Kerala High Court
M.G. Kollankulam vs Commissioner Of Income-Tax on 3 October, 1977
Bench: V. Balakrishna Eradi, T. Kochu Thommen
JUDGMENT Balakrishna Eradi, J.
1. The Income-tax Appellate Tribunal, Cochin Bench (hereinafter called "the Tribunal"), has referred the following two questions to this court under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter called "the Act") :
"(i) For an asset to be included either under Section 4(t)(a)(i) or, as the case may be, Section 4(1)(a)(ii) of the Wealth-tax Act, 1957, in the net wealth of the assessee for assessment year 1970-71, or assessment year 1971-72, whether that asset should also be an asset within the definition of that term 'asset' in the Wealth-tax Act, 1957, as it applied at the time that asset was transferred by the assessee ?
(ii) Whether the expression 'assessment year commencing after the 31st day of March, 1964' appearing in the proviso to Section 4(1)(a) of the Wealth-tax Act, 1957, as it applied to assessment years 1970-71 and 1971-72, refers to wealth-tax assessment year ?"
2. The aforesaid questions have arisen in relation to the assessments to wealth-tax made against the assessee for the assessment years 1970-71 and 1971-72, for which the valuation dates are 31st March, 1970, and 31st March, 1971, respectively. In making those assessments, the Wealth-tax Officer acting under Section 4(1)(a)(i) and (ii) of the Act added to the net wealth returned by the assessee a sum of Rs. 1,27,610 being the value of agricultural lands gifted by the assessee to his wife and children prior to April 1, 1963, but after the commencement of the Gift-tax Act, 1958. The assessee complained against the said addition by filing an appeal before the Appellate Assistant Commissioner. That appeal was allowed by the Appellate Assistant Commissioner who held that Sub-clauses (i) and (ii) of Section 4(1)(a) were not attracted to the case since the gift in question was of agricultural lands which did not constitute "assets" within the definition of that expression contained in Section 2(e) of the Act as it stood on the date of the said transaction. In this view, the Appellate Assistant Comissioner held that the agricultural property gifted by the assessee to his wife and children had to be excluded while computing the net wealth of the assessee. The farther contention put forward by the assessee that by virtue of the proviso to Section 4(1)(a) also the value of the gifted properties had to be excluded in computing his net wealth did not, however, find favour with the Appellate Assistant Commissioner. Rejecting the said contenion, the Appellate Assistant Commissioner held that the proviso will be attracted only in respect of gifts made during the previous years relevant for the assessment years to gift-tax commencing from 1964-65 and ending with 1971-72, but the benefit of full exclusion of the value of the assets covered by the gift was granted to the assessee on the basis of the finding that since the properties covered by the gift were agricultural lands not falling within the definition of "assets" in Section 2(1)(e) as it stood on the date of the transfer, Sub-clauses (i) and (ii) of Section 4(1)(a) are not attracted to the case.
3. The Wealth-tax Officer carried the matter in appeal before the Tribunal. Those appeals were allowed by the Tribunal by a common order dated October 9, 1974 (annexure "D"). The Tribunal held that there is nothing in the provisions of Section 4(1)(a)(i) and (ii) of the Act to indicate that the assets transferred by the assessee to his spouse or minor child by gift, etc., and held by the spouse or minor child of the assessee on the relevant valuation date should have been on the date of the gift "assets" as defined in the Act as it stood at the time of the transfer. In the opinion of the Tribunal Sub-clauses (i) and (ii) of Section 4(1)(a) of the Act will apply to all cases where on the valuation date assets are held by the spouse or minor child of an assessee pursuant to transfers effected in their favour by the assessee directly or indirectly otherwise than for adequate consideration. On the question of the applicability of the proviso the Tribunal agreed with the view taken by the Appellate Assistant Commissioner that the proviso will be attracted only in cases of transfers effected during the previous years relevant to the gift-tax assessment years 1964-65 to 1971-72. The assesses having moved the Tribunal under Section 27(1) of the Act the Tribunal has drawn up a statement of the case and referred the aforementioned two questions to this court.
4. The answers to both the questions referred will depend upon the interpretation to be placed on the provisions of Section 4(1)(a) of the Act. That section is in the following terms :
"4. Net wealth to include certain assets.--(1) In computing the net wealth of an individual, there shall be included, as belonging to that individual--
(a) the value of assets which on the valuation date are held--
(i) by the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or
(ii) by a minor child, not being a married daughter of such individual, to whom such assets have been transferred by the in dividual, directly or indirectly, otherwise than for adequate consideration, or (in) by a person or association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both, or (iv) by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise :
Provided that where the transfer of such assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958 (18 of 1958), or is not chargeable under Section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, but before the 1st day of April, 1972, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual. "
5. The point covered by the first question is whether in order to warrant the inclusion of the value of the assets held by the spouse or minor child of an assessee on the valuation date in the net wealth of the assessee it is necessary that the concerned properties of the spouse or minor child should have been "assets" as defined in the Act even on the dates when they were transferred by the assessee to the spouse or minor child. On the plain language used in Sub-clauses (i) and (ii) of Clause (a) the only requirements for the applicability of those sub-clauses are that, (i) the spouse or minor child, not being a married daughter of the assessee, should be holding assets on the valuation date ; and (ii) such assets should have been trans-ierred to the spouse or minor child, as the case may be, by the assessee, directly or indirectly, otherwise than for adequate consideration. The operation of the sub-clauses will, therefore, get attracted whenever it is found that as on the valuation date the spouse or a minor child (not being a married daughter) of the assessee is holding property, movable or immovable, which satisfies the definition of "assets" as on that date and that such property had come to be vested in the spouse or minor child by virtue of its having been transferred by the assessee directly or indirectly otherwise than for adequate consideration. The words "such assets" occurring in the two sub-clauses obviously connote assets which have been already made mention of earlier in the section, meaning thereby the properties falling within the definition of "assets" which on the vajuation date are held by the spouse or minor child of the assessee. If the properties held by the spouse or minor child are "assets" under Section 2(1)(e) of the Act oft the valuation date and if they are found to have been transferred by the assessee to the spouse or minor child, directly or indirectly, otherwise than for adequate consideration, the requirements of Sub-clauses (i) and (ii) are satisfied. It is not necessary that the properties concerned should have been "assets" as defined in the Act on the date of the transfers effected by the assessee. We would, therefore, answer question No. (i) in the negative, that is, against the assessee and in favour of the department.
6. The point raised in question No. (ii) is whether the expression "assessment year " occurring in the proviso to Section 4(1)(a) refers to wealth-tax assessment year or gift-tax assessment year. The proviso was inserted in Sub-section (1) of the Act by Section 4(a)(ii)(B) of the Wealth-tax (Amendment) Act, 1964(46 of 1964). The said amendment was to have effect only from April 1, 1965. The words "but before the 1st day of April, 1972 " were later introduced in the proviso by Finance (No, 2) Act of 1971 with effect from 1st April, 1972. It admits of no doubt that the intend-ment of the proviso is to confer relief in the nature of an exemption in respect of cases where the transfers of the assets concerned made by the assessee in favour of his spouse or minor child are chargeable to gift-tax under the Gift-tax Act, 1958, or fall within any of the exempted categories specified in Section 5 of the Gift-tax Act. The language of the proviso does no credit to its draftsman in point of clarity or precision and its unsatisfactory nature has been further aggravated by the amendment of 1971. However, it appears to us to be clear that the object and purpose of the proviso as originally enacted in 1965, was to exempt from the liability for inclusion under Sub-clauses (i) to (iv) the value of such assets in respect of which the transfers effected by the assessee are either chargeable to gift-tax under the Gift-tax Act, 1958, for any assessment year commencing after the 31st day of March, 1964, or are exempt from such levy for the said period under Section 5 of the Gift-tax Act. By the amending Act of 1971, the availability of the said exemption was restricted to transfers effected till March 31, 1972, by introducing the limitation that the chargeability of the transfer to gift-tax must be for an assessment year commencing before the 1st day of April, 1972. While introducing the proviso with effect from April 1, 1965, the legislature in referring to the chargeability of the transfer to gift-tax has used the words " is either chargeable to gift-tax under the Gift-tax Act, 1958, or is not chargeable under Section 5 of the Act ", thereby clearly indicating that the chargeability to gift-tax referred to is not in respect of any past periods anterior to the commencement of the amending Act. Construed in this context the succeeding words " for any assessment year commencing after the 31st day of March, 1964 " contained in the proviso as originally enacted were obviously intended to connote the assessment year relating to the charge of gift-tax.
7. It is true that there is a comma after the words "or is not chargeable under Section 5 of that Act" and before the succeeding words "for any assessment year....." and it does create some difficulty in the way of the above interpretation of the provision. We are not, however, inclined to attach too much importance to the said punctuation mark since the language used in the proviso read as a whole clearly indicates that the intention of Parliament was to grant the benefit of the exemption only prospectively in respect of transactions of transfers of assets by way of gift, etc., effected after the commencement of the assessment year 1964-65. The existence, of the comma in the place aforementioned in the proviso must be attributed to an accidental mistake on the part of either the draftsman or the printer.
8. While marks of punctuation contained in a statute will not generally be wholly ignored by the court in interpreting a statutory provision, it may not always be safe to rely on punctuation as a deciding factor in a question of construction. Greater importance will be attached by the court to the language employed by the legislature and if it is found that the words used in the section, when read as a whole, clearly furnish a clue to the legislative intent underlying the section and they admit of an interpretation consistent with the said legislative intent, any punctuation mark which is inconsistent with such construction will be disregarded and the punctuation will not be allowed to control the plain meaning of the text. As observed by the Supreme Court in A. K. Gopalan v. State of Madras, AIR 1950 SC 27 at page 45, if the Act as originally punctuated does not reflect the true legislative purpose, the punctuation may be disregarded, transposed or the Act may be re-punctuated by the court. We are clearly of the view that the aforementioned comma occurring in the proviso is a misplaced punctuation mark which, if heeded, will defeat the intention of Parliament and hence, it is to be disregarded while construing the proviso.
9. While dealing with the legislative intention underlying the proviso it is relevant to take notice of the fact that from the assessment year 1964-65 onwards there was a steep escalation of the rates of gift-tax chargeable under the Gift-tax Act, 1958. It is reasonable to think that having regard to the fact that high rates of gift-tax were being charged in respect of the transfers effected by assessees to wealth-tax in favour of the persons mentioned in Section 4(1) of the Act from the assessment years 1964-65 onwards, Parliament may have felt that it would be only just and fair to allow them an exemption to that extent from inclusion of the value of the gifted assets under Section 4(1) for purposes of levy of wealth-tax. We are inclined to consider that it was with this intention that Parliament introduced the proviso in Section 4(1) of the Act by Act 46 of 1964. Construed in this light it is clear that the words " for any assessment year commencing after the 31st day of March, 1964..." occurring in the proviso obviously refer to the assessment year under the Gift-tax Act, and not the assessment year under the Wealth-tax Act, Accordingly, only gifts made in the relevant gift-tax assessment years commencing after the 31st March, 1964, and prior to the 1st day of April, 1972, will fall within the scope of the exemption granted by the proviso. This is the view that has been taken by a Division Bench of the Madras High Court in T. Saraswathi Achi v. Commissioner of Income-tax [1976] 104 ITR 185 and by the High Court of Punjab in Commissioner of Wealth-tax v. Seth Nand Lal Ganeriwala [1977] 107 ITR 758, with which rulings we are in respectful agreement.
10. Our attention was invited by the counsel for the assessee to a decision of the Andhra Pradesh High Court in Commissioner of Wealth-tax v. Smt. Hashmatunnisa Begum [1977] 108 ITR 98, where a contrary view has been taken but, for the reasons already indicated, we are unable, with respect, to agree with that interpretation.
11. It was by Clause 31 of the Finance (No. 2) Bill of 1971 that the words " but before the 1st day of April, 1972 " were introduced into the proviso. In the Notes on Clauses in the Finance (No. 2) Bill of 1971, we find the following note given in respect of Clause 31 :
" Wealth-tax Act.
Clause 31 seeks to make certain amendments to Section 4 of the Wealth-tax Act, 1957, under which certain assets are included in the net wealth.
Under the amendment in Sub-clause (a)(i), the value of the assets transferred by an individual to his spouse or minor childern after the end of the previous year relevant to the assessment year 1971-72 for purposes of gift-tax under the Gift-tax Act will be included in the net wealth of such individual for the assessment year 1972-73 or any subsequent assessment year. "
12. The above note clearly indicates that the view taken by us regarding the parliamentary intent underlying the use of the words "for any assessment year commencing after the 31st day of March, 1964,......" is correct.
13. We accordingly hold that the Tribunal was right in rejecting the contention of the assessee that the expression "assessment year commencing after the 31st day of March, 1964" occurring in the proviso refers to wealth-tax assessment year. Question No. (ii) is also, therefore, answered in the negative, that is, against the assessee and in favour of the department.
14. The parties will bear their respective costs.
15. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Tribunal as required by Sub-section (6) of Section 27 of the Act.