COMMR OF WEALTH TAX Vs. RUGMINI ACHI

JUDGEMENT

(1.) PURSUANT to the direction of this Court in ITR Nos. 197 to 200 of 1979, the following question has been referred to us by the income-tax Appellate Tribunal, Cochin Bench along with the supplementary statement of the case: "whether, on the facts and in the circumstances of the case, and also considering the relevant provisions of the Wealth-tax Act, 1957, the Tribunal is right in law in holding that the transfer of shares effected by the assessee In favour of the donees in 1961 with an obligation to retransfer in 1969 (the same has been complied with) is irrevocable and that the shares are not assessable in the hands of the assessee?"

(2.) THE assessment years in question are 1965-66 to 1968-69. THE Wealth Tax Officer in computing the net wealth of the assessee included certain assets being shares in companies transferred by her to her parents-in-law under two instruments both dated 24-3-1961. THE very same instruments had been the subject matter of consideration in the earlier assessment years and had been treated as effecting an irrevocable transfer entitling the assessee to exclude the items covered by the instruments in the computation of the net wealth. However, as a result of the amendment of the wealth Tax Act, 1957 with effect from 1-4-1965, the Wealth Tax Officer found that the instruments in question no longer qualified to be considered as effecting an irrevocable transfer of the assets covered by them. Accordingly, the Officer included those assets in the computation of the assessee's net wealth. This finding was reversed by the Appellate Assistant Commissioner as well as by the Tribunal. THE Tribunal, confirming the finding of the Appellate assistant Commissioner, held that an instrument could be regarded as effecting an irrevocable transfer for the prescribed period in terms of S. 4 (1) (a) (iv) of the Wealth Tax Act, 1957, read with the Explanation to the Section, provided it contained no provision for retransfer or reassumption of power before the expiry of the said period. THE Tribunal held that the instruments in question which were executed in 1961 satisfied this requirement, notwithstanding the prevision for retransfer in 1969.

(3.) THE question is whether the Explanation is merely clarificatory, or, whether it has brought about a fundamental change in the concept of irrevocable transfer for the purpose of S. 4 (1) (a) (iv ). Counsel for the revenue submits that the whole concept has been altered by the insertion of clause. (i)and (ii) of the Explanation, as a result of which, according to him, any provision for retransfer or reassumption, whether before or after the expiry of the prescribed period, invalidated the instrument as an "irrevocable transfer" for the purpose of the Act. We do not agree.