TMI Blog1982 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... as been necessitated by reason of the conflicting views expressed in Srinivasan v. CWT [1980] 123 ITR 464 (Mad) and CIT v. Rajam [1982] 133 ITR 75 (Mad) as well as CWT v. Satish [1982] 133 ITR 834 (Mad). The facts in the Tax Cases may be briefly stated as follows: T. Cs. Nos. 369 to 371 of 1977: The assessee in these cases is one K. S. Vaidyanathan. The relevant assessment years are 1971-72, 1972-73 and 1973-74. The wealth with which we are concerned in these cases consists of shares. The assessee returned wealth of Rs. 2,71,596, Rs. 2,54,161 and Rs. 1,66,791, respectively. He claimed liabilities of Rs. 2,12,767, Rs. 2,17,472 and Rs. 2,39,464 respectively which included overdrafts from various banks of Rs. 1,84,642, Rs. 1,86,598 and Rs. 1,98,774, respectively. The WTO found that the overdrafts were taken for the purpose of purchasing shares of new companies and since part of the shares to the extent of Rs. 1,50,000 would be exempt under s. 5(1)(xxiii) of the Act, only a proportionate loan by way of overdraft should be disallowed in relation to the exempted asset. Accordingly, he held that the assessee would be entitled only to a disallowance of a proportionate loan by way of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7: The assessee, in these cases, claimed a deduction of Rs. 83,335 and Rs. 75,720 representing debts due to the Life Insurance Corporation of India which was disallowed by the WTO as well as the AAC. But on appeal, the Tribunal allowed those deductions. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this court: Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Act, the debt representing the loan taken from the Life Insurance Corporation was deductible in full from the total wealth of the assessee though the debt is secured on the life insurance policy which is an exempted asset ?" T. Cs. Nos. 901, 902 and 903 of 1977 In these cases, a sum of Rs. 50,000 representing the mortgage loan on the house property for the assessment year 1966-67, Rs. 50,000 for the assessment year 1967-68 and Rs. 50,000 for the assessment year 1968-69 were disallowed by the WTO and the AAC. But on appeal by the assessee to the Tribunal, the Tribunal allowed a sum of Rs. 46,000 for the assessment year 1966-67, Rs. 50,000 for the assessment year 1967-68 and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 69,716, Rs. 63,501 and Rs. 56,842 being the amounts due by the assessee to the Life Insurance Corporation of India are to be deducted from the aggregate value of the assets in computing his net taxable wealth for the assessment years 1972-73, 1973-74 and 1974-75?" T.C. No. 478 of 1978, T.C. No. 1603 of 1977 and T.C. Nos. 209 to 212 of 1978. The facts and the question of law referred by the Tribunal for the opinion of this court are similar to the one or the other of the cases referred to above and, therefore, they are not stated again here. T.C. No. 1409 of 1977 : The assessee in this case owned a house property which was partly let out and partly occupied as his dwelling house. The property was valued at Rs. 1,75,300. On this property, there was a mortgage loan to the extent of Rs. 19,000 for the assessment year 1972-73. The assessee claimed deduction of this amount. The WTO allowed a proportionate deduction. The assessee appealed. The AAC confirmed the order of the WTO. However, on further appeal to the Tribunal, the Tribunal allowed full deduction. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, according to the learned counsel, s. 2(m) (ii) has to be worked out in the following manner : (1) If the debt is secured or is incurred in relation to any item of property which is wholly exempt from wealth-tax, then the entirety of the debt has to be excluded. (2) If the debt is secured on several items of properties on(, of which or some of which alone are exempted from wealth-tax, then the portion of the debt which is attributable to the particular item or items of properties exempted from wealthtax could not be deducted in making the computation of the net wealth. As an illustration, the learned standing counsel referred to the various items of assets mentioned in s. 5(1A) of the Act under which in respect of those items, only assets to the a tune of Rs. 1,50,000 in all are excluded from being chargeable to wealth-tax. If the debt is secured on all or some of the items mentioned in s. 5(1A), only the portion of the debt relatable to Rs. 1,50,000 can be left out of reckoning and only the portion of the debt relatable to the value of the assets in excess of Rs. 1,50,000 can be deducted from the aggregate wealth of the assessee in computing the net wealth of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset, the assessee will not be entitled to take into reckoning the sum of Rs. 50,000 in arriving at his net wealth for the purpose of liability to wealth-tax inasmuch as it is secured oil an item of property which is totally exempt from Wealth-tax. If, on the other hand, the value of the house is above Rs. 1,00,000 and if the rule of apportionment is not followed, the assessee would be entitled to deduct the entire sum of Rs. 50,000 from the aggregate of his assets for arriving at his net wealth. In other words, the question of a particular debt being taken into account for arriving at the net wealth of an individual will depend upon the mere chance of the value of an asset. On the other hand, the submission of Air. S. V. Subramaniam and Mr. Srinivasamoorthy appearing for different assessees in some of the tax cases is that the Act contemplates four types of cases. Firstly, property on which no wealth-tax is chargeable. Secondly, property included in the assets and not included in the net wealth, in which case no wealth-tax is payable under s. 5(1) of the Act. Thirdly, property included in the computation of wealth but are not subject to payment of wealth-tax under s. 5(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty over the exemption limits included in the net wealth of the assessee, s. 2(m)(ii) is not applicable to such cases and the debts secured on those properties should be deducted in arriving at the net wealth of the assessee by the application of s. 2(m) of the Act. According to the learned counsel for the assessees, the working out of s. 2(m)(ii), as suggested by the learned standing counsel, cannot be done in the case of taxing statutes, as taxing statutes are to be, construed strictly and ill favour of the assessee. Further, the principle of casus omissus applies to s. 2(m)(ii) and the court is not obliged to supply what is not there in the statute and to do so will amount to legislation and not construction. Before dealing with the contentions urged on both sides, it is necessary to set out some of the provisions of the Act which are relevant for our purpose. Section 2(e) defines " assets " as under assets includes property of every description, movable or immovable, but does not include, (1) in relation to the assessment year commencing on the 1st of April, 1969, or any earlier assessment year (i) agricultural land and growing crops, grass or standing trees Oil such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4(1) states that in computing the net wealth of an individual, there shall be included certain assets as belonging to the individual. It is unnecessary to reproduce s. 4 for the purpose of this case. Section 5(1) reads thus: 5(1) Subject to the provisions of sub-section (1A), 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 . ...... (iv) one house or part of a house belonging to the assessee: Provided that, where the value of such house or part exceeds one hundred thousand rupees, the amount that shall not be included in the net wealth of the assessee under this clause shall be one hundred thousand (vi) the right or interest of the in any policy of insurance before the moneys covered by the policies become due and payable to the assessee: (xvia) 6 1/2 per cent, Gold Bonds, 1977, 7 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than the 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. The assessee is not liable to pay wealth-tax on certain assets mentioned in s. 5(1) of the Act and such assets shall not be included in the computation of net wealth. But the exclusion of the asset is in terms of the value of the assets as mentioned in the clauses themselves. For instance, in the case of one house or part of a house belonging to the assessee the amount that shall not be included in the net wealth of the assessee is. Rs. 1,00,000 only. The exclusion from the net wealth of the assessee, in respect of the following properties, viz., (1) agricultural land comprised in any tea, coffee, rubber or cardamom plantation belonging to the assessee, (2) deposits under any scheme framed by the Central Government, (3) ten year treasure savings deposit certificates, etc., (4) any security of the Central Government or State Government, (5) shares, debentures, units, deposits in banking companies, in finance corporations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 427). In Veerappa Chettiar v. CIT [1959] 35 ITR 322 (Mad), Rajagopalan J. observed as follows (p. 338): " We are clearly of opinion that the word charge in the statutory expression 'annual charge' in section 9(1)(iv) of the 1922 Act connotes something more than a mere liability to pay something more than the annual payment ...... To same up, the charge in the context of section 9(1)(iv) means an annual payment charged upon the house property, just as capital charge means payment of capital nature charged upon the house property." In CIT v. M. K. Kirtikar[1959] 36 ITR 360, S. R. Das C.J., speaking for the Supreme Court, observed as follows (p. 364) : " What is to be ascertained is the meaning of the word ' charge ' as used in the notification under consideration. It is clear that the primary object and purpose of the notification is to prevent double taxation on the same amount, namely, once in the assessment of the income of the business and again in the hands of the assessee who receives it from the business as commission, etc. The word 'charged' must be construed having regard to the subject and to the context in which it has been used. It is true "that section 3 of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our opinion, the decision of the Allahabad High Court in Jiwan Lal Virmani v. CWT [1967] 66 ITR 338 is not based on any peculiar significance attached to the word 'payable' and would apply even to the provision as amended. The fact that the decision had to interpret cl. (vi) of s. 5(1) is not also material, because both sub-cl. (iv) as well as cl. (vi) are designed for the same purpose." We are in agreement with the above observations of Sethuraman J. We do not, therefore, attach any importance to the argument of the learned counsel for the assessees based on the substitution of the word " chargeable " for the word " payable " by the Amendment Act, 1964. There is no substance in the contention of the learned counsel for the assessees that the debts referred to in s. 2(m)(ii) only refer to debts secured on or acquired in relation to any asset which is outside the purview of the definition of the word " assets " in s. 2(e) of the Act. The reason is the definition of "assets" does not take in assets specified in s. 2(e)(1) and (2) and s. 2(m) speaks that net wealth means the amount by which the aggregate value of all the assets is in excess of the aggregate value of all the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only be interpreted in such a way is to make the machinery workable. The next question for consideration is whether the principle of causus omissus applies in interpreting s. 2(m)(ii) or an interpretation as suggested by the learned counsel for the Revenue can he given to s. 2(m)(ii). The basic principle of interpretation is that if the statute is plain and free from any ambiguity, a bare reading of the statute would be sufficient and no interpretation would be called for. On the other hand, if the statute is ambiguous or its meaning uncertain, it would be the duty of the court to ascertain what the Legislature meant. There may be instances where the words do not clearly bring out, the legislative intent. This may be due, to the fact that the language used in a particular enactment either exceeds or falls short of expressing the meaning intended. In such circumstances the court is obliged to interpret the statute, by discovering the true intention of the Legislature. Maxwell on the Interpretation of Statues, 12th edition, 228, states the rule thus: " Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a mainfest contradiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Of a microscope. The same is true with reference to the subject-matter of the statute, the purpose or object of its enactment, its effect and consequences, its occasion and necessity, and its logic-all of which are not sources of the legislative intent but aids to its discovery. In other words, the court resorts to these aids not for the legislative intent but simply to identify it. The language is the reservoir of the legislative intention. It must in some feeble manner, at least, reveal some intention otherwise, .Ls we will hereafter see, the statute will completely fall. For if the statute is without meaning, the court cannot supply one, as that would involve an encroachment upon the legislative power. The learned author has observed as follows at page 269: " Omissions in a statute cannot, as a general rule, be supplied by construction. Thus, if a particular case is omitted from the terms of a statute even though such a case is within the obvious purpose of the statute and the omission appears to have been due to accident or inadvertence, the court cannot include the omitted case by supplying the omission. This is equally true where the omission was due to the failure of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal construction upon a statute, L court of justice 'is bound to construe it, and as far as it can, to make it available for carrying out the objects of the Legislature, and for doing justice between parties. ' " In R.M.D.C. v. Union of India, AIR 1957 SC 628, Venkatarama Ayyar J. stated the rule of interpretation of a statute thus (p. 631 ) : " Now, when a question arises as to the interpretation to be put on an enactment, what the court has to do is to ascertain 'the intent of them that make it ', and that must of course be gathered from the words actually used in the statute. That, however, does not mean that the decision should rest on a literal interpretation of the words used in disregard of all other materials. ' The literal construction then', says Maxwell on the Interpretation of Statutes, 10th edn., p. 19, ' has, in general, but prima facie preference. To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider, according to Lord Coke: (1) What was the law before the Act was passed; (2) What was the mischief or defect for which the law had not provided; (3) What remedy Parliament has appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give force and life to the intention of the Legislature. That was clearly laid down by the resolution of the judges in Heydon's case [1584] 3 Co. Rep. 7a, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his note Eyston v. Studd [1574] 2 Plowden, 463. Put into homely metaphor it is this: A judge should ask himself the question: If the makers of the Act had themselves come across this ruck in the texture of it, how would they have straightened it out ? He must then do as they would have done. A judge must not alter the material of which it is woven, but he can and should iron out the, creases." Denning L.J. reiterated the same view in Magor and St. Mellons R.D.C. v. Newport Corporation [1950] 2 All ER 1226 at p. 1236) thus: " I have no patience with an ultra-legalistic interpretation which would deprive them of their rights altogether. I would repeat what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850. In this case, Lord Diplock has dealt with what is called " purposive approach to statutory interpretation ". According to Lord Diplock, the purposive approach would enjoin a judge to impute to Parliament an intention not to impose a prohibition inconsistent with the objects which the statute was designed to achieve, though the draftsman has omitted to incorporate in express words any reference to that intention. The essence of the purposive approach, according to Lord Diplock, is for the judge to answer a series of questions ; " What is the subject-matter, of the Act (or part of the Act) being interpreted ? What object in relation to that subject-matter Parliament intended to achieve by the Act. And lastly, what part in the achievement of that object the section under construction was intended to play ? " The particular section will then be interpreted according to the object which the court deems the legislation is intended to serve. This operates even if Parliament has failed to incorporate the intention which the judge believes that the section possesses. The learned Law Lord has re-emphasised the importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we could and should iron out the creases. Wealth-tax is a tax on the net wealth of an individual. It is not tax on any particular asset of an individual. That is to say, the tax is not imposed on the components of the assets of the assessee, but it is imposed on the total assets which the assessee owns. This has been so held in Sudhir Chandra Nawn v. WTO [1968] 69 ITR 897 (SC). The same view has been taken by a Bench of this court in T. C. No. 538 of 1976 (CIT v. Rajam [1982] 133 ITR 75 (Mad)), which has taken a view different from that taken in T. V. Srinivasan v. CWT [1980] 123 ITR 464 (Mad). To quote one of us (Balasubrahmanyan J.) (p. 78): " Wealth-tax is not a tax on assets. It is not even a tax on gross assets less certain deductions. The true view of the impost is that it is periodical tax on the taxpayer's net worth reduced in terms of money. That this is so has been made clear beyond doubt by the Supreme Court in Sudhir Chandra.Nawn's case [1968] 69 ITR 897 (SC). Indeed, on any other idea of the nature of the tax, many of the provisions in the enactment would have had to be struck down as unconstitutional. That the tax is based on the conception of net worth, and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property which have been taken into account have to be deducted from the aggregate value of the assets. No doubt, s. 5(1) contemplates cases of assets which are entirely excluded from being included in the net wealth of an assessee. There is no difficulty at all in excluding debts which are solely secured on or which have been solely incurred in relation to any such assets which has been excluded in entirety under s. 5(1). This proposition is fully supported by the decision in Srinivasan v. CIT[1980] 123 ITR 464 (Mad) and fully accepted as correct by the Bench in T. C. No. 538 of 1976 (CIT v. Rajam [1982] 133 ITR 75 (Mad)), where Balasubramanyan J., has observed as follows : "Mr. Jayaraman, however, called our attention to a judgment of Division Bench of this court in Srinivasan v. CWT [1980] 123 ITR 464 (Mad) which, according to him, laid down a view different from the two provisions. The ratio of the decision, however, does not bear out this contention. An owner-occupied house valued at Rs. 80,000 had a subsisting mortgage on it, which stood at Rs. 36,000 on the valuation date. On these plain facts, the Bench had no hesitation in rejecting the assessee's claim for deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason, the other extreme contention advanced on behalf of the assessee that when a debt is secured on an asset or assets, some of which are excluded and some included or an asset which is partially excluded in the computation of the net wealth, the entirety of the debt should be deducted from the aggregate value of the assets in arriving at the net wealth for the purpose of s. 2(m)(ii) cannot be accepted. On the other hand, the reasonable and the purposive approach would warrant that in such a situation, s. 2(m)(ii) has to be given a harmonious interpretation which would be consistent with the other sections of the Act. Viewed in this light, no violence would be done to the language of s. 2(m)(ii) by holding that the debts referred to in that section can only refer to that portion of the debt which is secured on or which have been incurred in relation to that portion of the property in respect of which wealth-tax is not chargeable or payable under the Act. This conclusion will be in accord and in harmony with the scheme of the Act. The general rule as to a deduction of debts in s. 2(m) is that all debts must come into the reckoning. Clause (ii) excludes from the computation only deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation. The argument of the learned counsel for the assessees that inasmuch as s. 2(m)(ii) does not expressly provide for an apportionment of the debt as between a portion of the debt which is partially exempt and which is partially not exempt, or as between an asset which is totally exempt and which is not exempt at all, apportionment of the debt cannot be done, cannot be accepted. As we have already pointed out earlier, the section does not speak the other way about. It is for this precise reason we apply the reasonable rule of interpretation and say that where in a particular case a debt is charged on an asset which is partially chargeable to wealthtax and partially exempt, there should and there ought to be necessarily an apportionment. The rule of apportionment though not expressly authorised by the statute has been applied by the Supreme Court in dealing with the provisions of the I.T. Act. In CIT v. Best and Co. Private Ltd. [1966] 60 ITR 11 (SC), the respondent company before the Supreme Court, Best and Co. Private, Limited, were selling agents of Imperial Chemical Industries (Exports) Ltd., Glasgow. Later, in 1947, the Imperial Chemical Industries decided to termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1971-72 was completed on the basis that the assessee was entitled to exemption under s. 5(1)(iv) of the W.T. Act, 1957, in respect of the one-half used exclusively for her residence, namely, in a sum of Rs. 61,500. Consequently, only one-half of the mortgage debt was allowed as a deduction and the other half of the debt was not allowed under s. 2(m)(ii) of the Act. The Tribunal, however, held that the entire mortgage debt was wholly excluded from " net wealth " under s. 2(m)(ii) and no part of it could be included merely for the reason that one-half of the house on which the debt was secured happened to enjoy exemption under s. 5(1)(iv). This court did not, as we have already pointed out, accept the reasoning of the Tribunal that s. 2(m)(ii) does contemplate the divisibility of a debt in part and it is liable as to rest. We have also extracted the relevant passages from the judgment of the Bench dealing with the scope of the W.T. Act. The Bench, however, Came to the conclusion that when a loan was secured on a property half of which was exempt from chargeability to wealth-tax and the other half not, then the entire debt should be deducted from the computation of net wealth. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on property, which is neither wholly taxable nor wholly exempt, is not contemplated by the statute. In any case of such debt, it cannot be asserted, in terms of s. 2(m)(ii), that it is secured on property on which wealth-tax is not chargeable at all." We are afraid that the final ratio arrived at by the Bench on the basis of the application of the doctrine of casus omissus cannot be justified particularly so in the light of the observations made by the Bench as to the basis of the exclusion of debts in s. 2(m)(ii). When the Bench has in categorical terms pointed out that the basis of the exclusion of a debt secured on a property or incurred in relation to acquisition of a property, is to avoid a double advantage to an assessee, it must necessarily follow that when a portion of the value of the property is exempt from chargeability to wealth-tax, then the portion of the debt attributable to that portion of the asset should equally be excluded from being deducted in the matter of computation of wealth. No doubt, it is one of the fundamental canons of interpretation that omissions in a statute cannot, as a general rule, be supplied by construction. If a particular case is omit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and give effect to it ; where there is none, they must ascertain and give effect to the intention which the legislature presumably would have had, if the ambiguity, inconsistency or omission had been called to mind. This may be regarded as the dormant or latent intention of the legislature, and it is this which must be sought for as a substitute in the absence of any real and conscious intention." In CIT v. National Taj Traders [1980] 121 ITR 535, the Supreme Court stated the rule of casus omissus thus (headnote) : A casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductible and in part not deductible. For s. 2(m)(ii) to apply, the debt must be secured on properties with reference to all of which it could be said that wealth-tax is not payable and if such a finding cannot be rendered in respect of all the properties securing the, debt, the provision will not apply. Accordingly, in respect of any debt, either s. 2(m)(ii) applies or does not apply and there is no via media or intermediate, position in between." With very great respect, we are unable to subscribe to the view expressed on the basis of the language of s. 2(m)(ii) that there cannot be any apportionment of a debt as in part chargeable and in part not chargeable. In fact, this very theory was not accepted by the Bench in CIT v. Rajam [1982] 133 ITR 75. That decision proceeded on the basis of the applicability of the doctrine of casus omissus. No doubt, s. 2(m)(ii) does not specifically provide that the apportionment of the debt is secured only when one of the properties is exempted from wealth-tax or as between a portion of the asset which is partially exempt and which is not partially exempt. We have already stated that in such cases it is the duty of the court to make a purposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... language, under either version, might seem to be inappropriate, in one or two respects, to the central theme of the W.T. Act. Some of us may wonder whether the parliamentary draftsman had not quite forgotten the basis of wealth-tax while composing the words of s. 2(m)(ii) of the Act in that fashion. Wealth-tax is avowedly a tax on net wealth, and net wealth is, by definition, the amount by which the aggregate value of taxpayer's assets exceeds the aggregate value of his debts at any given moment of time. In the face of these charging provisions, to speak in terms of an individual item of property or asset being per se taxable or per se not taxable might almost seem to be a howler. An asset as such is not either in, or out of, net wealth. Only its value can be. For, net wealth is a monetary conception. Everything in the assessment is to be reduced to its money value. Again, assets are to be considered in the plural and in the aggregate, en masse. Individual identity of assets gets lost in the admass. And yet s. 2(m)(ii) speaks of an asset or property not chargeable to wealth-tax as if any property or asset, as such, can be made chargeable to wealth-tax even in the absence of this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses also indicate the quantum of exemption either by express provision or by necessary intendment. As respects certain exempted assets, for instance, no qualification, in express terms, is imposed on the precise quantum of exemption. This means that in the absence of qualifying words, the entire value, or rather, the entire market value, of the exempted asset will stand excluded from the computation of the aggregate value of the assets. As respects certain other classes of exempted assets, however, Parliament has clamped down ceilings or monetary upper limits on the quantum of exemption. Section 5(1A), for instance, imposes what may be called a groupal ceiling. Certain classes of exempted assets are, for this purpose, considered together as a group and it is provided that wherever their aggregate value exceeds, say, Rs. 1,50,000, the exemption will stand limited to that figure alone. The statute also imposes individual ceilings of individual assets to limit the exemption up to particular amount. The most familiar illustration of a limiting factor of the latter kind is to be found in the exemption of house property. Clause (iv) of s. 5(1) lays down the exemption in the following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " Any asset or property, in respect of which wealth-tax is not payable or chargeable, under this Act." The meaning of the provision must by now be clear. The property or asset under discussion must be of a kind with respect to which we must be in a position to say that wealth-tax is not payable or chargeable. What are those properties and assets ? The answer is not far to seek. In the first place, the expression " property " occurs in the W.T. Act primarily in connection with the definition of " assets " in s. 2(e). Assets are defined very broadly under this provision so as to include " property of every description, both movable and immovable ". Thus, all assets are properties and all properties are assets. Section 2(e), however, has two or three exceptions. These exceptions show that while assets must be properties of some description or other, the exceptions in s. 2(e) are properties which Pre not to be regarded as assets. They are non-assets, if we can give them that name. Section 2(e) specifies three exceptions. One of them relates to agricultural lands. Till the assessment year 1969-70, agricultural lands were expressly kept outside this comprehensive definition of assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppling with, namely, an asset which falls within the exemption clause in section 5(1), but which, at the same time, is subject to the ceiling on the amount of exemption actually exigible. What are we to make out of such an asset ? The answer must be found from the words of s. 2(m)(ii). The words of the section are " property in respect of which ". The word " which " stands for property. So, the inquiry in every case must be: Is this an item of property of which it can be said, without fear of contradiction, that it is property in respect of which wealth-tax is not chargeable? To take the familiar illustration of a taxpayer's only residential house valued at more than Rs. 1,00,000, anything above Rs. 1,00,000 would have to be included in the aggregate value of the assets and, therefore, would enter into the figure of " net wealth "; what stands exempted would be limited to Rs. 1,00,000 of its value. Can you say " in respect of " this house that wealth-tax is not payable " in respect of " this house ? The answer is " No ". The negative answer is too obvious to require any fears of construction. This was the answer which the Division Bench gave in Rajam and Satish [1982] 133 ITR 75 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble ; and (2) property in respect of which wealth-tax is not chargeable. Category (1) will certainly cover property the whole of the value of which is chargeable to wealth-tax. But that is not all. It would also cover property a portion of the value of which is chargeable. Category (1) will exclude only category (2) which represents property in respect of which no wealth-tax is chargeable at all, for if some wealth-tax is chargeable on the property, then that property would move into category (1). All this discussion about " property in respect of which wealth-tax is not chargeable " is only in the context of non-deductibility of debts in the, computation of net wealth. The general rule of deduction is all debts are deductible. The only three exceptions to the general rule are those set out in s. 2(m), cls. (i), (ii) and (iii). Clauses (i) and (iii) do not give rise to problems of construction, for, by looking at the mere aspect of the debts in question, without more, we can decide whether they are non-deductible debts falling under s. 2(m)(i) or (iii). Not so the debts falling under s. 2(m)(ii). The non-deductibility of these debts will have to depend on the ascertainment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into tax of deductible expenditure and disallowable expenditure under the I.T. Act is conditioned by the language of the provision in s. 37 of that Act. The section lays down that expenditure must be wholly and exclusively for the purpose of the business and it should be neither capital expenditure nor personal expenditure. Where, therefore, expenditure is of a mixed character, there is a statutory compulsion, as it were, to separate the allowable from the disallowable expenditure. Moreover, even for an apportionment of this kind, one has only to consider the nature of the expenditure, and not the nature of its relation to some other phenomenon and, what is more, the nature of that other phenomenon as well. I believe that any method of apportionment which has no statutory sanction, either express or implied, cannot be elevated to the status of binding principle even if it has a scientific backing. For, an apportionment by common consent is merely a convenient vehicle for making estimates in assessment wherever accurate data is lacking. Besides, it can be employed only where the statute either allows or compels its application'. In the words of s. 2(m)(ii), once an asset which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary intention, like the state of the weather, must then be no different from any other question of fact. If so, sitting only with the statute book open and counsel on either side arguing out the matter, courts would be hard put to it to go in search of proof of parliamentary intention, which most of the time any way would only be another name for the draftsmen's intention. It would, I think, accord with the fundamental separation of powers if the courts were to adhere to the good old canons of construction. They often go in contradictory pairs, and their counsel is not uniform. But they are, on balance, much safer guides than the purposive method of getting at the legislative intention. A legislative enactment like any other piece of writing is an attempt at communication. Only it is addressed to nobody in particular, but to everybody in general who may be affected by it one way or the other. Such mass communications are much better understood from the point of view of their meaning rather than from the point of view of their intentions. The two Bench decisions in Rajam [1982] 133 ITR 75 (Mad) and Satish [1982] 133 ITR 834 (Mad) have, in my considered opinion, arrived at a prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are secured on or are related to property the whole of whose value is not chargeable to wealth-tax and the rest of the debts. There is no intermediary class of properties and no intermediary class of debts. And, either a debt is deductible or is non-deductible. There is no such thing a debt which is deductible in part and non-deductible in part. I, therefore, express my dissent, with respect, from the reasonings and conclusions of my two learned brothers who are the other members of this Full Bench. My formal answers to the references on hand would, therefore, be against the Revenue and in favour of the concerned. No costs. ORDER OF THE COURT In view of the difference of opinion between members of the Full Bench in the above cases, the majority opinion prevails and the questions of law must be answered accordingly. A look at the details of the tax cases shows that they fall in three classes. (i) Cases where the Wealth-tax Officer had disallowed a debt in whole even though the secured asset was exempt from wealth-tax only in part and where the action of the Wealth-tax Officer was reversed by the Tribunal allowing the whole of the debt as a deduction. (ii) Cases where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57, with particular reference to claims by taxpayers for deduction of debts which are secured on properties or assets part of whose value is exempt from wealth-tax; claims of this kind are constantly recurring features in the administration of the W.T. Act, 1957. In such cases, the Department has always taken the stand that the whole of the debt is disallowable even though the secured asset is only partly exempt from wealth-tax. This Full Bench had to be constituted for resolving two earlier Bench decisions of this court on this difficult question. The majority of the Full Bench have now taken the view that where debts are charged to partially exempted assets, the debts have got to be disallowed only in proportion to the exempted value of the assets. This decision of the majority, it will be seen, does not accept in toto either the assessees' point of view or the Department's point of view but strikes a middle ground. The minority opinion in these cases has taken the, view that even though a debt is secured on a partially exempted asset, the debt must yet be allowed in whole. In view of the nature of the question, the difference of opinion between the learned judges, and the numb ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
