SENGUPTA, J. - (1.) IN this reference under S. 27(1) of the "WT Act, 1957 ('the Act) for the asst. yrs. 1973-74,1974-75 & 1975-76, the following question of law has been referred to this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified, in holding that the provisions of S. 21A of the WT Act, 1957 did not apply to the assessee's case?"
(2.) THE facts relate to this question are that the WTO found that the assessee-trust had 1775 shares of Shree Krishan Shares Pvt. Ltd. valued at Rs. 89,437. These shares were received by the assessee-trust as donations on 2nd May, 1962, 6th May, 1963 and 18th May, 1965. In addition to the above 1775 shares, the assessee-trust acquired on 4th Dec., 1971 as further block of 90 shares of the same company valued at Rs.9,000. The WTO further found that the aforesaid company was one in which the trustees of the assessee-trust were interested. Hence, he applied the provisions of ss. 13(3)(b), 13(3) (e) and 13(2)(h) of the IT Act, 1961 and as a consequence thereof, treated the entire income of the assessee-trust as liable to tax and invoked the provisions of S. 21A. In this manner he treated the entire income of the assessee-trust as liable to wealth-tax. The assessee appealed to the AAC and urged that the action WTO was wrong. The AAC found that the Tribunal in its orders in IT Appeal No.4106 (Cal.) of 1976-1977 and ITA Nos. 1557 and 1558 (Cal.) of 1978-79 held that the provisions of S. 13(2)(h) did not apply to the initial donations of shares received by the trust and so, the assessment of the income from these shares under the 1961 Act, was not justified. As a corollary, the assessment of the value of those shares under s. 21A of the Act was also not justified. Relying on the aforesaid orders of the Tribunal, the AAC quashed the wealth-tax assessment under consideration. He held that the acquisition of shares, worth Rs.9,000 by the assessee-trust in the aforesaid company would be hit by S. 13(2)(h) of the IT Act and, therefore, also by S. 21A of the WT Act. He directed the WTO to modify the assessments accordingly.
(3.) THE Department appealed to the Tribunal contending that the AAC was not justified in deleting from the total wealth of the assessee the value of the initial donation of shares to the tune of Rs.89,437.;