1977 (10) TMI 19 - HC - Wealth-tax

Agricultural Land Assessment Year Assets To Spouse Gift Tax Assessment Minor Child Net Wealth Taxing Statutes Wealth Tax Act

Summary

Issues Involved:
1. Whether an asset must be defined as an "asset" under the Wealth-tax Act at the time of its transfer to be included in the net wealth of the assessee.
2. Whether the term "assessment year commencing after the 31st day of March, 1964" in the proviso to section 4(1)(a) of the Wealth-tax Act refers to the wealth-tax assessment year or the gift-tax assessment year.

Issue-wise Detailed Analysis:

1. Definition of Asset at the Time of Transfer:

The first issue pertains to whether, for an asset to be included under section 4(1)(a)(i) or section 4(1)(a)(ii) of the Wealth-tax Act, 1957, in the net wealth of the assessee for assessment years 1970-71 or 1971-72, the asset should also be an "asset" as defined in the Act at the time of its transfer. The court observed that the plain language of sub-clauses (i) and (ii) of clause (a) indicates that the only requirements for their applicability are: (i) the spouse or minor child (not being a married daughter) of the assessee should hold assets on the valuation date; and (ii) these assets should have been transferred by the assessee directly or indirectly without adequate consideration. The court concluded that it is not necessary for the properties to have been "assets" as defined in the Act on the date of transfer by the assessee. The definition of "assets" should be considered as on the valuation date. Thus, the court answered the first question in the negative, against the assessee and in favor of the department.

2. Interpretation of "Assessment Year Commencing after the 31st day of March, 1964":

The second issue involves interpreting whether the term "assessment year commencing after the 31st day of March, 1964" in the proviso to section 4(1)(a) refers to the wealth-tax assessment year or the gift-tax assessment year. The court noted that the proviso was intended to provide relief by exempting certain assets from inclusion in net wealth if the transfer was chargeable to gift-tax for any assessment year commencing after March 31, 1964, but before April 1, 1972. The court emphasized that the legislative intent was to grant this exemption prospectively for transactions of transfers of assets by way of gift effected after the commencement of the assessment year 1964-65. The court concluded that the term "assessment year" in the proviso refers to the gift-tax assessment year, not the wealth-tax assessment year. This interpretation was supported by the legislative history and the context of the amendment. Consequently, the court answered the second question in the negative, against the assessee and in favor of the department.

Conclusion:

Both questions referred to the court were answered in the negative, against the assessee and in favor of the department. The court held that it is not necessary for the properties to have been "assets" as defined in the Act at the time of transfer, and the term "assessment year" in the proviso to section 4(1)(a) refers to the gift-tax assessment year. The parties were directed to bear their respective costs, and a copy of the judgment was to be forwarded to the Tribunal as required by section 27(6) of the Act.