VENKATACHALIAH, J. - (1.) CIVIL Appeal No. 1118/NT/1975, by special leave, by the Commissioner of Wealth-Tax, Andhra Pradesh, and CA Nos. 1226 & 1227/NT/1975, on a certificate, under Section 29(1) of the Wealth-Tax Act, 1957, [Act] by the assessee raise a question as to the proper construction of the proviso to Sec. 4[1][a] of the Act, which provides for exemption respecting transferred assets which would otherwise be includible in the wealth of the assessee under Sec. 4[1][a] of the Act. 2. The condition for the grant of the exemption under the proviso is that the transfer of the asset is either chargeable to gift-tax or is not chargeable under Sec. 5 of the Gift-Tax Act, 1958. The particular point for consideration is whether, on the language of the proviso, the exemption is attracted only to such gifts as were chargeable to tax for any assessment year commencing "after the 31st day of March, 1964, " as understood by the Revenue or whether the gifts even made earlier would attract the benefit of the exemption as claimed by the assesses.
(2.) THERE appears a divergence of judicial opinion on the point in the High Courts. In C.W.T. v. Smt. Sarala Debi Birla [101 ITR 488 (Cal.)], T. Saraswathi Achi v. C.I.T. [104 ITR 185 (Mad.)], C.W.T. v. Seth Nand Lal Ganeriwala [107 ITR 758 (Pun.)], M.G. Kollankulam v. C.I.T. [115 ITR 160 (Kerala)], Malti v. C.W.T. [121 ITR 676 (MP)] and C.W.T. v. Rasesh N. Mafatlal [126 ITR 173 (Bom.) several High Courts have constructed the provision in the manner suggested by the Revenue. C.W.T. v. Hashmatunnisa Begum [108 ITR 98 (AP)] has taken the opposite view extending a wider benefit of the exemption. The opinion of the Calcutta High Court in 101 ITR 488, which is representative of the view in favour of Revenue, is under appeal in CA 1226 and 1227 of 1985 and the opinion of the Andhra Pradesh High Court in 108 ITR 98 which is favourable to the assessee is under appeal No. CA 1118 of 1975 preferred by the Revenue. In CA 1118 of 1975 the assessee Smt. Hashmatunissa Begum, the legal representative of the late Nawab Zaheer Yar Jung Bahadur, claimed in respect of the assessment year 1967-68, that the value of the immovable properties gifted by the late Nawab to his wives before 1.4.1964 should not be included in the net wealth of the Nawab as on the valuation dated 30.9.1966. The Nawab under three deeds of gift on dated 25.5.1962, in favour of Smt. Hashmatunnisa Begum, his first wife, and two other deeds dated 17.8.1962 and 26.4.1962 in favour of Smt. Fareed Jehan Begum his second wife, gifted in their favour certain lands and buildings of a total value of Rs. 1, 96, 950/-. The gift were chargeable to gift-tax and were accordingly assessed to gift-tax in the assessment year 1963-64. On behalf of the estate of the Nawab - who later died on 16.12.1968 - it was claimed in the proceedings for assessment to wealth for the Assessment Year 1967-68, that though the gifts were otherwise includible as belonging to the Nawab under Sec. 4[I][a][i], as the transfers made to the spouses otherwise than for adequate consideration, however, as the gifts were chargeable to gift-tax, the proviso to Sec. 5[I][a] was attracted and that the assets so transferred were not includible in the net wealth of the Nawab "for any assessment year commencing after the 31st day of March, 1964". The Wealth-tax Officer rejected this claim. The Appellate Asstt. Commissioner, in the assessee's appeal, confirmed the assessment. In the assessee's further appeal before the Appellate Tribunal, the Tribunal, on a particular construction of the proviso, allowed the appeal and held that the assets transferred, which had attracted gift-tax, were not includible in the net wealth of the Nawab for the assessment year 1964-65 onwards. At the instance of the Revenue, the following question of law was referred to the High Court for its opinion :"Where, on the facts and in the circumstances of the case, the assessee was entitled to exclude, under the proviso to section 4(1)(a) of Wealth-tax Act, 1957, the value of the assets gifted to his wives in the Wealth-tax assessment for the assessment year 1967-68 ?" The High Court agreed with the construction placed on the proviso by the Tribunal and answered the question in the affirmative and against the revenue. The revenue has come up in appeal by special leave.
(3.) IN CA 1226 and 1227 of 1975 the assessment years concerned are 1964-65 and 1965-66 corresponding to the valuation dates 31.3.1964 and 31.3.1965. On 7.10.1959 Smt. Sarla Debi Birla, the assessee, made a gift of Rs. 1, 00, 011/-, to her minor daughter Smt. Manju Rani Birla. The assets so transferred were included in the assessee's wealth for the two assessment years 1964-65 and 1965-66 under Sec. 4[I][a][ii] of the Wealth-tax Act. The claim of the assessee that the proviso to Sec. 4[I][a] operated to exclude the asset from the net wealth of the assessee as the transfer was chargeable to gift-tax was not accepted by the Wealth-tax Officer, who completed the assessment including the transferred-asset in the assessee's net-wealth. The assessee's appeal before the Appellate Asstt. Commissioner was unsuccessful. However, the Appellate Tribunal accepted the contention of the assessee and by its appellate order dated 11.5.1970 allowed the assessee's appeal holding that on a true construction of the proviso, so long as the gift was chargeable to or exempt under Sec. 5 from gift-tax to that extent Sec. 4[I][a] ceased to have operation and the statutory fiction embodied in it was not attracted and that as at the relevant time the gift was chargeable to gift-tax. The exemption was to operate from the assessment year commencing after 31.3.1964. At the instance of the revenue, the Appellate Tribunal referred the following question of law for the opinion of the High Court :"Whether on the facts and in the circumstances of the case and on a proper interpretation of section 4(1)(a) of the Wealth-tax Act as amended by the Wealth-tax (Amendment) Act, (Act 46) of 1964, the sum of Rs. 1, 00, 011/- gifted by the assessee to her minor daughter could be included in computing her net wealth ?" The High Court of Calcutta in reversal of the view taken by the Tribunal answered the question in the affirmative and against the assessee. The assessee has come up in appeal by certificate.;