WEALTH TAX OFFICER Vs. NATHALAL JETHA
INCOME TAX APPELLATE TRIBUNAL
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P.K. Mehta, Accountant Member -
(1.) PARAS 1 and 2 are not reproduced here as they involve minor issues. 3. The common issue involved in the five appeals is a short one which arises from the reading of the head note of the Bombay High Court decision in the case of CWT v. Kishanlal Bubna  103 ITR 56. The brief facts are that the deceased assessee Shri Patel Jetha Veera gifted some land to his wife and included the value of such gifted land on the five valuation dates in the wealth-tax returns filed as required by Section 4(1)(a) of the Wealth-tax Act, 1957 ('the Act'). However, in the course of the assessment proceedings, it was claimed that the value of gifted property as on the date of transfer should only be included in the five wealth-tax assessments. The WTO rejected the claim by observing that value of the transferred asset, whether it is held in its original form or in any other form, was includible in the net wealth as on the valuation date under the provisions of the Act. The assessee went in appeal to the AAC who taking note of the Bombay High Court decision in Kishanlal's case (supra) accepted the assessee's contention and held that the value which the asset carried as on the valuation date relevant to the previous year in which the transfer was effected was includible in the assessments of the assessee. The revenue has come up in appeal against the decision of the AAC. 4. We have heard the submissions of the learned departmental representative and considered the submissions in writing of the assessee. The assessee solely relied on the Bombay High Court decision in Kishanlal's case (supra). The departmental representative read that authority to show that the AAC had totally misunderstood the authority. It was rightly pointed out that the Bombay High Court was not dealing with a case like that of the assessee where the asset transferred itself, i.e., the land, remained with the donee and was not converted into any other form by her. ft was pointed out that in Kishanlal's case (supra), what was settled upon the trust and transferred to the trustees for the benefit of two minor daughters of the settlor were two cash amounts which were subsequently converted into shares and, therefore, the Judgment of the High Court is to be read in the context of the original asset transferred was being converted into another asset. It was also contended that there was sample authority in the Bombay High Court Judgment itself to support the case of the revenue. 5. It is clear from the reading of the full report of the Bombay High Court in the case of Kishanlal (supra), that the decision of the AAC is quite erroneous and he is misled by two sentences in the head note which have been taken out of context while preparing the head note. To highlight our point, we quote : ...The words 'such assets' really indicate and pinpoint the specific assets which have been transferred. That such was the intention is made very clear by the latter part of this section because it says'whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise'. The object of this latter part of the section is that regard is to be had to the valuation of the original assets irrespective of the fact whether the original assets are retained in the form in which they are transferred or they are converted into different types of sets. In either case, it is the value of the assets that are transferred that is to be determined as on the relevant valuation date. There can be no controversy as regards the value of the assets transferred when the assets so transferred are in the form of money. In the present case, under the two trusts the trust is created for the cash amount of Rs. 46,302. Thus, the value of the assets like cash amount on the valuation date would remain the same unless devaluation of money has taken place by reducing the value of a rupee. Such a case does not arise in the present case. When the original assets transferred is cash in the form of rupees, then naturally irrespective of the fact whether the transferees like the trustees retain the same assets transferred in the form in which they were settled upon trust or invest them in other properties still for the purposes of Section 4(1)(a)(iii) it is the value of the original assets that has to be taken into account and not the value of the assets into which it is converted....(p. 60) It will be noticed from the above extract that the last sentence 0therein has undergone some change, which has affected the context, when the summary is made for the purpose of head note. In the head note, following two sentences occur separately : ...Regard is to be had to the value of the original assets irrespective of whether the original assets are retained in the form in which they were transferred or are converted into different types of assets. The value of the assets as on the date of the transfer is to be taken into consideration for purposes of Section 4(1)(a)(iii) ....(p. 56) The complete sentence in the High Court Judgment has been split into two and thereby the context has got lost. It is the second sentence in the head note quoted above which appears to have caused the misunderstanding to the AAC. He lost sight of the fact that the observations of the High Court were only when the asset originally transferred was converted into a different asset. If the complete report had been gone into and the full extract quoted above was read, the conclusion which the AAC had drawn could not be there. The Bombay High Court after analysing the relevant provisions itself had observed that "... it is quite clear from the definition of the expression 'net wealth' in Section 2(m) that not only the aggregate value of the assets belonging to the assessee is to be taken into account but the aggregate value of the assets which are required to be included in the net wealth under the Act are also to be taken into account as on the valuation date.... (p. 59). It is clear that in the case of assessee, the approach of the WTO is correct and the AAC has fallen into error. The order of the AAC on this point is reversed for all the five assessment years and the orders of the WTO are restored. 6. As a result, the appeal of the revenue is allowed.;
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