LAWS(DLH)-2001-11-28

COMMISSIONER OF INCOME TAX Vs. VASAVI PRATAP CHAND

Decided On November 26, 2001
COMMISSIONER OF INCOME TAX Appellant
V/S
VASAVI PRATAP CHAND Respondents

JUDGEMENT

(1.) Interpretation of certain provisions of Wealth-tax Act, 1957(hereinafter referred to as the Act) is involved in these set of references. The question which has been referred for the opinion of this Court is as under:

(2.) For the purpose of disposal of these matters, fact of the matter would be noticed from WTR 25 of 1980. The respondent is an assessee under the Wealth-tax Act. Partap Chand, husband of the assessee had obtained a loan against certain policies from LIC. The assessee was trustee as well as beneficiary of these policies. A sum of Rs. 1,13,258/ was obtained by way of loan and assignment of the said policy. A part of the loan was invested in purchase of shares and another part thereof was used for making advances-to others. She filed a return under the Wealth-tax Act showing- net wealth at Rs. 875384/ for the assessment year 1975-76 which included the value of certain shares including those which had been purchased out of the aforesaid loan. She claimed deduction for total liability of Rs. 138731.00 which included the aforesaid loan amount ofRs. 113,258/-. The Wealth-tax officer assessed the liability of the assessee at Rs. 13 8731.00 . The net wealth was thus determined at Rs. 926620.00. The Commissioner of Wealth Tax was however, of the view that the order passed by the Wealth-tax Officer was erroneous and prejudicial to the interest of the Revenue. He issued a show cause notice on 30.11.1977 calling upon her to explain why the liability relating to the aforesaid loan amount should not be deducted from the value of her assets. The Commissioner was, of the opinion that the said amount does not fall within the purview of the term net wealth as laid down in Section 2(m)(ii) of the Act. The contentions raised by the assessee in her show cause were rejected. Against the order of the Commissioner, the assessee preferred an appeal to the Tribunal. The Tribunal allowed the said appeal by an order dated 25.6.1979 holding that the Commissioner of Wealth-tax was not justified in withdrawing the relief already granted by the Wealth-tax officer by holding that his order was erroneous in so far as it was prejudicial to the interests of the revenue. Upon an application filed by the CIT, the Tribunal referred the aforesaid question to this Court for its opinion.

(3.) Mr Sanjiv Khanna, learned counsel appearing for Revenue would submit that undisputedly the LIC policies are exempted from the purview of Wealth- tax Act under Section 5(1)(4) of the said Act. According to the learned counsel if the benefit arising out of the policy could only be derived upon attaining maturity with the last payment made in relation thereto, the same would not attract the definition of 'net wealth' as contained in Section 2(m)(ii) of the Act. Learned counsel would submit that the provisions of Sections 3,4, and 5 of the Wealth Tax Act must be read harmoniously and so read, the amendment carried out in the definition to word 'chargeable' from, 'payable' would not attract the mischief rule. The words 'chargeable' and 'payable' according to Mr Khanna are synonymous. In support of the said contention reliance has been placed by him on CIT V. Vaidyanathan (1985) 153 ITR 11, Apoorva Shanti Lal v CWT [1982) 135 ITR 182 and CWT v. Premnarayan Garg (1982) 134 ITR 315. Our attention was also drawn to the fact that this aspect of the matter had although been accepted by the Tribunal but it erred in proceeding on the basis that insurance policy is not one- of the excluded assets. Mr Anup Sharma, learned counsel appearing for the respondent, on the other hand, would submit that the minority view in CIT V. Vaidyanathan ( supra) has been approved by the Division Bench in CIT V. Vasant 186 ITR 91. Learned counsel would contend that the expression payable used in Section 5 must be construed having regard to the fact that the assets must at first be 'chargeable' to tax and then a question would arise as to whether the same is 'payable' or not. Mr Khanna in reply pointed out that Bombay High court has not determined the question involved in this case and only in relation to another contention, the minority view of the Full Bench of madras High Court was followed. Interpretation clause contained in Section 2 of the Act begins with the words "unless the context otherwise requires".