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TMI Blog1989 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under the proviso is that the transfer of the asset is either chargeable to gift-tax or is not chargeable under section 5 of the Gift-tax Act, 1958. The particular point for consideration is whether, on the language of the proviso, the exemption is attracted only to such gifts as were chargeable to tax for any assessment year commencing "after the 31st day of March, 1964," as understood by the Revenue or whether the gifts even made earlier would attract the benefit of the exemption as claimed by the assessees. There appears to be a divergence of judicial opinion on the point in the High Courts. In CWT v. Sarala Debi Birla [1975] 101 ITR 488 (Cal), T. Saraswathi Achi v. CIT [1976] 104 ITR 185 (Mad), CWT v. Seth Nand Lal Ganeriwala [1977] 107 ITR 758 (P H), M. G. Kollankulam v. CIT [1978] 115 ITR 160 (Ker), Malti Harshey v. C WT [1980] 121 ITR 676 (MP) and CWT v. Rasesh N. Mafatlal [1980] 126 ITR 173 (Bom), the High Courts have construed the provision in the manner suggested by the Revenue. CWT v. Hashmatunnisa Begum [1977] 108 ITR 98 (AP) has taken the opposite view extending a wider benefit of the exemption. The opinion of the Calcutta High Court in CWT v. Sarala Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, the assessee was entitled to exclude, under the proviso to section 4(1)(a) of the Wealth-tax Act, 1957, the value of the assets gifted to his wives in the wealth-tax assessment for the assessment year 1967-68 ?" The High Court agreed with the construction placed on the proviso by the Tribunal and answered the question in the affirmative and against the Revenue. The Revenue has come up in appeal by special leave. In Civil Appeals Nos. 1226 and 1227 of 1975, the assessment years concerned are 1964-65 and 1965-66 corresponding to the valuation dates March 31, 1964, and March 31, 1965. On October 7, 1959, Smt. Sarala Debi Birla, the assessee, made a gift of Rs. 1,00,011, to her minor daughter, Smt. Manju Rani Birla. The asset so transferred was included in the assessee's wealth for the two assessment years 1964-65 and 1965-66 under section 4(1)(a)(ii) of the Wealth-tax Act. The claim of the assessee that the proviso to section 4(1)(a) operated to exclude the asset from the net wealth of the assessee as the transfer was chargeable to gift-tax was not accepted by the Wealth-tax Officer who completed the assessment including the transferred asset in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom April 1, 1965, by a notification. Under the various clauses of section 4(1)(a), certain transfers of assets made by an individual in favour of, or for the benefit of, the spouse or of a minor child, not being a married daughter, of such individual, are required to be ignored and the transferred assets included in the wealth of the assessee, as belonging to him. Section 4(1)(a) aims at foiling an individual's attempt at avoiding or reducing the incidence to wealth-tax by transferring the assets to or for the benefit of the spouse or the minor child of the individual, by requiring the inclusion of such transferred assets in computing the net wealth of the individual. However, the proviso makes the provision inoperative where and in so far as the transferred asset is either chargeable to gift-tax under, or is exempt under, section 5 of the Gift-tax Act. The controversy surrounds the question whether the expression "for any assessment year commencing after 31st day of March, 1964", occurring in the proviso should be read with the first part and as referring to the eligibility of the gifts for exemption with reference to the point of time at which the gifts were made or whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was brought into force with effect from April 1, 1965, by a notification which specified the commencement of the operation of the proviso and that, quite obviously, it would be redundant to read the clause under consideration as again referring to the commencement of the operation of the proviso. While the clause under consideration related to and qualified the gift and gift-tax assessments, the commencement of the exemption of the subject-matter of the gifts for purposes of wealth-tax was controlled and determined by the commencement of the operation of the proviso, which by a notification, was specified as April 1, 1965. Sri Ahuja submitted that the proviso was intended to effectuate the legislative policy that in respect of certain gifts made in favour of a spouse or a minor child, during a specified period, the assets transferred under the gifts would have the benefit of exemption from the operation of section 4(1)(a). This was because the legislature took into consideration that from April 1, 1964, onwards, there was a sharp ascent in the rates of gift-tax and that the assets which constituted the subject-matter of such gifts attracting such high rates of gift-tax should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to higher rates of tax, says Sri Salve, collapses and the cut-off date determining the difference in consequences in the two different classes of cases becomes wholly arbitrary. Sri Salve submitted that construction which promotes its constitutionality has to be preferred to the one which, if accepted, would expose the provision to the vice of discrimination and unconstitutionality. The essential basis of Sri Salve's suggested construction rests on the requirement that the words "for any assessment year commencing after the 31st day of March, 1964", should not be read as part of the first part of the proviso relating to gift-tax assessments but as part of the second part denoting the commencement of the operation of exemption from wealthtax. This, we are afraid, will embog itself in the quagmire of irreconcilable constructional contradictions. The amendment introducing the proviso was brought about by an amending Act of 1964 ; but the date of the commencement of its operation was left to be fixed by a notification. The effect of the notification issued bringing the proviso into effect from April 1, 1965, would be wholly ignored by the construction suggested by Sri Salve. Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n": 43 Har. L. R. 863 (868)]. The observations of Lord Russell of Killowen in Attorney-General v. Carlton Bank [1899] 2 QB 158, 164, though an early pronouncement, is refreshing for its broad common sense : "I see no reason why special canons of construction should be applied to any Act of Parliament, and I know of no authority for saying that taxing Act is to be construed differently from any other Act. The duty of the court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, namely, to give effect to the intention of the Legislature, as that intention is to be gathered from the language employed having regard to the context in connection with which it is employed ... Courts have to give effect to what the Legislature has said." The rule of construction that if the statutory provision is susceptible to, or admits of, two reasonably possible views, then the one which would promote its constitutionality should be preferred on the ground that the Legislature is presumed not to have intended an excess of its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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