Decided on November 15,1983



MEHTA,J. - (1.) AT the instance of the CWT, Gujarat, the following question is referred to us for our advice "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the fixed deposit blocked account of the assessee in the Ceylonese bank, the face value of which had been subjected to tax in the assessee's wealth-tax assessment was not cash and, therefore, it should have been valued under s. 7(1) of the WT Act, 1957 ? Briefly stated, the facts leading to this reference are as under : The assessment years involved in this reference are 1969-70 to 1973-74. The assessee is a repatriate from Ceylon where he was carrying on business. The assessee claimed that he was compelled to leave Ceylon and that though he was permitted to visit that country occasionally for short duration, he was not allowed to carry on business there, with the result that he left behind certain assets which were, under the directions of the Ceylon Government, required to be disposed of and the proceeds realised had to be kept with a Ceylon bank. Though it is not clear from the statement of the case, it appears that the assets were disposed of somewhere in 1968-69 and the amount so realised and deposited in the Chartered Bank of Ceylon in a fixed deposit account, as converted into Indian currency at the official rate of exchange as on the valuation date, was as shown below : It should be stated for putting the record straight that in the statement of the case, the balance shown for the asst. yr. 1973-74 is Rs. 4,57,887. But as it appears from the assessment order of the WTO, annexed to the statement of the case, it was Rs. 2,91,464. In the return, the assessee claimed that on account of various restrictions on the operation of the said account, the value of the deposit should be taken under s. 7(1) of the WT Act, 1957 (hereafter referred to as "the Act"), at 40 per cent. of the value of the deposit. In support of this claim, the assessee had produced a letter received from the Chartered Bank, Colombo, dt. 15th Feb., 1971, stating to the effect that the exchange control authorities of the Government of Ceylon did not permit the remittance of capital funds for the time being and in case of permission being granted by the authorities to remit the balance at the foot of account in the books of the said bank, which amounted to Rs. 2,31,328,81 (which appears to be in Ceylonese rupees), it would be subject to the purchase of the foreign exchange entitlement certificate which would be of the value of 55 per cent. of the aforesaid sum, leaving for remittance a net balance of approximately Rs. 1,49,243.22. The WTO did not accept the assessee's claim and having regard to s. 2(m) of the Act, included the entire value of the fixed deposit converted into Indian currency in the total wealth of the assessee in respect of all the five years. Being aggrieved with this order of the WTO, the assessee carried the matter in appeal before the AAC, who dismissed five appeals by a common order confirming the order of the WTO. In further appeal to the Tribunal, the assessee could persuade the Tribunal that the WTO was not justified in including the entire amount of the fixed deposit as converted into Indian currency in the net wealth of the assessee, since the said deposit did not amount to cash and, therefore, required proper valuation thereof at the hands of the WTO. This contention of the assessee found favour with the Tribunal which held that the fixed deposit in the blocked account and subject to restrictions cannot be treated as equivalent to cash though for all intents and purposes, it would be a taxable asset. The Tribunal, therefore, set aside the order of the AAC on the limited ground that while the blocked deposit was a part of the taxable wealth of the assessee, its value should be worked out under s. 7(1) of the Act. The Commissioner has, therefore, claimed this reference which has been granted setting out the question as aforesaid to us for our advice.
(2.) THE next question of law arises as to whether the amount belonging to an Indian national and lying in the frozen fixed deposit account in a bank in a foreign country and subject to temporary restraint prohibiting repatriation of such amount and permitting repatriation, if at all, of the balance amount only after certain deductions would amount to cash so as to entitle the wealth-tax authorities to take the face value thereof for the purpose of computation of the wealth-tax liability of the assessee. Sec. 3 of the Act is a charging section which provides that subject to the other provisions contained in the Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax in respect of the net wealth on the corresponding valuation date of every individual, HUF and company at the rate or rates specified in the Schedule. Sec. 2(m) defines "net wealth" to mean the amount by which the aggregate value computed in accordance with the provisions of the 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 the Act, is in excess of the aggregate value of all the debts owed by the assessee Assessment year Amount . Rs. 1969-70 3,01,215 1970-71 3,06,690 1971-72 2,96,389 1972-73 2,91,464 1973-74 4,57,887 On the valuatiOn date other than those specified in s. 2(e). Sec. 4 enumerates as to what assets are to be included in the net wealth of an individual. Sec. 2(e) defines "assets" which includes property of every descriptiOn, movable or immovable, but does not include those specified therein. Sec. 5 enumerates assets which are exempted from the purview of wealth- tax liability. Sec. 6, with which we are not cOncerned, provides for exclusiOn of assets and debts outside India of an individual who is not a citizen of India or who is a nOn-resident or a resident but not ordinarily resident in India and an HUF having the same status or a company not resident in India during the year ending On the valuatiOn date. It should be noted at this stage that the assessee in the present case is a citizen (of India). Sec. 7 provides for the determinatiOn of the value of assets. Material part of s. 7 which is relevant for the purpose of this reference reads as under: "7. (1). Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opiniOn of the WTO it would fetch if sold in the open market On the valuatiOn date."(Emphasis* supplied) It is particularly in the cOntext of s. 7 that the cOntroversy arises in this reference, since it is commOn ground that the amount lying in the fixed deposit account in the Chartered Bank, Colombo, is an asset which is liable to be subjected to wealth-tax under the Act. The short questiOn which arises in this reference, therefore, is that whether the amount lying in the frozen account of the Chartered Bank, Colombo, is cash for all intents and purposes; and, therefore, the WTO was under no obligatiOn to evaluate it. It should be noted that the word "cash" has not been defined in the legislative dictiOnary provided in s. 2 of the Act. The first questiOn which, therefore, arises is what meaning should be ascribed to the word "cash" in the cOntext of the valuatiOn in s. 7 of the Act. Is it to be interpreted in the widest sense so as to include not Only the cash On hand but also the cash lying in various accounts including the fixed deposit accounts in the bank ? Or should it be interpreted in a restricted sense so as to include the cash On hand and the cash in the current or savings bank account Only ? In other words, the short cOntroversy is whether cash would mean that amount Only which is On hand and readily available and for which no formalities are required to be complied with before the mOneys would be available to the assessee cOncerned. On behalf of the Revenue it has been cOntended that the Tribunal had committed an error of law in negativing the cOntentiOn of the Revenue that the mOneys lying in the fixed deposit account are mOneys in the bank and, therefore, should be treated, for all intents and purposes, as cash since the fixed deposit account holder can encash the deposit at his pleasure, though there may be certain formalities which he may be required to comply with; or in some cases, he may not be entitled to claim specified rate of interest which the bank had agreed to pay On the maturity of the fixed deposit. The learned counsel for the Revenue cOntended that the word "cash" occurring in s. 7 is of widest import and the Court * Here printed in italics. should not try to restrict its import, since there is no warrant in that behalf. On the other hand, On behalf of the assessee, it has been cOntended that all the assets which are required to be valued would not be liable to be treated as cash, since that is the very scheme of s. 7 ; and at least in the present case, since the amount lying in the fixed deposit account is in a frozen account and which is not permitted, according to the foreign exchange regulatiOns in force in CeylOn, to be repatriated to this country, in any case, without certain restrictive covenants or cOnditiOns being attached, therefore, such an asset has got to be evaluated. If the asset is to be valued, according to the learned counsel for the assessee, it is ex facie apparent that it cannot be treated as cash. The learned counsel for the Revenue has cited a few decisiOns to which we will presently refer to impress upOn us that there is no warrant to cOnstrue the term "cash" in a restricted manner as has been dOne by the Tribunal. Having given anxious cOnsideratiOn to all the aspects of the matter which we will indicate immediately hereafter, we are of the opiniOn that the Tribunal was right in the ultimate cOnclusiOn which it reached that the amount of the assessee lying in the fixed deposit account in the Chartered Bank, Colombo, cannot be treated as cash; and, therefore, the entire amount as cOnverted into Indian currency should not be included in the net assessable wealth of the assessee, not for the reasOns which it has stated, but for the reasOns given hereunder.
(3.) IN the first place, it should be emphasised that the legislative intent as evidenced in the scheme incorporated in s. 7 for the purpose of valuation of assets is what value it would fetch if sold in the open market. In other words, the basic scheme contained in s. 7 is to evaluate every asset with reference to its market value, i.e., the value which a willing seller will realise from a willing buyer. It is from this formula of the scheme of valuation that "cash asset" has been excluded. On recognised principles of interpretation of statutes, an exception clause is to be strictly construed. It is, therefore, difficult for us to agree with the learned counsel for the Revenue that there is no warrant in the section for giving a restricted meaning to the term "cash". On principle as well as on authority, it is settled position in law that an exception clause must be construed strictly and cannot be interpreted so as to nullify or destroy the main provision. (See T. Devadasan vs. Union of India, AIR 1964 SC 179). An exception has to be confined within its own limits and must be restricted to the matter embraced within it and it is not permissible to extend the meaning of the exception by analogy or by reference to the meaning of the same or similar word, in other cases, so as to include cases which cannot be reasonably brought within the purview of the language employed. Having regard to the overall context of the provision, we are not inclined to agree with the learned counsel for the Revenue that the word "cash" should be given an extended and enlarged meaning since otherwise it would include all sorts of bank accounts, including bills of exchange, deposits, cheques, bonds, dividend warrants and other securities which can be easily converted into money, Our attention has been invited by the learned counsel for the Revenue to the principle digested in Corpus Juris Secundum, Volume 14. He referred to article I 1, at page 14, in which the word "cash" has been defined. It has been stated that the word "cash" as a noun is generally used to signify money or its equivalent, including coin or specie, and, under certain circumstances, bank notes, drafts, bonds or commercial paper easily convertible into money. It is also true as digested in the said article at page 16 that in popular parlance, "cash" is used to refer not merely to money, but to money in hand, under full control for use in paying obligations and liabilities and has been defined as meaning money at command or in hand, either in current coin or other legal tender, or in bank bills or cheques paid and received as money; money in the treasury. We do not think that the learned counsel for the Revenue was justified in urging, on the basis of these observations in Corpus Juris Secundum, to persuade us to adopt a wider meaning for the term "cash" occurring in s. 7 of the Act, because in the ultimate analysis, it would depend in each instance on the context or circumstances of the use of the word "cash" in a given statute. At page 17 of Corpus Juris Secundum, Vol. 14, this is precisely what has been observed under the caption "What the term includes" : Under particular circumstances, and, of course, depending in each instance on the context or circumstances of its use, it has been held that 'cash' includes generally bank accounts, bills, and deposits, bank paper, checks, city bonds, commercial paper, bonds, warrants and other securities easily converted into cash, corporate stock into which cash has been converted, interest- bearing notes, liberty bonds and war savings stamps, municipal orders, warrants, or scrips, as well as payments in currency ...... Under other circumstances, however, the word has been held not to include bank notes, bills receivable, checks, check returned unpaid even though paid several days thereafter, foreign bills, gold dust, goods, government bonds, insurance premiums in course of collection, even though they may be collected within ninety days ................ promissory notes, real estate in absence of a manifest intent that it was used for that purpose, treasury notes or war currency of the Confederate States." ;

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