COMMISSIONER OF WEALTH TAX Vs. KISHANLAL BUBNA

JUDGEMENT

(1.) THIS reference involves a nice question as regards the interpretation of the provisions of S. 4(1)(a) (iii) of the WT Act, 1957. The question refers to the asst. year 1962 63, for which the relevant valuation date is 31st March, 1962. By the two trusts created by the assessee respectively on 18th Feb., 1957, and 11th Nov., 1957, two respective amounts of Rs. 25,101 and Rs. 21,201 were respectively settled upon trusts and transferred to the trustees for the benefit of his two minor daughters. After the trusts were created the trustees out of the trust funds purchased shares.

(2.) ON the valuation date the trust funds were held in shares of which the valuation was Rs. 75,610. In determining the wealth tax payable by the assessee who is the settlor, the WTO took the view that it is the market value of the shares on the valuation date that was to be included in the net wealth of the assessee and he accordingly included the sum of Rs. 75,610 being the market value of the shares as part of the net wealth held by the assessee. The contention on behalf of the assessee that merely the original sum of Rs. 46,302 which was settled upon trust under the two trusts is to be taken into account, was rejected by him. The decision of the WTO was confirmed in appeal by the AAC. On a further appeal before the Tribunal, the Tribunal held that upon interpretation of the provisions of S. 4(1)(a)(iii) it was the value of the assets when they were transferred to the trustees that was to be included in the net wealth of the transferor, although the form of the assets transferred may have undergone a change since the date of the transfer and the value thereof on the valuation date was different. According to the Tribunal, since the assets transferred by the assessee were the cash amount of Rs. 46,302 the value of these cash assets, viz., Rs. 46,302, should alone be included in the net wealth of the assessee, the transferor, who was the settlor.

(3.) UNDER the charging S. 3 tax is to be levied in respect of the net wealth of the assessee on the corresponding valuation date. Under that section, subject to the other provisions contained in the Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as "wealth tax"), in respect of the net wealth on the corresponding valuation date of every individual at the rate or rates specified in the Schedule. "Net wealth" is defined in S. 2(m) and the material part of the definition for our present purpose is that the expression "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including the assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those specified therein. Thus, net wealth is determined by computing the aggregate value of the assets in excess of the aggregate value of all the debts owed by the assessee. The word "assets" as defined in S. 2(e) normally includes property of every description, movable or immovable. It is quite clear from the definition of the expression "net wealth" in S. 2(m) that not only the aggregate value of the assets belonging to the assessee is to be taken into account but the aggregate value of the assets which are required to be included in the net wealth under the Act are also to be taken into account as on the valuation date. Assets not actually belonging to the assessee but which are to be computed as part of his wealth are enumerated in S. 4 and we are concerned with the provisions of S. 4(1). They are as under :