COMMISSIONER OF WEALTH TAX VS LABH KAVAR BAI
1999 P T D 3311
[236 I T R 872]
[Madras High Court (India)]
Before K. A. Thanikkachalam and N. V. Balasubramanian, JJ
COMMISSIONER OF WEALTH TAX
Versus
LABH KAVAR BAI
T.C. No. 1079 of 1981 (Reference No.571 of 1981), decided on 29/01/1996.
Wealth tax---
---- Rectification of mistakes---Conflicting decisions by Benches of Tribunal but decision of a High Court on subject---Question was not debatable---Loan raised on security of L.I.C. policy allowed as deduction---Deduction was not in accordance with S.2(m)(ii)---Deduction could be withdrawn in rectification proceedings---Indian Wealth Tax Act, 1957, S.35.
A mistake apparent from the record must bb an obvious and patent mistake and not something, which can be established by a long drawn Process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In a case where there are conflicting opinions on a subject by various Benches of the Tribunal the issue would be settled by a decision of a High Court. The decision of a High Court is binding on the Tribunal wherever it is located in .the country especially when there is no decision o that subject by the jurisdictional High Court:
Held, that there was a judgment of the Allahabad High Court (Jiwanlal Virmani v. CWT ((1967) 66 ITR 338), wherein it was held that loans raised on the security of the life insurance policies in respect of which no wealth tax was chargeable and utilised for acquiring assets, which an assessable to wealth tax, are not deductible in computing total wealth. In the present case, in the original assessment the liability was allowed as deduction. Since the deduction was not made in accordance with the provisions contained in section 2(m)(ii) of the Wealth Tax Act, 1957, there was a mistake, which was rectified under section 35 of the Act subsequently, on the materials available on record. The order of rectification was valid.
Apoorva Shantilal (HUF) v. CWT (1982) 135 ITR 182 (Guj.); Balaram (T.S.) I.T.O. v. Volkart Pros. (1971) 82 ITR 50 (SC); Basappa (D.) .v. CWT (1986) 160 ITR 826 (Kar.); CIT v. Sundaram Textiles Ltd. (1984) 149 ITR 525 (Mad.); CIT v. K. S. Vaidyanathan (1985) 153 ITR II (Mad.); CWT v. Narayandas J. Hemani (1983) 143 ITR 87 (MP); CWT v. Venaina (D. H.) (1992) 193 ITR 488 (Bon.); Jiwan Lal Virmani v. CWT (1967) 66 ITR 338 (All.); Manickavasagam Chettiar (T.) v. CIT (1983) 143 ITR 269 (Mad.) and Srinivasan (T.V.) v. CWT (1980) 123 ITR 464 (Mad.) ref.
C. V. Rajan for the Commissioner.
P. P. S. Janarthana Raja for the Assessee.
JUDGMENT
K. A. THANIKKACHALAM, J.---Pursuant to the directions given by this Court, in T.C.P. No.417 of 1979, dated September 14, 1980, the Tribunal has referred the following question for our opinion under section 27(3) of the Wealth Tax Act, 1957, (hereinafter referred to as the Act):
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that section 35 of the Wealth Tax Act, 1957, cannot be invoked in the assessee's case for the assessment year 1972-73?"
For the assessment year 1972-73, the Wealth Tax Officer in his order, dated May 31, 1975, under section 35 of the Act, added a sum of Rs.45,700 as a liability due by the assessee to the Life Insurance Corporation, omitted to be disallowed in the original assessment made on February .20, 19,73, wherein such liability has been allowed as a deduction. According to the Wealth -Fax Officer, rectification is possible, since the ability in question being secured and the life, insurance policies in respect of which no wealth tax was chargeable, had been wrongly allowed and the stake had been discovered on a perusal of the evidence available on record. The Appellate Assistant Commissioner, on appeal, confirmed the order of the Wealth Tax Officer, as, according to him, there was a clear mistake of patent omission to add back an obviously disallowable item and, as such, there could not be a debate. The aggrieved assessee filed a further second appeal before the Tribunal. The Tribunal was of the view that the interpretation of section 2(m)(ii) of the Act had been the subject-matter or consideration by the Benches of the Tribunal on several occasions. In I.T.A. No.523/Mds. of 1975-76, the A Bench by its order, dated January 22. 1976, has allowed a similar contention of the Department and, in fact, the question has been referred to the High Court as there was a question of law. Another view was also taken by the Tribunal that the liability will be allowed vide the decision ---Gulanikar's Two Acts Gift and Wealth Tax 1,1976) Edn ages 73-74 W.T.A. No. 122 (Ahd.) of 1970-71 for the assessment year X68-69 reported in (1973) Tax (3) 128. Since two views are possible, as is evident from the abovesaid orders of the Tribunal, and the matter involving a question of law and had been referred to the High Court, the Tribunal was of view that section 35 cannot be brought into application. According to the Tribunal, .the interpretation of section 2(m)(ii) involves long drawn out arguments and, therefore, section 35 which can be applied to correct mistakes apparent from the record cannot be invoked. Accordingly, the Tribunal allowed the assessee's appeal.
Learned standing counsel appearing for the Department submitted that in view of the definite provisions contained in section 2(m)(ii) and section 5(1)(vi) of the Act, omission to disallow in the original assessment deducted owed by the assessee on the life insurance policies, cannot be ducted from the total wealth of the assessee. According to learned standing counsel, when the provisions contained in section 2(m)(ii) were not followed in the original assessment order, made by the Wealth Tax Officer, there occurred a mistake apparent from the record warranting interference under section 35 of the Act. In order to support this contention reliance was placed upon a decision in CIT v. Sundaram Textiles Ltd. (1984) 149 ITR 525, wherein this Court., while considering the provisions of section 154 of the Income Tax Act, 1961, held that the application of a wrong provision of the Act or the erroneous application of the same to the facts of the case, which do not call for such application, will amount to a mistake apparent from the record for the purpose of section 154 of the income-tax Act. In order to come to this conclusion, this Court followed a decision of this Court in Manickavasagam Chettiar (T.) v. CIT (1983) 143 ITR 269. According to learned standing counsel, ail the High Courts took a uniform view that if the entire asset is completely excluded in the computation of the net wealth, the debt in question obtained on the security of the said asset cannot be deducted in computing the net wealth. Reliance was placed on the decisions in CIT v. K. S. Vaidyanathan (1985) 153 ITR 11 (Mad.), Srinivasan (T.V.) v. CWT (1980) 123 ITR 464 (Mad.),Iiwan Lal Virmani v. CWT (1967) 66 ITR 338 (All.), Apoorva Shah;ilal (HUF) v. CWT (1982) 135 ITR 182 (Guj.), CWT v. Narayandas J. Hemani (1983) 143 ITR 87 (MP), Basappa (D.) v. CWT (1986) 160 ITR 826 (Kar.) and CWT v. Venaina (D. H.) (1992) 193 ITR 488 (Bom.). Learned standing counsel also submitted that in view of the decision of the Allahabad High Court in Jiwan Lal Virmani v. CWT (1967) 66 ITR 338 wherein it was held that loans raised on the security of life insurance policies and utilised for acquiring assets which are assessable to wealth tax are not deductible in computing the net wealth. Therefore, it is not possible to argue that there are conflicting views in the orders of the Tribunals, inasmuch as the said conflict was settled by the abovesaid decision of the Allahabad High Court more so when there is no decision on that point by the jurisdictional High Court and especially when there is a decision by another High Court that decision will certainly be binding on the Tribunal. It was, therefore, submitted that the Tribunal was not correct in holding that the interpretation of section 2(m)(ii) involves long drawn out arguments and hence section 35 which can be applied to correct a mistake apparent from the record cannot be invoked.
On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that on the date when the Wealth Tax Officer passed the rectification order, there were conflicting views expressed by the various Benches of the Tribunal in the matter of interpreting section 2(m)(ii) of the Act. Therefore, there is a debatable question arising in the matter of understanding the provisions contained in section 2(m)(A) of the Act. Since it involves long drawn out arguments, rectification is not possible under section 35. Learned counsel also relied upon the judgment of the Full Bench of this Court in CIT v. K. S. Vaidyanathan (1985) 153 ITR 11, cited supra to show that there are conflicting views in the matter of interpreting section 2(m)(ii) of the Act. Therefore, it is pleaded that there is no error in the order passed by the Tribunal in holding that there is no ground for rectification under section 35 of the Act.
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It remains to be seen that the order under section 35 of the Act was passed for the inclusion of a sum of Rs.45,700, as a liability, omitted to be disallowed in the original assessment. The original assessment was completed on February 20, 1973, where the liability of Rs.45i,00 was allowed as a deduction. It was that liability which was sought to be withdrawn by the order passed under section 35 of the Act. According to the Wealth Tax Officer, the liability in question has been wrongly allowed and it was a mistake, which had been discovered on a perusal of the records. The Wealth Tax officer was also of the view that it is not a mistake, which requires discovery by a long drawn process of reasoning or examination of the arguments, on which, conceivably there may be two opinions.
According to the Tribunal, the interpretation of section 2(m)(ii) of the Act has been the subject-matter of consideration by various Benches of the Tribunal on several occasions and there are conflicting decisions by the Tribunals. But on the date when the Wealth Tax Officer passed the rectification order, there was a judgment by the Allahabad High Court in Jiwan Lai Virmani v. CWT (1967) 66 ITR 338, wherein it was held that loans raised on the security of life insurance policies and utilised for acquiring assets which are assessable to wealth tax are not deductible in computing the net wealth. Therefore, the difference of opinion expressed by the Tribunal's various Benches was settled by the aforesaid decision of the High Court, as the decision of a High Court is binding on the Tribunal whenever it is located in the country especially when there is no decision on that subject by the jurisdictional High Court. Hence, it cannot be contended that the conflicting views expressed by the various Benches of the Tribunal would constitute a ground to say that there is a debatable question and the interpretation of that section involved long drawn out arguments or process of reasoning. Subsequently, there are decisions of the High Courts cited supra uniformly holding that on a. proper reading of section 2(m)(ii) of the Act, the assessee was not eligible for deduction of a debt, which was secured on exempted property. In Balaram (T.S.) I.T.O. v. Volkart Bros. (1971) 82 ITR 50 (SC), the Court held that a mistake apparent on the record, must be an obvious and patent mistake and not something, which can be established by a long drawn process of reasoning on points, on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In the present case, inasmuch as in the original assessment, deduction was not made in accordance with the provisions contained in section 2(m)(ii) of the Act, there was a mistake, which was rectified under section 35 of the Act, subsequently, on the materials available on record and, therefore, inasmuch as the assessment was not made in accordance with the provisions of section 2(m)(ii) of the Act, there is a mistake apparent from the record warranting interference under section 35 of the Act. Hence, it cannot be said that there is no patent mistake and something, which can be established by a long drawn process of reasoning on points, on which there may be conceivably two opinions. In that view of the matter, we hold that the order passed by the Tribunal is not correct. We therefore, answer the question referred to us in the negative and in favour of the Department. No costs.
M.B.A./3321/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered