COMMISSIONER OF WEALTH TAX VS A. M. MEYYAMMAL
2001 P T D 1374
[244 I T R 758]
[Madras high Court (India)]
Before R. Jayasimha Babu and N. V Balasubramanian, JJ
COMMISSIONER OF WEALTH TAX
Versus
A. M. MEYYAMMAL
Tax Cases Nos. 1085 to .1088 of 1990 (References Nos.541 to 544 of 1990), decided on 17/02/2000.
(a) Wealth tax---
----Rectification---Status declared as "not ordinarily resident" ---Concessional rate of 50 percent of tax applicable to non-resident granted in original assessment---Rectification to withdraw concessional benefit---Concession applicable to non-resident granted to resident a mistake apparent from record---Rectification justified---Indian Wealth Tax Act, 1957, S. 35, Sched. I, Part II, R.3.
(b) Wealth tax----
----Residential status---Two separate categories, resident and non-resident only---Persons "not ordinarily resident" or "ordinarily resident"---Fall under category of resident---Indian Wealth Tax Act, 1957, S.6.
There are two broad categories in the classification of the assessee under the Wealth Tax Act, 1957. The first category is a resident and in that category there is a sub-classification (a) resident and ordinarily resident; (b) resident but not ordinarily resident. The second category is non-resident. Under the scheme of the Act the two categories are two separate water tight compartments except in cases specifically provided for in that Act itself and if the assessee falls in the category of resident whatever may be the sub -classification in that category he cannot be treated as a non-resident.
The assessee filed her returns of wealth for the assessment years 1975-76 to 1978-79 declaring her status to be person "not ordinarily resident" in India. The Wealth Tax Officer granted rebate of 50 per cent, of tax available to a non-resident under rule 3 of Part II of Schedule I to the Wealth Tax Act, 1957, and completed the assessment. Later,it was found that the assessee was a resident and was not a non-resident and in order to withdraw the concessional benefit granted in the original assessment, the Wealth Tax Officer passed orders of rectification. The Tribunal held that since the question whether a "not ordinarily resident" assessee could be considered as a non-resident was a debatable issue which could not be regarded as a mistake apparent from record, the assessments could not be rectified under section 35 of the Wealth Tax Act, 1957. On a reference:
Held, that the assessee by showing her status to be a resident but not ordinarily resident had declared that she was not a non-resident assessee during the relevant valuation dates and on her own showing she was not eligible for the rebate of tax granted under the orders of assessment. The concession available to a non-resident granted by the Wealth Tax Officer to a resident-assessee was a mistake apparent from the record. The Wealth Tax Officer was justified in rectifying the mistake invoking his powers under section 35 of the Act.
Chimanbhai K. Patel v. C.W.T. (1985) 156 ITR 373 (Guj.) fol.
Baharam (T.S.), I.T.O. v. Volkart Brothers (1971) 82 ITR 50 (SQ ) Bava (P.B.I.) v. C.I.T. (1955) 27 ITR 463 (Trap. & Coch.); C.I.T. v. E.I.D.. Parry Ltd. (1995) 216 ITR 489 (Mad.); Jiyajeerao Cotton Mills Ltd: v. I.T.O. (1981) 130 ITR 710 (Cal.) and Walchand Nagar Industries Ltd. v. Gaitonde, (V.S.),
C. V. Rajan for the Commissioner.
M. Philip George for the Assessee.
JUDGMENT
N. V. BALASUBRAMANIAN, J.---In compliance with the directions of this Court, the following common question of law arising out of the assessment of the wealth of the assessee under the Wealth Tax Act, 1957 (for short, "the Act"), for the assessment years 1975-76 to 1978-79 has been referred to us for our consideration:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in cancelling the rectification orders passed by the Wealth Tax Officer on the ground that there is no mistake apparent from record to be rectified under section 35 of the Wealth Tax Act?"
The assessment years with which we are concerned are 1975-76 to 1978-79 and the relevant valuation date ended on 12th April each year. The assessee filed her returns of wealth for the said assessment years wherein she had declared the status to be a person "not ordinarily resident" in India. The Wealth Tax Officer, while completing the assessment, granted the concessional rate at 50 per cent. of tax available to a non-resident under rule 3, Part II of Schedule I to the Wealth Tax Act, 1957 and completed the assessment. Later, the Wealth Tax Officer found that the assessee was a resident and she was not a non-resident. He held that a non-resident was alone eligible for the concessional rate provided in the relevant rules and the grant of concession available to a non-resident to the resident assessee was a mistake and hence with a view to rectify the mistake that had crept in the orders of assessment, after granting an opportunity to the assessee, he passed the orders of rectification under section 35 of the Act by withdrawing the concessional benefit of 50 per cent of the tax granted in the original assessments. Those orders of rectification were confirmed in appeal by the Appellate Assistant Commissioner.
The Tribunal, on further appeal by the assessee, found that the assessee was a resident, but not ordinarily resident, and the question whether a not ordinarily resident-assessee can be considered as a non-resident or not is a debatable issue which does not call for any rectification. The Tribunal also held that under section 6(6) of the Income Tax Act, 1961, a non-resident would fall within the category of "not ordinarily resident" and the question whether the status of the assessee is non-resident or not cannot be regarded as a mistake apparent from the records to be rectified under section 35 of the Act and allowed the appeals preferred by the assessee cancelling the orders of rectification.
The short point that arises for consideration is whether the view of the Tribunal holding that the Wealth Tax Officer had no power to rectify the error under section 35 of the Act is sustainable in law or not. It is not disputed that the assessee is an individual. She was a resident, but not ordinarily resident, during the previous years relevant to the assessment years in question. When she filed the returns for the assessment years in question, she declared her status to be person "not ordinarily resident" in India. The assessee, on her own showing, declared her status to be a resident but, not
ordinarily resident. Rule 3, Part II-of Schedule I to the Wealth Tax Act, the relevant rule granting the concession, reads, as, under:
"Where an assessee is an individual who is not a citizen of India and who is not resident in India, the wealth tax payable by him in respect of any assessment year computed in accordance with the rates specified in this Schedule shall be reduced by an amount equal to 50 per cent. thereof."
A fair reading of the rule indicates that the essential conditions to be fulfilled for granting the rebate of tax are (i) the assessee should be an individual, (ii) the assessee is not a citizen of India, and (iii) the assessee is not resident in India, and if all the conditions prescribed in rule 3 of the relevant Schedule are cumulatively satisfied, the assessee would become eligible to get the rebate in the rate of tax.
The assessee, no doubt, is an individual and she is also not a citizen of India. The further question is whether the assessee is not a resident. The assessee herself has declared the status to be a person "not ordinarily resident" in India. Explanation 1 to section .6 of the Wealth Tax Act deals with when an individual of a Hindu undivided family can be regarded as a non-resident or a resident but not ordinarily resident in India, and it provides that the relevant provisions found in-the Income-tax Act would apply to determine the status of the assessee for the purpose of the Wealth Tax Act. The status of the assessee as shown by her is that she was resident but not ordinarily resident during the relevant valuation dates.
The Wealth Tax Act, in our opinion, makes a clear distinction between a resident-assessee and anon-resident assessee. In so far as resident assessees are concerned, there is a further sub-classification made between "resident ordinarily resident-assessee" and "resident not ordinarily resident assessee", but both classes of assessee would fall within the scope of the expression, "resident-assessee". The assessee by showing her status to be a resident but not ordinarily resident, had declared that she was not a non -resident assessee during the relevant valuation dates, and on her own showing, she is not eligible for the rebate of tax granted under the orders of assessment. The concession available to a non-resident granted by the Wealth Tax Officer to a resident-assessee is a mistake apparent from the record and when the Wealth Tax Officer examined the records of the assessee in the light of the provisions of the relevant rules, the mistake would be apparent from the record, as the mistake committed by the Assessing Officer is an obvious one. It is a patent mistake and no long drawn process of reasoning is required to establish the mistake. Equally, no debatable point of law is involved to find out the mistake.
The Tribunal relied upon certain passages from the Commentaries on the Law of Income-tax by Kanga and Palkhivala, to hold that there was no mistake apparent from the record. We have perused the definition of "non- resident" as defined in section 2(30) of the Income-tax Act which is defined to mean a person who is not a resident, including persons falling under sections 92, 93 and 168 of the Income-tax Act. It is- in the context of the provisions of sections 92, 93 and 168 of the Income-tax Act, a person who is a resident but not ordinarily resident is treated as a non -resident, but, the case of the assessee does not fall within any one of the provisions of specified in section 6(6) of the Income-tax Act to treat her
The Gujarat High Court considered a similar issue in Chimanbhai K. Patel v. C.W.T. (1985) 156 ITR 373 and the issue raised before the Gujarat High Court was whether it was open to the Wealth Tax Officer to rectify the mistake apparent from the records, when a rebate was granted to a person who is a resident but not ordinarily resident treating the assessee as a non-resident. The Court held that the rebate granted would amount to a mistake apparent from the records and the rebate could be withdrawn in rectification proceedings. The Gujarat High Court held that when an assessee claims the status of not ordinarily resident, he is not a non-resident, and the assessee is not entitled to the benefit of rebate of 50 per cent, of the tax, under rule 3 of the relevant schedule. We respectfully concur with die view expressed by the Gujarat High Court.
Learned counsel for the Revenue also placed reliance on the decision of the Travancore-Cochin High Court in the case of P.B.1. Bava v. C. I. T. (1955) 27 ITR 463 wherein the Travancore-Cochin High Court held that under the Income-tax Act, a broad distinction is made between those who arc resident, and those who are not resident and when the assessee is found to be a resident, the further question arises whether he is a resident but ordinarily resident, and a resident but not ordinarily resident. The Court held that in order to be an ordinarily resident, an individual has first to be a resident in Travancore. The Court also held that a non-resident, and a resident but riot ordinarily resident, are not positive concepts and only the converse of "resident" and "ordinarily resident" and a category of persons "non-resident and not ordinarily resident" is impossible to imagine and unknown to the Act.
We are of the view that there are two broad categories in the classification of the assessee. The first category is a resident, and in that category, there is a sub-classification (a) resident but ordinarily resident and (b) resident but not ordinarily resident. The second category is a non-resident find under the scheme of the Act, the two categories are to separate water tight compartments, except in cases specifically provided for in the Act itself and if the assessee falls in the category of resident, whatever may be the sub-classification in that category, she cannot be treated as a non-resident. Therefore, where the assessee is a resident but not ordinarily resident, she maintains her status as a resident and she is not a non-resident in India, and is not eligible for the grant of the rebate, of 50 per cent of tax and the grant of rebate, on the plain meaning of the rule, is an obvious mistake which was required to be rectified.
Learned counsel for the assessee placed strong reliance on the decision of the Supreme Court in (T.S.) Balaram, I.T.O. v. Volkart Brothers (1971) 82 ITR 50, wherein the apex Court held as under (headnote):
"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."
The ratio laid down by the Supreme Court does not help the assessee as the tests laid down by the Supreme Court when the mistake can be regarded as a mistake apparent from the record, are fully satisfied in the instant case.
Learned counsel for the assessee also invited our attention to the decision of the Calcutta High Court in Jiyajeerao Cotton Mills Ltd. v. I.T.O. (1981) 130 ITR 71.0, the decision of the Bombay High Court in Walchand Nagar Industries Ltd. v. Gaitonde, (V.S.), I.T.O (1962) 44 ITR 260 and the decision of this Court in the case of C.I.T. v. E.I.D. Parry Ltd. (1995) 216 ITR 489. The above decisions explain the meaning of the expression, "mistake apparent from the record" found in section 154 of the Income-tax Act. There is no dispute that the conditions specified in section 35 of the Wealth Tax Act should be satisfied, but it would depend upon the facts of each case to find out whether there is a mistake apparent from the record, or not.
We are satisfied on the facts of this case that there is a mistake apparent from the record and the Wealth Tax Officer was justified in rectifying the same, invoking his power under section 35 of the Act. We hold that the Appellate Tribunal was not justified in holding that there was no mistake in the orders of assessment apparent from the record. Accordingly, we answer the common question of law referred to us in the negative, in favour of the Revenue and against the assessee. The Revenue would be entitled to costs in the sum of Rs.1,000 one set.
M.B.A./471/FCReference answered.