TMI Blog1980 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... then stood. The view which was taken by him was that these ornaments and jewellery would have been exempted for the purposes of assessment in the respective assessments of the wife and the daughter under s. 5(1)(viii) of the Act because they were their articles of personal use and, according to the AAC, this position could not be ignored for the purpose of deciding whether these ornaments should be excluded from the net wealth of the assessee. He thus took the view that, as these ornaments were exempt in the hands of the donees, they would also be exempt from assessment in the hands of the assessee who was the donor. The exclusion of the ornaments was put in issue by the revenue in the appeal filed before the Appellate Tribunal. The assessee filed cross objection challenging the inclusion of the jewellery worth Rs. 1,10,000 in his net wealth. The Appellate Tribunal took the view that the ornaments worth Rs. 1,10,000 belonging to the assessee were exempt under s. 5(1)(viii) of the Act as they were intended for the household use of the assessee. With regard to the inclusion of the value of the ornaments gifted to the wife and the daughter of the assessee, the Tribunal referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fe and the daughter on the ground that they were intended for their personal use, they were not exempt under s. 5( 1)(viii) on the ground that they were meant for personal use when they were treated as belonging to the assessee as they were not in fact intended for the personal use of the assessee ". Arising out of this order of the Tribunal, the following questions have been referred to this court under s. 27(1) of the Act, at the instance of the revenue: " (1) Whether, on the facts and in the circumstances of the case, the ornaments and jewellery worth Rs. 1,10,000 actually belonging to the assessee were exempt from tax u/s. 5(1)(viii) of the Act on the ground that they were articles intended for the household use of the assessee ? (2) Whether the benefit of the proviso to section 4(1)(a) of the Act is restricted to those gifts, which have been made in the previous year relevant to the assessment year 1964-65 and thereafter? (3) Whether the ornaments gifted by the assessee to his wife and daughter were exempt under section 5(1)(viii) on the ground that they were articles intended for his household use? (4) Whether the ornaments and jewellery gifted by the assessee to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958 (18 of 1958), or is not, chargeable under section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, but before the 1st day of April, 1972, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual." Section 5(1)(viii) of the Act originally provided as follows : " 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 (viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee." By Finance Act of 1971, cl. (viii) reproduced above was amended retrospectively from April 1, 1963, by adding the words " but not including jewellery " at the end of the clause. The earlier opening portion of s. 5(1) was also amended by the Finance Act of 1970 and with these two amendments, the relevant provision now reads as follows : " 5. (1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f they belonged to the donees, these ornaments could also be exempt in the hands of the assessee. It is difficult for us to appreciate the logic of this argument accepted by the Tribunal, but it is not necessary to consider the view taken by the Tribunal any further because even in the hands of the donee, the ornaments must be treated as not being entitled to exemption right from April 1, 1963, and consequently the further question of these ornaments being entitled to exemption in the hands of the assessee really would not arise. That brings us to the second question which has been exhaustively argued both on behalf of the department and on behalf of the assessee. The proviso with which we are concerned in so far as question No. 2 is concerned, is the proviso without the words " but before the 1st day of April, 1972 ". The Tribunal has taken the View that even in the case of gifts made prior to the assessment year in question, the assessee would be entitled to exemption in respect of assessment to wealth-tax as the benefit of the proviso is not restricted only to those gifts which have been made in the assessment year commencing after March 31, 1964. The Tribunal held that the " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1958 or 1959, as in the instant case, they would be exempt from inclusion in the net wealth of the assessee for assessment to wealth-tax for any assessment year commencing after March 31, 1964. According to the learned counsel, the exemption which was granted in respect of assessment to wealth-tax after March 31, 1964, was, by the amendment made in the proviso by the Finance Act, 1971, taken away with effect from the assessment year commencing from April 1, 1972, i.e., assessment year 1972-73. It is vehemently contended before us that the proviso has been incorporated in the W.T. Act and it deals with assessment to wealth-tax and, therefore, the words "for any assessment year commencing after the 31st day of March, 1964 " must be read as referring to the assessment year relevant for assessment to wealth-tax and not to gift-tax. The learned counsel contended that the decisions relied upon by the revenue do not seem to have taken a correct view of the provisions of the proviso. Normally, in the interest of uniformity in the construction of a Central Act relating to taxation, if a particular provision of law has already been construed by any High Court, unless there is any apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted from computation of the net wealth of the assessee. The argument is that in respect of the assessment years 1964-65 to 1971-72 all gifts whenever made prior to those assessment years will have to be exempted for the purpose of assessment to wealth-tax in the hands of the donor. The language of the proviso being ambiguous, we have tried to ascertain from the Notes on Clauses attached to the W.T. (Amendment) Bill No. 57 of 1964, whether any indication is available about the intention of Parliament When the proviso was sought to be incorporated in s. 4(1) of the Act. A perusal of the Bill however shows that in the original Bill, the proviso did not find a place at all and there was, therefore, nothing in the Notes on Clauses to give us any indication as to the purpose of the enactment of the proviso. There is, however, some indication as to the purpose of the proviso in the Notes on Clauses when the words " but before the 1st day of April, 1972 " were added by Finance (No. 2) Bill, 1971. The text of the Finance (No. 2) Bill, 1971, is to be found in [1971] 80 ITR 105, in the Statutes Section. The amendment of the W.T. Act is dealt with in Chap. IV of the Bill and cl. 31 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years following it for which the gift was to be chargeable or not chargeable under the G.T. Act before the exemption could be claimed in respect of any gifts. If the intention of Parliament was really to exclude all gifts made even before March 31, 1964, and an exemption from wealth-tax was to be given for the assessment year 1964-65 and thereafter, the clause in question would have properly appeared at the end of the proviso. The effect of the proviso, as construed by us, therefore, is that any gift which was either chargeable to gift-tax or not chargeable to gift-tax during the Assessment years 1964-65 to 1971-72 was alone intended to be excludible for the purposes of computation of the, net wealth of the assessee who was the donor. It is important to point out that so far as this exemption is concerned there is no outer limit in so far as the assessment to wealth-tax is concerned. The proviso specified the nature of transfers which are exempt with reference to the period during which those transfers were made but it does not seem to put any limit with regard to the assessment years for which, for the purposes of assessment to wealth-tax, such exemption will oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the assessment year 1964-65. The other reason given by the Bench was that by the Finance Act, 1964, aggregation of the gifts made to the same donee during a certain period was also provided for the purpose of taxation. The Division Bench of the Madras High Court then observed (p. 187) : "We, therefore, presume that Parliament might have intended that when the gift made suffers a tax to the extent of 40% under the Gift-tax Act, it might be exempted from wealth-tax." We would not speculate on the reasons set out by the Madras High Court because finding out the reasons without any indication in the Notes on Clauses would be only an exercise in imagination. That, however, does not affect the ratio of the decision of the Madras High Court. The third decision is of the Kerala High Court reported in [1978] 115 ITR 160 (M. G. Kollankulam v. CIT). The Kerala High Court took the view while dealing with the proviso that (headnote): " While introducing the proviso with effect from 1st April, 1965, the legislature in referring to the chargeability of the transfer to gift-tax has used the words `is either chargeable to gift-tax under the Gift-tax Act, 1958, or is not chargeable un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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