Commissioner Of Income Tax Vs. vs Namby on 3 February, 1998

Madras High Court

Equivalent citations: (1999) 151 CTR Mad 272

JUDGMENT

N. V. BALASUBRAMANL4N, j

In pursuance of the directions of this Court under s. 27(3) of the WT 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 ss. 5(3) and 5(1A) of the WT Act, 1957, and s. 32(1)(ba) of

the Unit Trust of India Act, 1963, the Tribunal was right in allowing exemption on Rs. 23,955 being the value of the units in 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 asst. yr. 1977-78?"

2. Though Mr. CY. 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.

3. V. Namby, the assessee herein, was assessed to wealth-tax for the asst. yr. 1977-78. He was a holder of units in Unit Trust of India and claimed exemption under s. 5(1A) of the Act on the value of the units held by him.

The WTO rejected the claim of the assessee on the ground that the assessee was holding the units for the period of less than six months ending with the valuation date and in view of the provisions of s. 5(3) of the Act, the assessee was not entitled to exemption of the sum of Rs. 24,965 claimed by the assessee.

4. The AAC, on appeal, upheld the view of the WTO. On assessee's appeal before the Tribunal, the Tribunal held that under the provisions of s. 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 s. 5(1) 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 Tribunal.

5. &. C.V. Rajan, learned counsel for the Revenue submitted that under the provisions of s. 5(3) of the Act, exemption is available to the assessee only if the assessee held the units atleast for a period of 6 months ending with the relevant valuation date and since the assessee was not holding the units for a period of 6 months ending with the valuation date, the assessee was not entitled to exemption under s. 5(1A) of the Act. He submitted that the WT 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 s. 5(3) of the Act, the Tribunal was not correct in holding that the assessee would be entitled to exemption under s. 5(3) of the Act.

6. We have carefully considered the submissions of the learned counsel for the Revenue. There is no dispute on the proposition of law put forth by the learned counsel for the Revenue that to claim exemption under the provisions of the WT Act, the assessee must satisfy the conditions laid down or prescribed in s. 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 s. 5(3)(b) of the WT Act, the assessee must hold the assets on which the assessee claim.. exemption at least for a period of 6 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 6 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 WT Act, but also with reference to the provisions of Unit Trust Act. Sec. 32 of the Unit Trust of India Act provides that notwithstanding anything contained in the WT Act, 1957, the IT Act, 1961, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act (VII of 1964) or in any other enactment, for the time being in force relating to income-tax, super-tax, super profit tax, surtax or any other tax on income, the assessee would be entitled to exemption under the provisions of WT Act in the case of the assessee being an individual or an HUF, subject to that condition that the value of the assets to be excluded shall not exceed Rs. 25,000. The relevant provision reads as under :

22. income-tax and other taxes:-(1) Notwithstanding anything contained in the WT Act, 1957, the IT Act, 1961, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act, (VII of 1964) or in any other enactment, for the time being in force relating to income-tax, super-tax, super-profit tax, surtax or any other tax on income, profits or gains,-

(a) xxx

(aa) xxx (i) xxx (ii) xxx (b) xxx

(i) xxx

(ii) xxx

(iii) xxx

(ba) in the case of an assessee, being an individual or an HUF, 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 WT Act, 1957, so much of the assets in the form of units not being assets referred to in cl. (bb) as have not been excluded from the net wealth of the assessee under s. 5 of the Act; so, however, that the value of the assets excluded under this clause shall not exceed twenty-five thousand rupees".

7. Admittedly, the value of the units held by the assessee was only Rs, 24,965

and the provisions of s. 32 of the Unit Trust of India Act have an overriding effect over the provisions of the WT 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 s. 5(3) of the Act, since s. 32 of the Unit Trust of India Act overrides s. 5(3) of the WT Act, we are of the opinion, the assessee would be entitled to the exemption contemplated under s. 5(3) of the WT Act, r/w s. 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 the Parliament as the 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 s. 32 of the Unit Trust of India Act was amended by the Trust Laws (Amendment) Act, 1975, w.e.f. 1st April, 1975, the provision of s. 5(3) of the WT Act was already in the statute book and the Parliament was aware of the provision contained in s. 5(3) of the WT Act and when the Parliament has granted exemption in respect of the units held by the assessee not exceeding Rs. 25,000, the exemption granted under s. 32(10a) of the Unit Trust of India Act has to be given effect to. We have already held that s. 32 of the Unit Trust of India Act has an overriding effect and since s. 32 of the Unit Trust of India Act overrides the provisions of s. 5(3) of the WT 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 WT 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 s. 32 of' the Unit Trust of India Act and there is no infirmity in the order of the Tribunal.

8. 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.