption under section 5(1)(viii) of the Wealth-tax Act, 1957, in respect of ornaments and jewellery.

Issue-Wise Detailed Analysis:

Issue 1: Life Interest and Annuity Exemption
1. Ahmedabad Trust:
- The Tribunal concluded that the assessee's interest in the Ahmedabad trust was a right to an annuity, precluding commutation into a lump sum grant, thus exempt under section 2(e)(iv) of the Wealth-tax Act.
- The High Court examined the trust deed and determined that the income received by the assessee was dependent on the general income of the estate, thus constituting a life interest rather than an annuity.
- Consequently, the court held that the interest in the Ahmedabad trust could not be excluded from the net wealth of the assessee.

2. Bombay Trusts:
- The Tribunal found that the assessee's interest in the Bombay trusts allowed for commutation of up to half of the corpus, thus not entirely exempt under section 2(e)(iv).
- The High Court analyzed the trust deeds, noting that the income was again dependent on the general income of the estate, making it a life interest rather than an annuity.
- The court concluded that the assessee's interest in the Bombay trusts was not a right to an annuity and thus includible in the net wealth.

Issue 2: Exemption for Ornaments and Jewellery
1. Claim under Section 5(1)(viii):
- The assessee claimed that the ornaments and jewellery were articles of personal use and thus exempt under section 5(1)(viii).
- The Wealth-tax Officer and the Appellate Assistant Commissioner limited the exemption to Rs. 25,000 under section 5(1)(xv), rejecting the broader exemption claim.
- The Tribunal upheld this view, but the High Court disagreed, emphasizing that section 5(1)(viii) could apply to articles intended for personal use, including jewellery, without the Rs. 25,000 limit.
- The court clarified that the intention behind the use of the articles is crucial, and if they are intended for personal use, they qualify for exemption under section 5(1)(viii).

Conclusion:
1. Questions 1, 2, and 3:
- The High Court answered these in the negative and against the assessee, concluding that the interests in the Ahmedabad and Bombay trusts were life interests, not annuities, and thus includible in the net wealth.

2. Question 4:
- The High Court answered in the affirmative, holding that ornaments and jewellery intended for personal use are exempt under section 5(1)(viii) without the Rs. 25,000 limit.

Costs:
- Each party to bear its own costs.