DIGVIJAYSINHJI K S Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THIS reference made at the instance of the assessee involves an interpretation of s. 5(1A) of the WT Act, 1957 (hereinafter referred to as "the Act"), in the light of the following facts. Assessment years under reference are the asst. yrs. 1971-72 and 1973-74. The assessee's net wealth for these years included the assets which were exempt from payment of wealth-tax under cls. (xv), (xvi), (xxiii) and (xxv) of s. 5(1) of the Act. The value of the assets covered by cls. (xv) and (xvi) of s. 5(1) was Rs. 1,16,600, Rs. 1,27,338 and Rs. 1,28,548 for the asst. yrs. 1971- 72, 1972-73 and 1973-74, respectively. These assets were owned by the assessee from a date prior to 1st March, 1970. The assessee owned shares in Indian companies valued at Rs. 3,53,522 in the asst. yr. 1971-72 and Rs. 3,28,134 in the asst. yr. 1972-73. The assessee also owned units worth Rs. 5,000 in the Unit Trust of India in the asst. yrs. 1971-72 and 1972-73. The value of the shares held in the Indian companies and units in the Unit Trust of India for the assessment year 1973-74 is not available, but we are told that the value of Rs. 3,87,945 shown for "movables" in the assessment order for the asst. yr. 1973-74 includes the value of the above shares and units. The shares in the Indian companies are the assets covered by cl. (xxiii) and units in the Unit Trust of India are covered by cl. (xxv) of sub-s. (1) of s. 5. In other words, both these assets are exempt from payment of tax under s. 5(1). Sub-s. (1A) of s. 5, however, prescribes the limit of Rs. 1,50,000 for exemption in respect of the assets covered by the various clauses including cls. (xv), (xvi), (xxiii) and (xxv) of sub-s. (1) of s. 5. The proviso to s. 5(1A) lays down that if the value of the assets referred to in cls. (xv) and (xvi) of s. 5(1) which have been owned by the assessee continuously from a date prior to the 1st day of March, 1970, exceeds the limit of one hundred and fifty thousand rupees, the limit prescribed by sub-s. (1A) shall stand raised by the amount by which the value of these assets exceeds Rs. 1,50,000. The contention of the assessee, however, was that the assets covered by cls. (xv) and (xvi) of s. 5(1) were totally exempt from payment of wealth-tax and the limit of Rs. 1,50,000 prescribed by sub-s. (1A) of s. 5 applies to the assets covered by the other clauses specified in the said sub-section. The WTO accepted the contention of the assessee and did not include the value of the assets covered by cls, (xv) and (xvi) of s. 5(1) in the net wealth of the assessee for the assessment years under reference. He also deducted Rs. 1,50,000 out of the value of the shares and units in the Unit Trust of India in each of the years under reference. The CWT on examining the records of the assessment proceedings for the assessment years under reference found that the WTO had committed an error in granting exemption in respect of the value of the assets covered by cls. (xv) and (xvi) of s. 5(1) in addition to the exemption to the extent of Rs. 1,50,000 in respect of assets other than those covered by cls. (xv) and (xvi). According to the CIT, sub-s. (1A) of s. 5 prescribes an overall limit of Rs. 1,50,000. THIS limit was raised only in cases where the value of the assets referred to in cls. (xv) and (xvi) of s. 5(1) exceeds Rs. 1,50,000. Since the value of the assets of the assessee covered by cls. (xv) and (xvi) of s. 5(1) did not exceed Rs. 1,50,000 the question of raising the limit under the proviso to sub-s. (1A) of s. 5 did not arise. The Commissioner, therefore, in exercise of his power under s. 25(2) of the Act, set aside the assessment order passed by the WTO and directed him to recompute the net wealth of the assessee in accordance with law in each of the assessment years under reference. The Tribunal having confirmed the view taken by the CIT, at the instance of the assessee, the following questions have been referred to us for our opinion under s. 27(1) of the Act :

(2.) THE controversy in this reference is as regards the interpretation to be placed upon sub-s. (1A) of s. 5. Sub-s. (1A) of s. 5 read, as under :