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1996 DIGILAW 110 (MAD)

Commissioner of Wealth Tax v. Labh Kavar Bai

1996-01-29

K.A.THANIKKACHALAM, N.V.BALASUBRAMANIAN

body1996
Judgment :- K.A. THANIKKACHALAM, J. Pursuant to the directions given by this court, in T. C. P. No. 417 of 1979 dated September 14, 1980, the Tribunal has referred the following question for our opinion under section 27(3) of the Wealth-tax Act, 1957, (hereinafter referred to as the Act). "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that section 35 of the Wealth-tax Act, 1957, cannot be invoked in the assessee's case for the assessment year 1972-73 ?". For the assessment year 1972-73, the Wealth-tax Officer in his order dated May 31, 1975, under section 35 of the Act, added a sum of Rs. 45, 700 as a liability due by the assessee to the Life Insurance Corporation, omitted to be disallowed in the original assessment made on February 20, 1973, wherein such liability has been allowed as a deduction. According to the Wealth-tax Officer, rectification is possible, since the liability in question being secured and the life insurance policies in respect of which no wealth-tax was chargeable, had been wrongly allowed and the mistake had been discovered on a perusal of the evidence available on record. The Appellate Assistant Commissioner, on appeal, confirmed the order of the Wealth-tax Officer, as, according to him, there was a clear mistake of patent omission to add back an obviously disallowable item and, as such, there could not be a debate. The aggrieved assessee filed a further second appeal before the Tribunal. The Tribunal was of the view that the interpretation of section 2(m)(ii) of the Act had been the subject-matter of consideration by the Benches of the Tribunal on several occasions. In I. T. A. No. 523/Mds. of 1975-76, the A Bench by its order dated January 22, 1976, has allowed a similar contention of the Department and, in fact, the question has been referred to the High Court as there was a question of law. Another view was also taken by the Tribunal that the liability will be allowed (vide the decision-Gulanikar's Two Acts Gift and Wealth-tax (1976) Edn. pages 73-74 W. T. A. No. 122 (Ahd.) of 1970-71 for the assessment year 1968-69 reported in 1973 Tax 3) 128)). Another view was also taken by the Tribunal that the liability will be allowed (vide the decision-Gulanikar's Two Acts Gift and Wealth-tax (1976) Edn. pages 73-74 W. T. A. No. 122 (Ahd.) of 1970-71 for the assessment year 1968-69 reported in 1973 Tax 3) 128)). Since two views are possible, as is evident from the abovesaid orders of the Tribunal and the matter involving a question of law and had been referred to the High Court, the Tribunal was of the view that section 35 cannot be brought into application. According to the Tribunal, the interpretation of section 2(m)(ii) involves long drawn out arguments and, therefore, section 35 which can be applied to correct mistakes apparent from the record cannot be invoked. Accordingly, the Tribunal allowed the assessee's appealLearned standing counsel appearing for the Department submitted that in view of the definite provisions contained in section 2(m)(ii) and section 5(1)(vi) of the Act, omission to disallow in the original assessment, the debt owed by the assessee on the life insurance policies, cannot be deducted from the total wealth of the assessee. According to learned standing counsel, when the provisions contained in section 2(m)(ii) were not followed in the original assessment order, made by the Wealth-tax Officer, there occurred a mistake apparent from the record warranting interference under section 35 of the Act. In order to support this contention, reliance was placed upon a decision in CIT v. Sundaram Textiles Ltd., wherein this court, while considering the provisions of section 154 of the Income-tax Act, 1961, held that the application of a wrong provision of the Act or the erroneous application of the same to the facts of the case, which do not call for such application, will amount to a mistake apparent from the record for the purpose of section 154 of the Income-tax Act, In order to come to this conclusion, this court followed a decision of this court in Manickavasagam Chettiar (T) v. CIT. According to learned standing counsel, all the High Courts took a uniform view that if the entire asset is completely excluded in the computation of the net wealth, the debt in question obtained on the security of the said asset cannot be deducted in computing the net wealth. According to learned standing counsel, all the High Courts took a uniform view that if the entire asset is completely excluded in the computation of the net wealth, the debt in question obtained on the security of the said asset cannot be deducted in computing the net wealth. Reliance was placed on the decisions in CIT v. K S. Vaidyanathan; T. V. Srinivasan v. CWT; Jiwan Lal Virmani v. CWT; Apoorva Shantilal (HUF) v. CWT; CWT v. Narayandas J. Hemani; D. Basappa v. CWT and CWT v. D. H. Venaina. Learned standing counsel also submitted that in view of the decision of the Allahabad High Court in Jiwan Lal Virmani v. CWT wherein it was held that loans raised on the security of life insurance policies and utilised for acquiring assets which are assessable to wealth-tax are not deductible in computing the net wealth. Therefore, it is not possible to argue that there are conflicting views in the orders of the Tribunals, inasmuch as the said conflict was settled by the abovesaid decision of the Allahabad High Court more so when there is no decision on that point by the jurisdictional High Court and especially when there is a decision by another High Court that decision will certainly be binding on the Tribunal. It was, therefore, submitted that the Tribunal was not correct in holding that the interpretation of section 2(m)(ii) involves long drawn out arguments and hence section 35 which can be applied to correct a mistake apparent from the record cannot be invokedOn the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that on the date when the Wealth-tax Officer passed the rectification order, there were conflicting views expressed by the various Benches of the Tribunal in the matter of interpreting section 2(m)(ii) of the Act. Therefore, there is a debatable question arising in the matter of understanding the provisions contained in section 2(m)(ii) of the Act. Since it involves long drawn out arguments, rectification is not possible under section 35. Learned counsel also relied upon the judgment of the Full Bench of this court in CIT v. K S. Vaidyanathan, cited supra to show that there are conflicting views in the matter of interpreting section 2(m)(ii) of the Act. Since it involves long drawn out arguments, rectification is not possible under section 35. Learned counsel also relied upon the judgment of the Full Bench of this court in CIT v. K S. Vaidyanathan, cited supra to show that there are conflicting views in the matter of interpreting section 2(m)(ii) of the Act. Therefore, it is pleaded that there is no error in the order passed by the Tribunal in holding that there is no ground for rectification under section 35 of the Act. It remains to be seen that the order under section 35 of the Act was passed for the inclusion of a sum of Rs. 45, 700, as a liability, omitted to be disallowed in the original assessment. The original assessment was completed on February 20, 1973, where the liability of Rs. 45, 700 was allowed as a deduction. It was that liability which was sought to be withdrawn by the order passed under section 35 of the Act. According to the Wealth-tax Officer, the liability in question has been wrongly allowed and it was a mistake which had been discovered on a perusal of the records. The Wealth-tax Officer was also of the view that it is not a mistake which requires discovery by a long drawn process of reasoning or examination of the arguments, on which, conceivably there may be two opinions. According to the Tribunal, the interpretation of section 2(m)(ii) of the Act has been the subject-matter of consideration by various Benches of the Tribunal on several occasions and there are conflicting decisions by the Tribunals. But on the date when the Wealth-tax Officer passed the rectification order, there was a judgment by the Allahabad High Court in Jiwan Lal Virmani v. CWT, wherein it was held that loans raised on the security of life insurance policies and utilised for acquiring assets which are assessable to wealth-tax are not deductible in computing the net wealth. Therefore, the difference of opinion expressed by the Tribunal's various Benches was settled by the aforesaid decision of the High Court, as the decision of a High Court is binding on the Tribunal wherever it is located in the country especially when there is no decision on that subject by the jurisdictional High Court. Therefore, the difference of opinion expressed by the Tribunal's various Benches was settled by the aforesaid decision of the High Court, as the decision of a High Court is binding on the Tribunal wherever it is located in the country especially when there is no decision on that subject by the jurisdictional High Court. Hence, it cannot be contended that the conflicting views expressed by the various Benches of the Tribunal would constitute a ground to say that there is a debatable question and the interpretation of that section involved long drawn out arguments or process of reasoning. Subsequently, there are decisions of the High Courts cited supra uniformly holding that on a proper reading of section 2(m)(ii) of the Act, the assessee was not eligible for deduction of a debt, which was secured on exempted property. In Balaram (T. S.), ITO v Volkart Bros. the court held that 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. In the present case, inasmuch as in the original assessment, deduction was not made in accordance with the provisions contained in section 2(m)(ii) of the Act, there was a mistake, which was rectified under section 35 of the Act, subsequently, on the materials available on record and therefore, inasmuch as the assessment was not made in accordance with the provisions of section 2(m)(ii) of the Act, there is a mistake apparent from the record warranting interference under section 35 of the Act. Hence, it cannot be said that there is no patent mistake and something which can be established by a long drawn process of reasoning on points, on which there may be conceivably two opinions. In that view of the matter, we hold that the order passed by the Tribunal is not correct. We, therefore, answer the question referred to us in the negative and in favour of the Department. No costs.