COMMISSIONER OF WEALTH TAX Vs. RAMALINGAM B M

JUDGEMENT

(1.) THIS reference has been sent by the Tribunal. The reference raises a question of law under the WT Act, 1957. The tax under this Act is fastened on the net wealth of a taxpayer. Net wealth on any given valuation date is the excess of the taxpayer's assets over his debts. In the computation of the net wealth, certain assets are, under the terms of the statute, to be excluded from reckoning. Sec. 5(1) of the Act contains a list of such exempted assets. Under cl. (viii) of this provision, the "wearing apparel" of an assessee stands excluded from his taxable assets. The Supreme Court held, in a case which came before them, that items of an assessee's jewellery must be brought within the term wearing apparel, and thus qualify for exemption under S. 5(1)(viii). This decision was rendered on 25th Feb., 1970. It is found reported in CWT vs. Arundhati Balkrishna (1970) 77 ITR 505 (SC) : TC65R.1029. Parliament, however, did not accept this decision as reflecting its idea of what a wearing apparel is. Hence, it introduced an amendment in S. 5(1)(viii), which made the provision read differently, and as follows:

(2.) THIS is the history of S. 5(1)(viii) of the WT Act. This legislative history has significance in the present case. The WTO made an assessment in this case on 25th Nov., 1969. The assessment was for the asst. year 1969 -70. The assessee's assets included certain items of jewellery. The WTO included those items in the assessment as part of the assessee's taxable net wealth. He apparently did not accept the view that jewellery is a wearing apparel. The assessee questioned this decision in appeal. By the time the AAC heard the appeal, the Supreme Court's decision had come. Following that decision, the AAC deleted the value of the jewels from the computation of the assessee's net wealth. This the Asstt. CWT did by his order dt. 18th Jan., 1971. Subsequently, the retrospective amendment of S. 5(1)(viii) came, neutralising the Supreme Court's decision. This meant that the decision of the AAC in this case, based on the Supreme Court's judgment, was wrong. The correct law which ought to have been applied was the section as amended retrospectively, which expressly excluded jewellery from the ambit of the exemption. This law applied to the asst. year 1969 -70 as well, which was the assessment year in question before the AAC. The order passed by the AAC was, therefore, palbably wrong when viewed in the light of the retrospective amendment to this section.

(3.) SEC . 35 of the Act lays down a special procedure for carrying out a rectification of errors in an order passed by the AAC, or for that matter by the WTO. Sec. 35(5) enacted that the AAC, or the WTO, as the case may be, should pass a distinctive order for carrying out the rectification. The whole idea behind a rectification is that the error in the order should be corrected or rectified. But for the provision of S. 35(5), a mistake might be corrected by any of the familiar ways of carrying out corrections, such, for instance, as striking out the offending word, figure, sentence or paragraph from the order in question and carrying out the necessary correction in the very text of the order. Or, again, a correction may be made by appending a corrigendum or a table of errata to the order that is sought to be rectified. Sec. 35(5), however, insists that a distinct order of rectification should be passed, even though the purpose in view is the rectification of a mistake which had occurred in what may be called the "parent" order.