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TMI Blog1979 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by virtue of section 4(1)(a) of the Act ?" Assessee is an individual. The relevant assessment year is 1974-75, the relevant valuation date being March 31, 1974. Assessee had made gift of Rs. 20,000 in cash to his wife in an earlier year and the donee had invested the same amount in a fixed deposit with a bank. The WTO treated this amount as includible in the assessee's assets under s. 4(1)(a) of the Act and finding that the asset was not held by the assessee did not grant exemption in respect of the asset under s. 5(1)(xxvi) of the Act. The assessee appealed to the AAC who took the view that the exemption in s. 5(1)(xxvi) of the Act was intended to be given to all fixed deposits forming part of the net wealth of the assessee subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanakasabai reported in [1973] 89 ITR 251 at p. 257 (SC). Again it was held in the case of Commissioner of Income-tax v. Vadilal Lallubhai reported in [1972] 86 ITR 2 at p. 8 (SC) that legal fictions are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond their legitimate field. In our opinion, the legal fiction enacted in section 4(1) of the Act was created for the definite purpose of including certain assets in the net wealth of the assessee even though they did not belong to him. Once this is done, that purpose is completely fulfilled. Consequently, the legal fiction is no longer available for granting the exemption contemplated in section 5(1)(xxvi) of the Act rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the statute should not be withheld. In support of this proposition, reliance is placed on a Bench decision of the Madras High Court in the case of S. Naganathan v. CWT [1975] 101 ITR 287. That was a case where a house standing in the name of the wife was treated as an asset includible for the purpose of determining the net wealth of the assessee under s. 4(1). The WTO did not grant the exemption provided in s. 5(1)(iv) and included the value of the house in the net wealth of the assessee. The Tribunal ultimately took the view that in spite of the fiction created under s. 4(1)(a), the house still belonged to the wife and the exemption under s. 5(1)(iv) would apply only to a case where the assessee was the owner of the asset and not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) is to be achieved, the transferor shall not be allowed to be in a better position than what he would have been in if he had not resorted to such a fraudulent transfer. We have used the expression 'fraudulent transfer ' not with the intention of restricting the scope of section 4(1) to only such fraudulent transfers, but in order to emphasize the need for a provision like section 4(1)(a). But we are not persuaded to hold that by this provision Parliament intended that the transferor should be put under a worse position or shall be subjected to more liability than what he would have been if the transfer had not taken place. There is nothing either in section 4 or in section 5(1), in our view, which show an intention of Parliament either to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust inevitably have flowed from or accompanied it ....... The statute says that you must imagine a certain state of affairs; it does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corrollaries of that state of affairs." These words have been quoted with approval by the Supreme Court in the cases of State of Bombay v. Pandurang Vinayak AIR 1953 SC 244; CIT v. S. Teja Singh (1959] 35 ITR 408 (SC) and Sri Jagadguru Kari Basava Rajendraswami of Govimutt v. Commissioner of Hindu Religious and Charitable Endowments, Hyderabad AIR 1965 SC 502. Learned standing counsel on the other hand has relied upon a passage from the well-known decision of the Supreme Court in the case of Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's net wealth for the purpose of computation of his liability under the Act, in administering the law, the provision of s. 5 which has been prescribed by Parliament for the purpose of completing the assessment must also be taken into account. We are in accord with the view expressed by the Madras High Court and we do not subscribe to the contention of the learned standing counsel that in doing so we violate the doctrine applicable to a legal fiction. The Tribunal was very much impressed by the provision in s. 5(3) of the Act which at the relevant time had provided that the asset should be held by the assessee. The construction put by the Tribunal on the provision of sub-s. (3) of s. 5 seems to be wholly unwarranted. We are not conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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