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TMI Blog1986 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of Bikaner and Jaipur in order to facilitate advance of loan of Rs. 47,000 to M/s. Fibre Trading Company, Bikaner (for short " the Company " hereinafter). By a letter the assessee discharged the FDR and directed that on its maturity, the amount may be credited to the account of the company. While filing the return for the assessment year 1973-74 the assessee claimed exemption of the amount of the aforesaid FDR under section 5(1)(xxvi) of the Act. The Wealth-tax Officer rejected that claim on the ground that the pledging of the FDR was for consideration of the amount of Rs. 47,000 to be advanced to the company and as such the assessee cannot be said to have held the FDR for six months ending on the valuation date as required by section 5(3) of the Act. The assessee went in appeal before the Appellate Assistant Commissioner of Income-tax, Bikaner Range, Bikaner. The Appellate Authority agreed with the findings of the Wealth-tax Officer and rejected the appeal. The assessee approached the Income-tax Appellate Tribunal for redressal of her grievance against the order of the Assistant Commissioner but was unsuccessful. The assessee then filed an application under section 27(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit receipt on its maturity may be credited to the account of the company. Mr. B. R. Arora contended that the fact that on maturity the amount of the fixed deposit receipt along with the interest was credited in the account of the company is sufficient to justify the order of the Tribunal that the assessee, while pledging the fixed deposit receipt, had given up her control over its value. The assessee wanted the amount of Rs. 50,000 of the fixed deposit receipt to be excluded from her wealth under section 5(1)(xxvi) of the Act which reads as under: 5. Exemptions in respect of certain assets.- (1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-... (xxvi) any deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act), or with a co-operative society engaged in carrying on the business of banking including a co-operative land mortgage bank or a co-operative land development bank)." Sub-section (1A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the aggregate value of all the debts owed by the assessee on the valuation date... " Section 4(1) of the Act creates a legal fiction by which assets enumerated in that section are deemed to be the assets belonging to the assessee for the purpose of computing his net wealth. Section 5(1) of the Act provides that, in respect of certain assets, exemption is to be made and they are to be excluded while computing the net wealth of the assessee. The correct conclusion in the matter on hand would depend on the interpretation of the word " held ". This word has been the subject matter of construction in a number of decisions dealing with the provisions of this Act as well as certain other Acts. In the case of Manohar v. G. G. Desai, AIR 1951 Nag 33, the question before their Lordships was as to whether C. P. Berar Accommodation (Requisition) Act, 1948 had been rendered unconstitutional because of articles 19 and 31 of the Constitution. The argument advanced was that the word " held " means to " possess " and as the act of requisitioning interferes with that right, it is unconstitutional. According to their Lordships, the word " held " has several meanings, one of which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption under clause (xvi) and not the rest of the certificates. As such, the interpretation of clause (xvi) of section 5(1) by the Tribunal that the assessees were entitled to exemption in respect of the value of all the certificates and that no distinction could be made between the certificates standing in the name of the assessee and those standing in the name of his nominees, was held to be erroneous. However, a different interpretation to the words " held by the assessee " was made in the case of CWT v. C. Rai [1979] 119 ITR 553 (Bom). The subject of discussion in that case was the interpretation of the words " held by the assessee " appearing in section 5(1)(xx) of the Act. The question referred for the opinion of the High Court was whether the Tribunal erred in law in holding that the 400 shares of " Colour Chem Ltd." transferred to the name of the assessee's wife were exempt under section 5(1)(xx) read with section 4(1)(a)(i) of the Wealth-tax Act. Reliance was placed by the Department upon the decision of the Gujarat High Court in the case of CWT v. Harshad Rambhai Patel [1964] 54 ITR 740 and it was argued that section 5(1)(xx) means shares standing in the name of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption under section 5(1)(iv) of the Wealth-tax Act, 1957, in respect of the value of his interest in the house property owned by the firm in accordance with rule 2 of the Wealth-tax Rules, 1957, read with section 2(m) of the Act. From the aforesaid decisions on the point, it is evident that the meaning of a word is to be understood in the context of the provisions of the Act or the section it appears in. To interpret the meaning of the term " held by the assessee " appearing in section 5(3) of the Act, it would be profitable to have an idea of the object and purpose of enacting clause (xxvi) of section 5(1) of the Act. In order to widen the area of investment in financial assets qualifying for exemption from levy of wealth-tax, six types of investments enumerated in clauses (xxii) to (xxvii) were inserted in section 5(1). One type of investment amongst them, such as deposits in bank, falls in clause (xxvi) of section 5(1) of the Act. In order to enable the assessee to have the benefit of clause (xxvi), it is required that the property, i.e., the fixed deposit receipt, remains in her name till its maturity and she must have control over the same. The admitted position is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the date of maturity, the fixed deposit receipt belonged to the owner and she was in constructive possession of the same, and also in view of the fact that the account of the fixed deposit receipt and the loan advanced to the company were separately maintained, the assessee would be entitled to exemption under clause (xxvi) of section 5(1) of the Act. It is noteworthy that the fixed deposit receipt was pledged as security to facilitate the advancing of loan to the company and till the date of its maturity, the fixed deposit receipt remained in the name of the assessee. On repaying the amount of Rs. 47,000 at any time before the maturity of the fixed deposit receipt, the bank was bound to release the fixed deposit receipt and in that situation, the assessee would have held it physically till the date of its maturity. The right of the company to have the amount credited to its name did not accrue till the date of maturity of the fixed deposit receipt. It is also relevant to note that the interest of Rs. 3,000 accrued on the amount of the fixed deposit receipt was also credited in the account of the assessee and remained so till the date of its maturity, i.e., April 20, 1973. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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