COMMISSIONER OF WEALTH TAX Vs. VASUDEVA V DEMPO

JUDGEMENT

(1.) THIS is a reference at the instance of the CWT, Bangalore, Karnataka, under S. 27(1) of the W. T. Act, 1957 (hereinafter referred to as "the said Act"). The following question of law has been referred to us :

(2.) THE facts lie within a narrow compass and may be briefly noted. The assessee before us is one Vasudeva V. Dempo of Goa governed by the Portuguese Civil Code. He was married according to the custom of the country (a phrase utilised by the said Code) and without having any ante nuptial agreement to keep the properties of himself and his wife separate. In this reference we are concerned with the wealth tax assessments for the years 1971 72 to 1973 74. For these years, the WTO first calculated the value of the movable properties consisting mostly of shares in limited companies, deposits in bank and loan to a company. Thus, the movable properties were taken by the WTO as belonging to the BOI consisting of the assessee and his wife, Shrimati Neela V. Dempo. In working out the net wealth of the communion of the husband and the wife, the WTO gave a deduction of Rs. 1,50,000 on account of exemption under S. 5(1)(xxiii) r/w S. 5(1A) of the said Act. After allowing this exemption and deducting the liabilities of the communion, he arrived at the net wealth of the communion and took fifty per cent. of the same as the net wealth of the assessee. Copies of the assessment orders of the WTO for each of these three years are annexed to the statement of the case as annexs. "A", "B" and "C", respectively. These assessments were challenged in appeal by the assessee before the AAC, who, however, agreed with the computation made by the WTO and dismissed the appeals for all the three years. The assessee thereafter went up in further appeal to the Tribunal. A number of other points were also gone into by the Tribunal, but we are not concerned with the same in this reference. The only contention of the assessee which requires mention relates to the exemption claimed by the assessee under S. 5(1)(xxiii) r/w s. 5(1A) of the said Act. It was claimed before the Tribunal that the exemption and/or deductions under S. 5 should be allowed in the assessee's assessment against his share in the assets of the communion of himself and his wife and not while computing the net wealth of the communion itself. The Tribunal, following its earlier decision, upheld the contention. A copy of the earlier decision of the Tribunal on which reliance was placed in the assessee's case has been annexed to the statement of the case as annex. "F". In that decision, it had been held that the husband and the wife were owners in common and not joint owners. In the view of the Tribunal, therefore, there was no AOP which had come into existence and hence S. 4(1)(b) of the said Act or r. 2 of the W. T. Rules, 1957, on which reliance was placed by the Department, were not applicable to the facts of the case. Further, according to the Tribunal, it was clearly provided by S. 5 of the said Act that the exemption was to be calculated or deduction made as provided in the section at the stage of the assessment of the individual who was the assessable entity and not at the stage of calculating the net wealth of the communion. It is from this decision of the Tribunal that the reference has been made to us at the instance of the CIT.

(3.) ON the other hand, the learned counsel for the assessee submitted that the communion between the husband and the wife constituted as a result of the Portuguese Civil Code was not an AOP known to either the I. T. Act or the W. T. Act. It was further submitted that even if the communion be considered to be an AOP, this would not warrant the exemption or deduction under S. 5 being allowable at the stage of determination of the net wealth of the communion. In the submission of the learned counsel, the clear language employed by the Legislature showed that the exemption under S. 5 was to be considered at the stage of the assessment of the individual. Finally, reliance was placed on Instruction No. 897 contained in C. B. D. T. Bulletin. The said instruction was issued by the CBDT under Reference No. F. 320/157/75 WT dt. 19th Nov., 1975.