S NAGANATHAN Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) FOR the assessment years 1964-65 and 1965-66 the assessee submitted wealth-tax returns declaring a net wealth of Rs. 92, 958 and Rs. 99, 908 and claimed that this being less than rupees one lakh no wealth-tax was payable by him. The assessee claimed that the house and ground bearing No. 17, Lakshmi Colony, North Crescent Road, T. Nagar, Madras, which stood in the name of his wife in which he and his wife were living was not liable to be included in determining the net wealth of the assessee on the ground that the value of the house was less than Rs. 1, 00, 000 and the assessee was entitled to the exemption under section 5(1)(iv) of the Wealth-tax Act. Though the facts are not very clear as to how exactly the said house was treated as falling under section 4(1)(a) of the Wealth-tax Act, it is agreed in this reference by the learned counsel for both the parties that it will have to be treated as one falling under section 4(1)(a). The Wealth-tax Officer was of the view that, though the value of the house is to be included in the net wealth of the assessee under the provisions of section 4(1)(a), since the transfer in favour of the wife itself is not invalidated and the wife still holds the property as belonging to her, the provisions of section 5(1)(iv) is not applicable. In this view, he valued the house at Rs. 64, 000 and included the same in the net wealth of the assessee.

(2.) THE Appellate Assistant Commissioner, however, took a different view and held that, though the house belonged to the assessee's wife, by reason of a fiction created under section 4(1) it is included in the net wealth of the assessee and under the scheme of the Act the fiction is to be extended even for the purpose of determining the exemption under section 5(1)(iv). Any other construction, according to the Appellate Assistant Commissioner, will lead to an anomalous position of the asset not getting the benefit of section 5(1)(iv) either in the hands of the assessee or in the hands of the transferee, viz., the wife of the assessee. On appeal preferred by the department, the Tribunal held that in spite of the fiction created under section 4(1)(a) the house still belonged to the wife of the assessee and section 5(1)(iv) would only apply to a case where the assessee is the owner of the asset and not to a case where it is treated as belonging to him only by the fiction created under section 4(1)(a) At the instance of the assessee the following question has been referred under section 27(1) of the Wealth-tax Act, 1957 "Whether, on the facts and in the circumstances of the case, the inclusion of the value of the house belonging to the assessee's wife in the hands of the assessee for the assessment years 1964-65 and 1965-66 is justified in law ?" *Learned counsel for the assessee referred to the provisions of section 4(1)(a) and in particular the use of the words "as belonging to that individual" in that section as clearly indicating that Parliament intended to treat the property as that of the transferor for the purpose of the Wealth-tax Act and that, therefore, all the consequences of such treatment of the asset as belonging to the transferor would have to be given effect to. He also referred to the language used in section 5(1)(iv) and pointed out that even in that provision the same words "belonging to the assessee" are used. THE learned counsel also drew our attention to the provisions of section 4 as it stood in the Bill stage and the amendment suggested by the Select Committee. It may be noted that the Wealth-tax Bill did not include the words "as belonging to that individual" and they were included only by the Select Committee. It was the contention of the learned counsel that the words were included by the Select Committee only for the purpose of bringing section 4(1)(a) in line with the other provisions contained in sections 2(m), 3, 5(1)(iv) and 33 of the Act.