COMMISSIONER OF WEALTH TAX Vs. JAYANTILAL AMRATLAL

JUDGEMENT

(1.) AT the instance of the Commissioner of Wealth -tax, the following two questions have been referred to us for our opinion :

(2.) THE assessee is a Hindu undivided family and the relevant assessment years for the purpose of this reference are 1962 -63 to 1964 -65. The assessee claimed before the Wealth -tax Officer that the value of jewellery and ornaments amounting to Rs. 1,85,216 was exempt under section 5(1)(viii) of the Wealth -tax Act on the ground that they were meant for personal use of the ladies of the family. The Wealth -tax Officer rejected this claims of the assessee as the same was negatived in all the preceding assessments on ground that the assessee was not entitled to claim exemption in respect of the jewellery owned by the family beyond a sum of Rs. 25,000 under section 5(1)(xv) of the said Act. As the jewellery and ornaments was last valued on December, 31, 1959, and the value of the gold and jewellery had gone up considerably since that date, the Wealth -tax Officer enhanced the valuation by 12% as far as the gold ornaments were concerned and by 7 1/2% as far as other jewellery were concerned. He, therefore, after allowing the statutory exemption of Rs. 25,000 valued the jewellery and ornaments at Rs. 1,94,908. The assessee had also claimed deduction on account of Income -tax liabilities for the assessment years from 1959 -60 and the wealth -tax liabilities for the year 1962 -63. This claim was rejected by the Wealth -tax Officer as, in his opinion, there was no liability for these taxes as it did not arise till the assessments were made and demand notices were served in pursuance thereof on the assessee after the relevant valuation dates. The assessee, therefore, took the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner negatived the claim for deduction on account of jewellery for the assessment years 1962 -63 and 1963 -64. However, he allowed the appeal for the year 1964 -65 following the decision of the Gujarat High Court in Commissioner of Wealth -tax v. Mrs. Arundhati Balkrishna. The Appellate Assistant Commissioner, however, upheld the claim of the assessee in respect of deduction of wealth -tax and income -tax liability for all the years of 1962 -63 to 1964 -65. The assessee being aggrieved with the orders of the Appellate Assistant Commissioner rejecting its claim for deduction of the entire valuation of jewellery and ornaments and also for tax liabilities went in appeal before the Tribunal. The Tribunal following the decision of the Supreme Court in Commissioner of Wealth -tax v. Arundhati Balkrishna held that ht entire value of jewellery was exempt from inclusion in the net wealth as the jewellery and ornaments were intended for personal use of the ladies of the family. The Tribunal following the decision Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth -tax and H. H. Setu Parvati Bayi v. Commissioner of Wealth -tax held that the assessee was entitled to deduction in respect of taxation liabilities for the years under appeal as well as the preceding years on the basis of assessments as finally determined. The Commissioner of Wealth -tax, therefore, sought the reference on two grounds, namely, (1) claim for deduction of entire valuation of the jewellery, and (2) claim for deduction of tax liabilities.

(3.) ON behalf of the revenue it has been urged that the amendment made in section 5(1)(vii) by Finance (No. 2) Act of 1971 excluding the jewellery from the purview of exemption under the said clause with effect from April 1, 1963, changes the complexion of exemption for the two assessment years involved in this reference, namely 1963 -64 and 1964 -65. As far as the assessment year 1962 -63 is involved in this reference, it was conceded on behalf of the revenue that the ratio of the decision of the Supreme Court in Commissioner of Wealth -tax v. Arundhati Balkrishna holds good. It was, therefore, submitted that the entire valuation of jewellery and ornaments belonging to the Hindu undivided family of the assessee is liable to be included in its net wealth for the assessment years 1963 -64 and 1964 -65. On behalf of the assessee the contention of the revenue in so far as it sought to include the valuation of jewellery of the Hindu undivided family of the assessee in its net wealth was conceded and accepted. However, the attempt of the revenue to include the golden ornaments as jewellery and, therefore, not liable to be exempted under section 5(1)(viii) in view of the amendment made by the Finance (No. 2) Act of 1971 was resisted on the ground amongst others that the Explanation 1, added to the said section 5(1)(viii) by the aforesaid amending Act for the first time included the golden ornaments in the 'jewellery' by the inclusive definition given therein, came into force with effect from April 1, 1972, and, therefore, for all intents and purposes the intended definition of jewellery cannot be applied retrospectively for purpose of the relevant assessment years 1963 -64 and 1964 -65.