M. G. KOLLANKULAM v. CIT — 1977 DIGILAW 272 (KER)

Judgment :- 1. The Income-tax Appellate Tribunal, Cochin Bench (hereinafter called the Tribunal) has referred the following two questions to this court under S.27 (1) of the Wealth-tax Act, 1957 (hereinafter called the Act): "(i) For an asset to be included either under S.4(1)(a)(i) or, as the case may be 4 (1) (a) (ii) of 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 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 S (4) (1) (a) of Wealth-tax Act, 1957 as it applied to assessment years 1970-71 and 1971-1972 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 S.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 14 963 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 S.4 (1) (a) were not attracted to the the case since the gift in question was of agricultural lands which did not constitute 'assets' within the definition of that expression contained in S 2 (e) of the Act as it stood on the date of the said transaction. In this view the Appellate Assistant Commissioner 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. In this view the Appellate Assistant Commissioner 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 further contention put forward by the assessee that by virtue of the proviso to S.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 contention 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 S.2 (e) as it stood on the date of the transfer, sub-clauses (i) and (ii) of S.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 9-10-1974 (Annexure D). The Tribunal held that there is nothing in the provisions of S.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 S.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. 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 assessee having moved the Tribunal under S.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 S.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 individual, directly or indirectly, otherwise than for adequate consideration or (iii) by a person or association of persons to whom such assets have been transferred by the individual 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 S.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. 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 at 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 transferred 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 bad 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 valuation 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 S.2 (1) (e) of the Act on 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 (it) are satisfied. If the properties held by the spouse or minor child are 'assets' under S.2 (1) (e) of the Act on 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 (it) 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 should 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 S.4(1) (a) refers to wealth-tax assessment year or gift-tax assessment year The proviso was inserted in subsection (1) of the Act by S.4(a) (ii) B of the Wealth-tax (Amendment) Act, 1964 (46 of 1964). The said amendment was to have effect only from 1-4-1965. 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 intendment 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 S.5 of the Gift-tax Act. The language of the proviso does no credit to its draftsman in point of clarity or precision and us unsatisfactory nature has been further aggravated by the amendment of 197 1. 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 S.5 of the Gift-tax Act. By the amending Act of 1971 the availability of the said exemption was restricted to transfers effected till 31-3-1972 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 1-4-1965 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 S.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 S.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 1964-6. 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 is a question of construction. 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 is 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 p. 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 Gifi-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 the assessees to wealth-tax in favour of the persons mentioned in S.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 S.4 (1) for purposes of levy of wealth-tax. We are inclined to consider that it was with this intention that the Parliament introduced the proviso in S.4 (1) of the Act by Act 46 of 1964. We are inclined to consider that it was with this intention that the Parliament introduced the proviso in S.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 3Ist 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, Madras, (1976) 104 ITR 185, and by the High Court of Punjab in Commissioner of Wealth-tax, Patiala-II 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 reported in Commissioner of Wealth-tax, A. P. 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 Notes on Clauses in 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 S.4 of the Wealth-tax Act, 1957, under, which certain assets are included in the net wealth. In Notes on Clauses in 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 S.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 children after the end of the previous year relevant to the assessment year 1971 72 for purposes of Gift-tax Act will be included in the net wealth of such individual for the assessment year 1972 73 or any subsequent assessment year." 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 " incorrect. 12. 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. 13. The parties will bear their respective costs. 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 subsection (6) of S.27 of the Act.