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TMI Blog1993 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... d by S. P. BHARUCHA J.- This is an appeal by special leave against the judgment of the High Court at Bombay ( [1976] 103 ITR 56) on reference under the provisions of section 27(1) of the Wealth-tax Act, 1957. The question arose in respect of the assessment year 1962-63, for which the relevant valuation date was March 31, 1962, and it read thus (at page 58 of 103 ITR) : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that under section 4(1)(a)(iii) of the Wealth tax Act, 1957, it is the value of the assets which have been actually transferred by the assessee that should be included in the net wealth of the assessee, the transferor, although the form of assets transferred had undergone a cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, as belonging to him (a) the value of assets which on the valuation date are held . .... (iii) by a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of the individual or his wife or minor child; or . . . . whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise." The High Court, in its judgment (which is reported in CWT v. Kishanlal Bubna [1976] 103 ITR 56), said that the identification of the words "such assets" used in sub-clause (iii) was to be found in clause (a) of sub-section (1) of section 4. The assets which were contemplated in clause (a) were the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n date that had to be determined was the value of the original assets which were transferred. Learned counsel for the Revenue assailed the correctness of the interpretation placed in the impugned judgment upon section 4(1)(a)(iii). In support of his case, he drew attention to the judgment of the Madras High Court in V. Vaidyasubramaniam v. CWT [1977] 108 ITR 538, wherein the impugned judgment had been discussed. The Madras High Court was considering a case where the assessee had gifted a sum of Rs. 90,000 to his wife who had constructed a house therefrom. The assessee claimed that the value of the assets to be included in his wealth-tax assessment was Rs. 90,000 only and not the actual value of the house on the valuation date. Counsel on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) of the Indian Income-tax Act, 1922. That provision said that in computing the total income of any individual for the purpose of assessment, there shall be included-(a) so much of the income of a wife or minor child of such individual as arises directly or indirectly-. . . . (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart ; . . . . " This court held that the income which could be brought to tax under section 16(3)(a)(iii) had to have a nexus with the assets transferred, directly or indirectly. Learned counsel urged that the object of section 16(3)(a)(iii) of the Indian Income-tax Act, 1922, was the same as that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of computing the net wealth of the assessee. Where what is transferred by the assessee is an asset and the transferee disposes of that asset and acquires from the consideration received another asset, it is the value of that acquired asset on the valuation date which is relevant for the purposes of computing the net wealth of the assessee. The object of this provision is much the same as the object of the provisions in the Income-tax Act by reason of which income arising from an asset transferred to or for the benefit of an assessee's wife or minor child is treated as the income of the assessee. The interpretation placed by the impugned judgment, we may add, would, in given cases, make the provision well-nigh impossible to work whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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