TMI Blog2001 (12) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ies from the Life Insurance Corporation. The assessee was a trustee as well as the beneficiary of these policies. A sum of Rs.1,13,258 was obtained by way of loan and assignment of the said policy. A part of the loan was invested in purchase of shares and another part thereof was used for making advances to others. She filed a return under the Wealth-tax Act showing net wealth at Rs.8,75,384 for the assessment year 1975-76 which included the value of certain shares including those which had been purchased out of the aforesaid loan. She claimed deduction for total liability of Rs.1,38,731 which included the aforesaid loan amount of Rs.1,13,258. The Wealth-tax Officer assessed the liability of the assessee at Rs.1,38,731. The net wealth was thus determined at Rs.9,26,620. The Commissioner of Wealth-tax was, however, of the view that the order passed by the Wealth-tax Officer was erroneous and prejudicial to the interests of the Revenue. He issued a show-cause notice on November 30, 1977, calling upon her to explain why the liability relating to the aforesaid loan amount should not be deducted from the value of her assets. The Commmissioner was of the opinion that the said amount does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be "chargeable" to tax and then a question would arise as to whether the same is "payable" or not. Mr Khanna in reply pointed out that the Bombay High Court has not determined the question involved in this case and only in relation to another contention, the minority view of the Full Bench of the Madras High Court was followed. The interpretation clause contained in section 2 of the Act begins with the words "unless the context otherwise requires". "Assets" has been defined in section 2(e) to mean: "'assets' includes property of every description, movable or immovable, but does not include,- (1) in relation to the assessment year commencing on the 1st day of April, 1969, or any earlier assessment year- (i) agricultural land and growing crops, grass or standing trees on such land; (ii) any building owned or occupied by a cultivator of, or receiver of rent or revenue out of, agricultural land: Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of the rent or revenue by reason of his connection with the land requires as a dwelling house or a store-house or an out-house." The said de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretative expedition shall identify on its radar the contextual use of the word or expression and then determine its direction avoiding collision with icebergs of inconsistency and repugnancy." It is also trite that the legislator is presumed to know the law. In Dadi Jagannadham v. Jammulu Ramulu, AIR 2001 SC 2699; [2001] AIR SCW 3051, it has been held: "We have considered the submissions made by the parties. The settled principles of interpretation are that the court must proceed on the assumption that the Legislature did not make a mistake and that it did what it intended to do. The court must, as far as possible, adopt a construction which will carry out the obvious intention of the Legislature. Undoubtedly, if there is a defect or an omission in the words used by the Legislature, the court would not go to its aid to correct or make up the deficiency. The court could not add words to a statute or read words into it which are not there, especially when the literal reading produces an intelligible result. The court cannot aid the Legislature's defective phrasing of an Act or add and mend, and by construction, make up deficiencies which are there." It is further well settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction, which shall suppress the mischief and advance the remedy. The rule was explained in Bengal Immunity Co. Ltd. v. State of Bihar, AIR 1955 SC 661, 674 by S.R. Das, Actg. C.J. as follows: 'It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case [1584] 3 Co. Rep. 7a was decided that-- "...for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: First--What was the common law before the making of the Act; Second--What was the mischief and defect for which the common law did not provide; Third--What remedy Parliament hath resolved and appointed to cure the disease of the commonwealth; and Fourth--The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono public". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit prescribed by reason of the Schedule appended thereto. Having regard to the fact that in the definition of net wealth both the expression "means" and "includes," are employed the same must be held to be exhaustive. Reference in this connection may be made to CIT v. Venkateswara Hatcheries Pvt. Ltd. [1999] 237 ITR 174 (SC). It may be that chargeability to tax never operates on gross amount but nothing is payable as wealth-tax until by process of computation it forms part of net wealth. The decision rendered in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC); Bawa Shiv Charan Singh v. CIT [1984] 149 ITR 29 (Delhi); CIT v. Harprasad and Co. P. Ltd. [1975] 99 ITR 118 (SC) were referred to in a different context. The court in these cases was dealing with the concept of loss. No asset is chargeable to wealth-tax. The apex court in Sudhir Chandra Nawn v. WTO [1968] 69 ITR 897 while considering the question as regards the constitutional validity of the Wealth-tax Act and also wealth-tax held: "It is a tax on the capital value of the assets of individuals and companies on the valuation date. The wealth-tax is not imposed on the components of the assets of the assessee; it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 2(m)(ii) speaks of debts which are secured on or which have been incurred in relation to any property in respect of which wealth-tax is not chargeable under the Act. In cases where an asset is only partially exempt from chargeability to wealth-tax, then it must necessarily follow that the portion of the debt secured on such portion of the asset or incurred in acquiring such portion of the asset has to be excluded from the reckoning. This construction will be in harmony with the scheme and purpose of the Wealth-tax Act" With utmost respect we cannot subscribe to this said view. The rule of purposive construction may be taken recourse to when the literal meaning attributed to a provision of the statute leads to an absurdity. Such is not the case here. It is, in our view, possible to give effect to the definition of "net wealth" in implementing section 3 vis a vis section 5 of the Act. The minority view expressed by Balasubrahmanyan J. commends to us. The view expressed runs thus: "Section 2(m)(ii) does not speak of exempted assets. It only refers to property in respect of which wealth-tax is not chargeable. This phrase must be understood as meaning 'property in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. In the comments that follow it is pointed out that an ongoing Act is taken to be always speaking. It is also, further, stated thus: "In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as give effect to the true original intention. Accordingly the interpreter is to to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters. just as the US Constitution is regarded as 'a living Constitution', so an ongoing British Act is regarded as 'a living Act'. That today's construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording. An enactment of former days is thus to be read today. In the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured debt must be deducted." The policy amount would be payable only upon its maturity but the same by itself in our considered view cannot be a ground to exclude any assets acquired out of the loan from the Life Insurance Corporation by securing the policies. The loan could have been obtained from any other source. Section 5(1)(vi) of the Act has provided for exemption. An exemption clause may be strictly construed and the same cannot be interpreted in such a manner so as to take away a benefit to which the assessee may otherwise be entitled to. In Federation of Andhra Pradesh Chambers of Commerce and Industry v. State of Andhra Pradesh [2001] 247 ITR 36, the apex court observed thus: "It is trite law that a taxing statute has to be strictly construed and nothing can be read into it. In the classic passage from Cape Brandy Syndicate's case [1921] 1 KB 64, 71 which was noticed in the judgment under appeal, it was said: 'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language ..... X X X X Extracts X X X X X X X X Extracts X X X X
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