Dwarka Prasad, C.J. - (1.) THE question which arises for determination in this reference relates to the interpretation and application of Section 5(l)(viii) of the Wealth-tax Act, 1957.
(2.) THE assessee is an individual who owned 3,505 tolas of gold ornaments prior to 1949 which were received by him from his father. THE assessee sold 1,133 tolas of gold ornaments on various dates, retaining 2, 372 tolas of gold ornaments with him. When the question relating to the inclusion of the value of the said gold ornaments in the net wealth of the assessee arose in connection with his assessment to wealth-tax pertaining to the assessment year's 1959-60, 1962-63, 1963-64, 1964-65, 1965-66, 1967-68 and 1968-69, a plea was taken by the assessee that the said gold ornaments did not belong to him but they were the exclusive property of his wife, Smt. Pushpa Devi, to whom he had gifted the said gold ornaments in the year 1949 at the time of engagement with her. According to the assessee, the gift was made by him to his wife prior to the coming into force of the Wealth-tax Act, and so the value of the gold ornaments could not be included in his wealth under Section 4(1)(a)(i) of the Act. THE Wealth-tax Officer did not accept the assessee's case of gift of the gold ornaments before his marriage and the value of the said ornaments was worked out at the rate of Rs. 145 per tola in the assessment order. Appeals preferred before the Appellate Assistant Commissioner were dismissed. In the further appeals preferred by the assessee before the Income-tax Appellate Tribunal, a new plea was raised on his behalf that even if the gold ornaments are includible in the net wealth of the assessee under Section 4(1 )(a)(i) of the Act, yet they were excluded on account of the exemption provided by Clause (viii) of Sub-section (1) of Section 5 of the Act, as they were used by his wife who was a member of his household. This argument was advanced in the alternative, besides the argument based on the alleged gift said to have been made by the assessee to Smt. Pushpa Devi in the year 1949 before their marriage had taken place. THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as " the Tribunal"), rejected the assessee's story about the alleged gift, It was held that the assessee was married in May, 1957, and there was no evidence on record to support the assertion of the assessee that the gold ornaments in question were gifted by the assessee to Smt. Pushpa Devi in the year 1949 or they were with Smt. Pushpa Devi since the year 1949. It was held by the Tribunal that if the gold ornaments were gifted by the assessee to his wife at or about the time of his marriage which took place in May, 1957, the said gold ornaments were includible in the net wealth of the assessee in terms of Section 4(1)(a)(i) of the Act. THE Tribunal proceeded to hold that the gold ornaments were not articles intended for the personal use of the assessee, more so, as no such claim was advanced on behalf of the assessee at any stage. THE Tribunal was also of the view that the gold ornaments could not be held to be articles intended for personal or household use of the assessee, as in its view the word "household" was used in Section 5(1)(viii) in contradistinction to the word " personal " and that the articles meant for the personal use of the wife could not be held to be articles of household use. THE Tribunal further held that as in Explanation 1 added to Section 5(l)(viii) with effect from April 1, 1972, the words "but not including jewellery" occurred, the exemption did not include gold ornaments up to March 31, 1972. However, in view of the fact that the gold ornaments in the present case were not intended for personal or household use of the assessee as such, they could not be exempted from payment of wealth-tax under Clause (viii) of Section 5(1) of the Wealth-tax Act. The assessee applied to the Tribunal for making a reference to this court under Section 27(1) of the Wealth-tax Act. The Tribunal was of the view that two questions of law did arise out of its order dated December 19, 1973, and as such by the order of the Tribunal dated December 27, 1974, the following two questions have been referred by the Tribunal to this court for its opinion : " 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal erred in law in holding that Section 4(1 )(a)(i) of the Wealth-tax Act, 1957, applied to the case of the assessee to warrant the inclusion of the value of gold ornaments in the net wealth of the assessee ? 2. Whether, on a true construction of Section 5(1)(viii) of the Act, the assessee is entitled to the exclusion of the value of gold ornaments from the computation of his net wealth ? " By the Finance (No. 2) Act of 1971, Clause (viii) of Section 5(1) of the Act was amended by adding the words " but not including jewellery " at the end of the clause and two Explanations were also added by the same amending Act. Thus, Section 5(l)(viii), as it stood after its amendment by the Finance (No. 2) Act of 1971, reads as under : "(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee, but not including jewellery: Provided that the furniture, utensils or other articles are neither made wholly or partly of, nor contain (whether by way of embedding, covering or otherwise), gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals : Provided further that nothing in this clause shall operate to exclude from the net wealth of the assessee any conveyance or conveyances to the extent the value or the aggregate value thereof exceeds the sum of thirty thousand rupees. Explanation 1.--For the purposes of this clause and Clause(xiii), ' jewellery ' includes- (a) ornaments made of gold, silver, platinum or any other precious metals or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel. Explanation 2.--For the purposes of this clause, ' conveyance' means any motor car or other mechanically propelled vehicle, aircraft or boat." Here, we may point out that the addition of the words "but not including jewellery" made in section Section 5(1 )(viii) was given retrospective effect from April 1,1963, while the two provisos and the two Explanations added to the aforesaid clause were prospectively made applicable with effect from April 1, 1972. It may be observed that assets which would not be includible in the net wealth of the assessee for the purpose of assessment and payment of wealth-tax have been enumerated in Section 5 and while Clause (viii) thereof does not specifically refer to jewellery, Clauses (xiii), (xiv) and (xv) as they were contained in the original Act of 1957 referred to jewellery. Under Clause (xiii), any drawings, paintings, photographs, prints and any other heirloom not falling within Clause (xii) and not intended for sale, but not including jewellery, were exempted from payment of wealth-tax. Similarly, in Clause (xiv), jewellery in the possession of any Ruler, not being his personal property, which was recognised before the commencement of the Act, by the Central Government as his heirloom was exempted from payment of wealth-tax. Under Clause (xv), as it then stood, jewellery belonging to the assessee, subject to a maximum of twenty-five thousand rupees in value was also exempted from payment of tax under the Wealth-tax Act. Clause (xv) was deleted with effect from April 1, 1963.
(3.) THE question whether jewellery belonging to an assessee would fall under Clause (xv) alone or jewellery intended for personal or household use of the assessee could be exempt from payment of tax under the Act under Clause (viii) was raised before the Gujarat High Court in CWT v. Mrs. Arundhati Balkrishm [l968] 70 ITR 203. THE learned judges of the Gujarat High Court held that the scheme of Section 5 appeared to be that if any particular asset or assets of the assessee fell within any one of the clauses of Section 5(1), such asset or assets must not be included in the net wealth of the assessee. Under Clause (xv) of Section 5(1), jewellery belonging to the assessee up to the maximum limit of Rs. 25,000 was not includible in the net wealth, while under Clause (viii), exemption could be claimed only in respect of jewellery and ornaments which were intended for the personal use of the assessee like any other articles of personal use. THEir Lordships expressed the view that jewellery and ornaments though they can be collectively described as jewellery, if they fall within the four corners of Section 5(1)(viii) can be excluded from the net wealth of the assessee and need not necessarily be governed by Section 5(l)(xv), but the exemption under Section 5(l)(viii) would be available only when the article was intended for the personal use of the assessee concerned and, in that event, the exemption would apply to all articles of jewellery and ornaments intended for personal use, irrespective of the limit of Rs. 25,000 which is imposed by the Legislature in respect of jewellery and ornaments falling under Clause (xv) of Sub-section (1) of section 5. In Pandit Lakshmi Kant Jha v. CWT [1968] 69 ITR 545 (Pat), the case of the assessee before the Wealth-tax Officer was that the entire jewellery worth Rs. 27,27,330 was intended for the personal use of the assessee and it should be excluded from his total wealth. The claim of the assessee that the jewellery in question was intended for the personal use of the assessee was not rejected by the Wealth-tax Officer but he disallowed the claim of the assessee in this respect on the ground that items of jewellery were covered by Clause (xv) of Section 5(1) of the Wealth-tax Act and not by Clause (viii) of that section. The learned judges of the Patna High Court held that the only object of inserting a separate Clause (xv) dealing with " jewellery " was obviously to fix an exemption limit of Rs. 25,000 for " jewellery" and not to fix any such limit for the " other articles " intended for the personal use of the assessee described in Clause (viii) of Section 5(1) of the Act. According to the learned judges of the Patna High Court, the reasonable inference, therefore, seemed to be that all classes of jewellery, excluding perhaps ornaments and precious stones sewn or worked into wearing apparel, would be outside the scope of Clause (viii) altogether and should be dealt with only under Clause (xv). The learned judges, therefore, agreed with the view taken by the taxing authorities that the special provision contained in Clause (xv) must override the general Clause (viii) and that jewellery should be excluded from the other articles intended for the personal or household use of the assessee. The decision of the Patna High Court in the aforesaid case was set aside by their Lordships of the Supreme Court in Pandit Lakshmi Kant Jha v. CWT [1973] 90 ITR 97 in respect of the interpretation of Sections 5(l)(viii) and 5(l)(xv) of the Wealth-tax Act and the entitlement of the assessee to the exclusion of the value of jewellery amounting to Rs. 27,27,330 from the computation of total wealth of the assessee. Their Lordships of the Supreme Court observed that the view of the High Court could not be sustained because of the decision of the Supreme Court in the case of CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC). Section 5(l)(xv) of the Act dealt with jewellery in general, whether intended for personal use of the assessee or not, while jewellery intended for the personal use of the assessee specifically came within the scope of Section 5(l)(viii) of the Act. Thus, the value of all jewellery of an assessee intended for his personal use would stand excluded under Section 5(l)(viii) of the Act in the computation of the net wealth of the assessee. It was pointed out by their Lordships of the Supreme Court that jewellery was excluded from the purview of Clause (viii) of Section 5(1) of the Act with effect from-Aprill, 1963, and so the amendment made in Clause (viii) would become operative with effect from April 1, 1963. Thus, the amended provisions of Section 5(1)(viii) would be effective in relation to assessments made in respect of the accounting years from April 1, 1963. It may be observed that in Arundhati Balkrishna's case [1970] 77 ITR 505, their Lordships of the Supreme Court approved the decision of the Gujarat High Court and it was held that the provisions of Sections 5(1)(viii) and 5(1)(xv) dealt with different situations and while Clause (viii) of Section 5(1) exempted from the net wealth of the assessee the entire jewellery intended for the personal use of the assessee, Clause (xv) of that section dealt with jewellery in general which was exempted to the extent of Rs. 25,000. ;