High Court Of Gujarat
Commissioner Of Wealth Tax vs. Dilherkunverba C. Jadeja
Sections WT 2(m), WT 5(1)(iv)
R.S. Garg & M.R. Shah, JJ.
WT Ref. No. 80 & 119 of 1995
19th July, 2006
Counsel Appeared
Manish R. Bhatt & Mrs. M.R. Bhatt, for the Applicant : None, for the Respondent
JUDGMENT
R.S. Garg, J. :
Smt. Mauna R. Bhatt, learned counsel for the Revenue. The office report shows that the assessee was served, however, nobody appears for the assessee.
2. Tribunal, at the instance of the Revenue, has referred the following questions to this Court for its answer :
WT Ref. No. 80 of 1995 :
“1. Whether, the Tribunal is right in law and on facts in holding that the Bombay property did not belong to the assessee till the estate is administered and the asset is allocated, handed over to the beneficiary under the Will and hence the value of the immovable property could not be included in the total wealth of the assessee ?
2. Whether the Tribunal is right in law and on facts in holding that life interest of the assessee in Hajoor Palace was eligible for exemption under s. 5(1)(iv) ?”Â
WT Ref. No. 119 of 1995 :
“1. Whether, the Tribunal is right in law and on facts in holding that the Bombay property did not belong to the assessee till the estate (was) handed over to the beneficiary under the Will and hence the value of immovable property could not be included in the total wealth of the assessee ?
Whether the Tribunal is right in law and on facts in holding that the life interest of the assessee in Rajkot Palace was eligible for exemption under s. 5(1)(iv) ?
Whether the Tribunal is right in law and on facts in deleting the addition made by the WTO in respect of the jewellery which the assessee claimed that the same was misappropriated by Shri Dharmendrasinhji Jhala ?”
3. The facts necessary for disposal of the present matters are that, palace was belonging to late Chandrasinhji D. Jadeja, who had executed a Will in favour of his wife/assessee and granted her life interest in the said property. On commencement of the assessment proceedings, WTO did not grant any exemption in favour of the assessee holding that life interest was for more than six years. However, on appeal, the CWT(A) held that since the assessee occupied the residential palace from the very date of death of her husband, life interest in the palace was already available to her on the valuation date and, therefore, the same was includible in her wealth. However, following the decision of Madras High Court in the case of CWT vs. K. Ramachandra Chettiar (1983) 35 CTR (Mad) 126 : (1983) 141 ITR 771 (Mad), he held that the value of life interest is eligible for exemption under s. 5(1)(iv) of the WT Act.
4. On an appeal by the Revenue, the Tribunal held that the action of the learned CWT(A) was fully justified. They also observed that from the Will of late Shri Chandrasinhji Jadeja, it was clear that the palace belonged to him in the capacity of “Ruler of the State” and he had bequeathed the same to his wife with a specific observation that “she shall have right to live in the old and new Hajoor Palace”.
5. The Tribunal further observed that the case of the assessee is squarely covered by ratio of Madras High Court in the case of CWT vs. K. Ramachandra Chettiar (supra). The Tribunal accordingly held that action of the learned CWT(A) was in accordance with law.
6. In the matter of CWT vs. K. Ramachandra Chettiar (supra), Madras High Court has observed as under : “The expression ‘assets’ is defined in the WT Act as including property of every description, both movable and immovable. It is an axiom of property law that property includes any interest in property. Property, in this sense, may be regarded as a bundle of proprietary interests or rights. Any one of those interests will itself be property, and hence has to be included in the connotation of ‘assets’. A life interest is a fractional interest in property, falling short of the entire interest in it. It is a well-known species of property under many systems of law, ancient and modern.”
7. This very judgment has been observed and followed by Kerala High Court in case of CWT vs. N. Lakshmikutty Amma (1989) 180 ITR 289 (Ker), wherein the Division Bench of Kerala High Court has observed that since life interest was included in the net wealth of the assessee, the assessee was entitled to claim exemption under s. 5(1)(iv) of the WT Act as the property “belongs to the assessee” within the meaning of s. 5(1)(iv) of the Act. They also referred to the judgment of the Calcutta High Court in case of CED vs. Jyotirmoy Raha (1978) 112 ITR 969 (Cal). The Calcutta High Court in the matter of CWT vs. Bhaskar Mitter (1994) 122 CTR (Cal) 299 : (1993) 202 ITR 612 (Cal) has again relied upon the very same judgment and came to a conclusion that under s. 2(m) of the Act, an asset can be included in the wealth-tax assessment if it belongs to the assessee. If life interest is treated as such an asset belonging to the assessee and included in the assessment, there is no reason why such asset will not be entitled to exemption provided in respect of any such asset.
8. The three High Courts, though differed a little in their reasonings, but came to the very same conclusion that if life interest can be treated as an asset and is includible in the net wealth of the assessee, then, the assessee would be entitled to exemption under s. 5(1)(iv) of the WT Act.
9. After hearing the learned counsel for the Revenue, we are unable to take a different view. Tribunal was absolutely justified in confirming the order passed by the learned CWT(A) by granting exemption.
10. Question Nos. 1 and 2 in both the references are common and in view of the above findings, the said questions are answered against the interest of the Revenue.
11. So far as question No. 3 in WT Ref. No. 119 of 1995 is concerned, from the frame of the said question, it would appear that it is a question relating to the facts. The assessee made submission before the authorities that the jewellery could not be added to the net wealth of the assessee as the same was misappropriated by Dharmendrasinhji Jhala. Whether jewellery was misappropriated or not would depend upon proof of a fact. If the Tribunal was thoroughly satisfied on basis of the facts and the evidence produced before it that the jewellery was misappropriated by Dharmendrasinhji Jhala, then, it would also be justified in holding that the property which never came in possession of the assessee as it was misappropriated, could not be added to the net wealth. The finding is pure finding of fact and no question of law arises. Third question in WT Ref. No. 119 of 1995 is also answered against the Revenue. Both the references are disposed of. No costs.
[Citation : 287 ITR 501]
