TMI Blog1998 (1) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a discretionary trust, charged the same at a maximum rate. In the appeal, the Deputy Commissioner of Income-tax (Appeals) held that since the return of wealth of the assessee-trust was below the statutory limit of Rs. 1 lakh which was provided for at the relevant time, the question of levy of wealth-tax on such net wealth did not arise and, consequently, the higher rate prescribed under section 21(4) of the Wealth-tax Act becomes immaterial in such cases. The Revenue challenged the said decision of the appellate authority before the Tribunal and the Tribunal, relying upon the ratio of the decision of the Madras High Court in the case of Haresh Anitha Trust v. CWT [1988] 173 ITR 103, dismissed the appeal, holding that the higher rate prescribed under section 21(4) of the Act, became immaterial in cases where the net wealth did not exceed Rs. 1 lakh. It has been contended by learned counsel, Mr. B. B. Naik, Mr. Pranav Desai and Mr. Mihir Joshi, who addressed us in this and all the cognate matters on board, which were heard together, that section 21(4) of the Act was a special provision for recovery of wealth-tax from the representative assessee when the shares of the benefici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0] AIR 1970 SC 829 and K. P. Varghese v. ITO [1981] 131 ITR 597. It was submitted that if the exemption limit provided in Schedule I is read in the provision of section 21(4) of the said Act, it would lead to absurdity. Section 3 of the said Act which provides for charge of wealth-tax and falls in Chapter II relating to "charge of wealth-tax and assets subject to such charge", reads as under : "3. Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I." Section 21(4) which is in Chapter V-----"Liability to assessment in special cases", falls for our consideration and it reads as follows : "21. (4) Notwithstanding anything contained in this section, where the shares of the persons on whose behalf or for whose benefit any such assets are held are indeterminate or unknown, the wealth-tax shall be levied upon and recovered from the court of wards, administrator-general, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection in any case, not being a case referred to in the proviso, any assets referred to in clauses (xv), (xvi), (xxii), (xxiii), (xxiv), (xxv), (xxvii), (xxviii) and (xxix) of sub-section (1) of that section shall not be excluded." Schedule I, Part 1, which is relevant for the purposes of this matter stood as follows at the relevant time : "Rates of wealth-tax PART I (1) In the case of every individual or Hindu undivided family, not being a Hindu undivided family to which item (2) of this Part applies,---- Rate of tax (a) where the net wealth does 1/2 per cent. of the net wealth; not exceed Rs. 2,50,000 (b) where the net wealth Rs. 1,250 plus 1 per cent. of the exceeds Rs. 2,50,000 but does not amount by which the net wealth exceed Rs. 5,00,000 exceeds Rs. 2,50,000 ; (c) where the net wealth Rs. 3,750 plus 2 per cent. of the exceeds Rs. 5,00,000 but does not amount by which the net wealth exceed Rs. 10,00,000 exceeds Rs. 5,00,000 ; (d) where the net wealth Rs. 13,750 plus 3 per cent. of the exceeds Rs. 10,00,000 but does not amount by which the net wealth exceed Rs. 15,00,000 exceeds Rs. 10,00,000 ; (e) where the net wealth Rs. 28,750 plus 5 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the extent of the tax that could be levied upon and recovered from the representative assessee to the same extent as it would be leviable upon and recoverable from an individual in sub-section (4) of section 21, clearly provided that if no wealth-tax was payable from an individual, the further question of applying the higher rate would not arise. Since sub-section (4) of section 21 itself provided the extent of liability of a representative assessee to be that of an individual and thereby preserved the exemption limit there was no conflict between the provision of sub-section (4) of section 21 and section 3 of the Act as regards availability of exemption limit to the representative assessee. It will be noted that as the provision of sub-section (4) of section 21 was originally enacted and remained in operation till substituted by the amending provision with effect from April 1, 1980, the base of charge with extent of liability was "as if the persons on whose behalf the assets were held were an individual for the purpose of the Act". Now, while maintaining the extent of leviability and recoverability of tax from the representative assessee, all that is done is to provide a higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertaining whether the higher rate prescribed in section 21(4) will benefit the Revenue or not will not at all arise. The court distinguished the cases of Piarelal Sakseria Family Trust v. CIT [1982] 136 ITR 583 (MP) and Surendranath Gangopadhyaya Trust v. CIT [1983] 142 ITR 149 (Cal/), which were in the context of the provisions of section 164 of the Income-tax Act, 1961. It will be noted that the words "the wealth-tax shall be levied upon and recovered from... in the like manner and to the same extent as it would be leviable upon and recoverable from an individual..." of sub-section (4) of section 21 of the Wealth-tax Act, were not there in the provisions of section 164 of the Income-tax Act, and, therefore, these decisions cannot assist the petitioners. We agree with the opinion of the Madras High Court that there was nothing in section 21(4) of the said Act, which took away the benefit of the exemption of Rs. 1 lakh, which was granted to an individual assessee, while assessing the representative assessee from whom the tax was to be leviable and recoverable to the same extent. The Budget Speech of the Finance Minister and the Notes on Clauses, were referred to by learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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