COMMISSIONER OF INCOME-TAX VS V. NAMBY
2000 P T D 1497
[239 I T R 179]
[Madras High Court (India)]
Before N. V. Balasubramanian and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME-TAX
versus
V. NAMBY
Tax Case No.594 of 1984 (Reference No.520 of 1984), decided on /01/.
rd
February, 1998 Wealth tax---
----Exemption---Units of Unit Trust of India---Section 32 of Unit Trust of India Act overrides S.5(3) of Wealth Tax Act---Units of a value less than Rs.25,000 held for less than six months -prior to valuation date--Entitled to exemption---Indian Wealth Tax Act, 1957, S.5---Unit Trust of India Act, 1963, S.32.
The question of grant of exemption has to be considered not only with reference to the relevant provisions of the Wealth Tax Act, 1957, but also with reference to the provisions of the Unit Trust of India Act, 1963. Section 32 of the Unit Trust of India Act, 1963, provides that notwithstanding anything contained in the Wealth Tax Act, 1957, the Income Tax Act, 1961, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act, 1964, or in any other enactment, for the time being in force relating to income-tax, super-tax, super profits tax, surtax or any other tax on income, the assessee would be entitled to exemption under the provisions of the Wealth Tax Act, in the case of the assessee being an individual or a Hindu undivided family, subject to the condition that the value of the assets to be excluded shall not exceed Rs.25,000. When section 32 of the Unit Trust of India Act was amended by the Trust Laws (Amendment) Act, 1975, with effect from April 1, 1975, the provision of section 5(3) of the Wealth Tax Act was already in the statute book and Parliament was aware of the provision contained in section 5(3) of the Wealth Tax Act and when parliament has granted exemption in respect of the units held by the assessee not exceeding Rs.25,000, the exemption granted under section 32(1)(ba) of the Unit Trust of India Act has to be given effect to, The assessee is entitled to exemption in respect of the units held by him to the extent of Rs.25,000 notwithstanding anything contrary contained in the Wealth Tax Act and notwithstanding the fact that the assessee was holding the units for a period less than six months prior to the relevant valuation date.
C. V. Rajan for the Commissioner.
JUDGMENT
N. V. BALASUBRAMANIAN, J.---In pursuance of the directions of this Court under section 27(3) of the Wealth Tax Act, 1957 (hereinafter to be referred to as "the Act"), the following question of law has been referred to us for our consideration:
"Whether, on the facts and in the circumstances of the case and having regard to the provisions of sections 5(3) and 5(lA) of the Wealth Tax Act, 1957, and section 32(1)(ba) of the Unit Trust of India Act, 1963, the Appellate Tribunal was right in allowing exemption on Rs.23,955 being the value of the units in the Unit Trust of India even though they were not held by the assessee for the period of six months as on the valuation date for the assessment year 1977-78?"
Though Mr. C. V. Rajan, learned counsel for the Revenue, fairly stated that the assessee is no more and time should be granted to take steps to bring the legal representatives on record, yet, in our opinion, this tax case is of the year 1984 and, therefore, it is not necessary for us to wait for the Revenue to take steps and, therefore, we dispose of the tax case reference.
V. Namby, the assessee herein, was assessed to wealth tax for the assessment year 1977-78. He was a holder of units in the Unit Trust of India and claimed exemption under section 5(lA) of the Act on the value of the units held by him. The Wealth Tax Officer rejected the claim of the assessee on the ground that the assessee was holding the units for a period of less than six. months ending with the valuation date and in view of the provisions of section 5(3) of the Act, the assessee was not entitled to exemption of the sum of Rs.23,955 claimed by the assessee.
The Appellate Assistant Commissioner, on appeal, upheld the view of the Wealth Tax Officer. On the assessee's appeal before the Income-tax Appellate Tribunal, the Tribunal held that under the provisions of section 32 of the Unit Trust of India Act, 1963, the exemption was available to the assessee, notwithstanding anything contained in the tax laws and, therefore, the assessee would be entitled to exemption under section 5(lA) of the Act. On the basis of the directions of this Court, the question of law set out above has been referred to us by the Appellate Tribunal.
Mr. C.V. Rajan, learned counsel for the Revenue, submitted that under the provisions of section 5(3) of the Act, exemption is available to the assessee only if the assessee held the units at least for a period of six months ending with the relevant valuation date and since the assessee was not holding the units for a period of six months ending with the valuation date, the assessee was not entitled to exemption under section 5(lA) of the Act. He submitted that the Wealth Tax Act is a special enactment and the assessee can claim exemption only if the assessee is able to satisfy the conditions prescribed under the Act and since the assessee has not complied with the conditions for claiming exemption under section 5(3) of the Act, the Tribunal was not correct in holding that the assessee would be entitled to exemption under section 5(3) of the Act.
We have carefully considered the submissions of learned counsel for the Revenue. There is no dispute on the proposition of law put forth by learned counsel for the Revenue that to claim exemption under the provisions of the Wealth Tax Act, the assessee must satisfy the conditions laid down or prescribed in section 5(3) of the Act. One such condition for claiming exemption is that in the case of. assets like units or other assets as contemplated under section 5(3)(b) of the Wealth Tax Act, the assessee must hold the assets on which the assessee claims exemption at least for a period of six months ending with the relevant valuation date. There is no dispute about the fact that the assessee was not holding the units at least for a period of six months ending with the relevant valuation date. But, in our opinion, the question for grant of exemption has to be considered not only with reference to the relevant provisions of the Wealth Tax Act, but also with reference to the provisions of the Unit Trust of India Act. Section 32 of the Unit Trust of India Act provides that notwithstanding anything contained in the Wealth Tax Act, 1957 the Income Tax Act, 1961, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act, 1964 (VII of 1964), or in any other enactment; for the time being in force relating to income-tax, super-tax, super profits tax, surtax or any other tax on income, the assessee would be entitled to exemption under the provisions of the Wealth Tax Act in the case of the assessee being an individual or a Hindu undivided family subject to the condition that the value of the assets to be excluded shall not exceed Rs.25,000. The relevant provision reads as under:
"32. Income-tax and other taxes.---(1) Notwithstanding anything contained in the Wealth Tax Act, 1957, the Income Tax Act, 1961, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act, 1964 (VII of 1964), or in any other enactment, for the time being in force relating to income tax super tax or super profits tax surtax or any other tax on income profits or gains---
(ba) In the case of an assessee being an individual or a Hindu undivided family, wealth tax shall not be payable by the assessee in respect of, and there shall not be included in, the net wealth of the assessee computed under the Wealth Tax Act, 1957, so much of the assets in the form of units not being assets referred to in clause (bb) as have not been excluded from the net wealth of the assessee under section 5 of that Act; so, however, that the value of the assets excluded under this clause shall not exceed twenty-five thousand rupees."
Admittedly, the value of the units held by the assessee was only Rs.24,965 and the provisions of section 32 of the Unit Trust of India Act have an overriding effect over the provisions of the Wealth Tax Act to the extent covered by the Unit Trust of India Act. Therefore, notwithstanding the fact that the assessee has not complied with the conditions prescribed under section 5(3) of the Act, since section 32 of the Unit Trust of India Act overrides section 5(3) of the Wealth Tax Act, we are of the opinion the assessee would be entitled to the exemption contemplated under section 5(3) of the Wealth Tax Act read with section 32(1)(ba) of the Unit Trust of India Act. If we hold otherwise, .we will not be giving due effect to the intention of Parliament as Parliament by the enactment has specifically granted an exemption in respect of the units, the value of which did not exceed Rs.25,000. It is relevant to notice that when section 32 of the Unit Trust of India Act was amended by the Trust Laws (Amendment) Act, 1975, with effect from April 1, 1975, the provision of section 5(3) of the. Wealth Tax Act was already in the statute book and Parliament was aware of the provision contained in section 5(3) of the Wealth Tax Act and when Parliament has granted exemption m respect of the units held by the assessee not exceeding Rs,25,000, the exemption granted under section 32(1)(ba) of the Unit Trust of India Act has to be given effect to. We have already held that section 32 of the Unit Trust of India Act has an overriding effect and since section 32 of the Unit Trust of India Act overrides the provisions of section 5(3) of the Wealth Tax Act, the assessee is entitled to exemption in respect of the units held by the assessee to the extent of Rs.25,000, notwithstanding anything contrary contained in the Wealth Tax Act and notwithstanding the fact that the assessee was holding the units for a period of less than six months prior to the relevant valuation date. We are of the opinion that the Tribunal was correct in its conclusion in holding that the assessee was entitled to exemption under the provisions of section 32 of the Unit Trust of India Act and there is no infirmity in the order of the Appellate Tribunal.
Accordingly, we answer the question of law referred to us in the affirmative and against the Revenue. There will be no order as to costs.
M.B.A./4247/FC Reference answered.