Karnataka H.C : Whether the Tribunal was right in its interpretation of the proviso to s. 5(1A) of the WT Act, 1957 ?

Counsel Appeared

K. Srinivasan, for the Assessee : S.R. Rajashekharamurthy, for S. Rajendra Babu, for the Revenue

SRINIVASA IYENGAR, J. :

The assessee in these two cases is the same and the question referred is also common. The matters relate to the asst. yr. 1972-73 and 1973-74 and are in relation to wealth-tax assessment.

The WTO rectified the assessment by having recourse to s. 35 on the ground that in making the deduction under s. 5(1A) of the WT Act, excess deduction had been given in a sum of Rs 87,250 and Rs. 77,250 in the two years respectively. This action was challenged in appeal before the AAC as well as the Tribunal but without success. At the instance of the assessee, the reference has been made. The Tribunal has referred the following common question : “On the facts and in the circumstances of the assessee’s case, whether the Tribunal was right in its interpretation of the proviso to s. 5(1A) of the WT Act, 1957 ?”

The relevant section reads as follows: “(1A) Nothing contained in sub-s. (1) shall operate to exclude from the net wealth of the assessee any assets referred to in cls. (iva), (xv), (xvi), (xxii), (xxiii), (xxiv), (xxv), (xxvi), (xxvii), (xxviii), (xxix), (xxxi) and (xxxii) (not being deposits under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959), to the extent the value thereof exceeds, in the aggregate, a sum of one hundred and fifty thousand rupees : Provided that where the assets include any assets referred to in cl. (xv) or cl. (xvi) (not being deposits under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959), which have been owned by the assessee continuously from a date prior to the first day of March, 1970, and the value of the assets so included exceeds the limit of one hundred and fifty thousand rupees by any amount, such limit shall be raised by the said amount.”

It may be mentioned that cls. (xxxi) and (xxxii) were added w.e.f. 1st April, 1973, by the Finance Act, 1972, and cl. (iva) was inserted w.e.f. 1st April, 1975, by the Finance Act, 1974.

The Tribunal found that the aggregate of the assets referred to in cls. (xv) and (xvi) did not exceed Rs. 1,50,000 and, therefore, the assessee was not entitled I to any deduction in excess of Rs. 1,50,000. It further held that the effect of the proviso was that only if the value of the assets described in cls. (xv) and (xvi) exceeded Rs. 1,50,000 the total deduction available would equal the value of the assets under cls. (xv) and (xvi). It appears to us that the view taken by the Tribunal is, correct. Under the main provision in sub-cl. (1A), the maximum deduction permissible is Rs. 1.5 lakhs. The proviso specifies that in the event the assets included in the computation of the net wealth consist of assets coming within the ambit of cls. (xv) and (xvi) and the value of such assets exceeds Rs. 1.5 lakhs, the limit of Rs. 1.5 lakhs shall be raised to the said value. That is, in a case where the value of the assets falling under cls. (xv) and (xvi) exceed Rs. 1.5 lakhs, the maximum amount of deduction permissible Would be the value of those two items.

Accordingly, we answer the question referred in the affirmative.

[Citation : 141 ITR 309]