COMMISSIONER OF WEALTH TAX Vs. HARSHAD RAMBHAI PATEL
HIGH COURT OF GUJARAT
COMMISSIONER OF WEALTH TAX
HARSHAD RAMBHAI PATEL
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P.N.BHAGWATI, J.M.SHELAT -
(1.) THIS is a Reference under sec. 27 of the Wealth-Tax Act XXVII of 1957. The relevant assessment years are 1957-1958 and 1958 and the relevant valuation dates are the 31st of December 1956 and the 31st of December 1957.
(2.) THE two assessees are brothers and have been separately assessed as individuals. Amongst the other properties the two assessees were possessed of 12 Year National Savings Certificates and 10 Years 3 1/2%Treasury Savings Certificates. THE assessee Harshad had at the relevant time 12 Year National Savings Certificates of the value of Rs. 25 0 in his own name and of Rs. 1 35 0 in some other name or names. He was also possessed of the 10 Year 31/4 % Treasury Savings Deposit Certificates of the value of Rs. 25 0 which stood in his name and other such Certificates of the value of Rs. 1 0 0 which stood in other name or names. Likewise the other assessee Mahendra was possessed of 12 Year Post Office National Savings Certificates of the value of Rs. 25 0 which stood in his own name as also 10 Year 31/2 % Treasury Savings Deposit Certificates of the value in all of Rs. 75 0 out of which Certificates of the value of Rs. 50 0 stood in his and his wife's joint names and the rest of the Certificates of the value of Rs. 25 0 in some other name or names. In addition to these Certificates each of the two assessees inherited Certificates of the value of Rs. 1 0 0 upon the death of their brother one Manubhai R. Patel. THE holdings as on the 31st of December 1957 of each of the two assessees in the aforesaid Certificates were the same as those on the 31st of December 1956. THE assessees claimed exemption from wealth-tax in respect of these certificates and relied upon therefore on section 5(1) clause (xvi) of the Act. THE Wealth-Tax Officer granted exemption to the assessee Harshad in respect of Certificates of both the types of the value of Rs. 25 0 each and so far as the assessee Mahendra was concerned he granted exemption in respect of the 12 Year National Savings Certificates of the value of Rs. 25 0 and the 10 Year 3 1/2% Treasury Savings Deposit Certificates of the value of Rs. 50 0 only. THE rest of the claim for exemption in respect of the other Certificates was rejected by the Officer. THE Wealth-Tax Officer while rejecting the aforesaid claim in his assessment order against the assessee Harshad stated as follows:-- THE total holdings of the assessee in such certificates is Rs. 3 35 0 which are claimed to be exempt under section 5(1)(xvi) of the Wealth-tax Act. It is however to be noted that the exemption embodied in sec. 5(1)(xvi) of the W. T. Act is restricted to the actual holdings of the assessee. On the other hand it is admitted that the holdings to the tune of Rs. 3 35 0 as detailed above are not entirely held by the assessee in his own name. As already stated above Rs. 1 0 0 in these holdings represent the share in the holding of his brother Shri Manubhai who is now deceased. This amount therefore cannot enjoy the exemption prescribed by sec. 5(1)(xvi) of the W. T. Act. As for the balance of holdings of Rs. 1 85 0 the assessee is entitled to exemption for Rs. 25 0 in respect of 12 year post office national savings certificates only and Rs.25 0 in respect of 10 year 31/2% Treasury saving deposits which is the limit upto which he can invest into such certificates in his personal name. THE assessee is therefore entitled to total exemption of Rs. 50 0 THE balance of Rs. 3 35 0 is therefore included in his total wealth Rs. 3 35 0 A similar order was passed against the other assessee Mahendra THE two assessees took the matter in appeal before the Appellate Assistant Commissioner before whom they raised two contentions (1) that since the Certificates were not in the name of the assessees but in the names of the nominees under the Post Office Rules and under the Government Rules the owners of such certificates would be the persons in whose names such certificates stood and therefore such certificates could not be included in the net wealth of the assessees and (2) in the alternative that if it were held that the assessees were the owners of these certificates then these certificates must be treated as having been held by the assessees within the meaning of section 5(1)(xvi) of the Wealth Tax Act. In either event therefore these certificates were not includible in the net wealth of the assessees. THE Appellate Assistant Commissioner declined to accept either of the two contentions and held that the Wealth Tax Officer was entitled to include the value of these certificates in the net wealth of the assessees as the certificates were admittedly owned by them including the certificates which stood in the names of their nominees. As regards section 5(1)(xvi) the Assistant Commissioner held that clause (xvi) applied only to those certificates which were held by the assessees in other words which stood in the names of the assessees and that the concept of beneficial ownership or Benamiwas unknown to section 5 of the Act. In that view he held that though the certificates standing in the names of their nominees were the assets of the assesses includible in the net wealth of the assessees such of the certificates as did not stand in the names of the assessees were not entitled to exemption and therefore were rightly included by the Wealth Tax Officer in the taxable net wealth of the assessees.
Aggrieved by the orders of the Assistant Commissioner both the assessees filed appeals before the Tribunal and the Tribunal taking a different view on the interpretation of clause (xvi) of section 5(1) set aside the orders of the Assistant Commissioner and held that the assessees were entitled to exemption in respect of the value of all the certificates and that no distinction could be made between the certificates standing in the names of the assessees and those standing in the names of their nominees. The Tribunal held that the securities in question formed part of the wealth exempt from assessment altogether with no limit specified in the exempting sub-section and under sec. 5(1)(xvi) such certificates were not includible in any assessment whether they stood in the names of the assessees or were possessed of by them as beneficial owners. The Tribunal thereafter made the present Reference at the instance of the Commissioner of Wealth-Tax and the question of law that has been referred to us is as follows:-- Whether on a proper interpretation of section 5(1)(xvi) of Wealth-tax Act the assets representing the aforesaid savings certificates which are not in the name of the assessee but of which the assessee was the beneficial owner are exempt from wealth-tax ?
The question that falls for our determination is one of interpretation of clause (xvi) of sec. 5(1) and in particular of the words held by the assessee occurring in that clause. Before however we go to sec. 5(1 ) (xvi) it will be necessary first to turn to the definitions of net wealth and assets given in the Act. Section 2(m) defines net wealth's meaning the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act is in excess of the aggregate value of all the debts owed by the assesses on the valuation date. It is clear from this definition that any property wherever located belonging to the assesses on the relevant valuation date would be includible in the computation of his net wealth. Clause (o) of section 2 defines the word assets as including property of every description movable or immovable except properties thereinafter set out. Since the excepted properties are not relevant for the purposes of this Reference it is not necessary to quote the rest of the definition of the word assets .
(3.) SECTION 5(1)(xvi) which is the section which requires to be construed in this Reference provides as follows:-- 5 Exemption in respect of certain assets. (1) 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-............................ ............... (xvi) ten-year treasury savings certificates fifteen-year annuity certificates deposits in post office savings banks post office cash certificates post office national plan certificates and twelve-year national plan savings certificates held by the assessee. Clause (xvi) was subsequently amended but so far as the present Reference is concerned it is clause (xvi) as it stood prior to the amendment and as cited above which is relevant. It will be noticed at once that both in the definition of net wealth as also in sec. 4 of the Act which provides for the net wealth to include certain assets set out therein the Legislature has used the expression belonging to the assessee but while enacting clause (xvi) in sec. 5(1) it has used the expression held by the assessee. The question is whether the interpretation given by the Tribunal to the expression held by the assessee namely whether standing in the name of the assessee or not is a true and proper construction.
The learned Advocate General appearing for the Commissioner contended that there was a clear distinction between the two expressions namely belonging to and held by the assessee . He submitted that the expression belonging to has reference to ownership in the property and that the expression belonging to means that the assessee has proprietary right or ownership in the property in question. He argued that as against such a meaning of the expression belonging to the expression held by the assessee as used in clause (xvi) of sec. 5(1)has a limited meaning in the sense that the certificates in question can be said to be held by the assessee only if such certificates stand in the name of the assessee. As against this construction Mr. Nanavati for the assessees canvassed for the interpretation of the expression held by the assessee as meaning belonging to or of the ownership of the assessee and argued that the expression meant not only the certificates standing in the name of the assessee but also those in the name or names of his nominees. Mr. Nanavati went to the extent of suggesting that there was no difference between the expressions held by and belonging to and that both the expressions were synonymous and relied upon the meaning of the verb hold i. e. own as property as given in the Oxford Short Dictionary. Mr. Nanavati also submitted that since clause (xvi) was an exemption clause in favour of an assessee that clause should be liberally construed particularly in view of the object of the scheme under which the Government of India have issued these certificates viz. encouraging thrift and economy amongst the people of this country. Mr. Nanavati therefore contended that the Tribunal was right in holding that these certificates whether they stood in the name of the assessee or in the names of his nominees had to be exempted under the provisions of clause (xvi) of sec. 5(1).;
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