Commissioner of Wealth Tax vs K.O. Mathews

The following question of law is referred u/s 27(1) of the Wealth-tax Act, 1957 (for short "the Act"), at the instance of the Revenue.

"Whether, on the facts and in the circumstances of the case/ the assessee is entitled to claim exemption of the price received by him on the sale of the car u/s 5(1)(xxxiii) of the Wealth-tax Act ?"

The respondent/assessee was a non-resident Indian, who returned to India for permanent settlement on May 2, 1985. While returning to India, he had brought a Mercedes Benz car and claimed the value of the same as exempt u/s 5(1)(xxxiii) of the Wealth-tax Act. This claim was allowed up to the assessment year 1988-89. During the previous year relevant tp the assessment year 1989-90, the assessee sold the car for Rs. 4,50,000 and the sale proceeds were invested in movable properties and claimed exemption u/s 5(1)(xxxiii) on the amount of Rs. 4,50,000. The Assessing Officer disallowed the exemption holding that u/s 5(1)(xxxiii) exemption is available only for moneys and the value of assets brought into India and the value of assets acquired out of such money. According, to the Assessing Officer, assets which are sold and converted into money lose the exemption. The order of the Assessing Officer was confirmed in appeal by the Commissioner of Income Tax (Appeals), Kochi. However, in further appeal by the assessee, the Income Tax Appellate Tribunal upheld the claim of the assessee and allowed the appeal. It is against the said appellate order of the Tribunal, the question of law specified in paragraph 1 of this judgment is referred to.

Shri P. K. R. Menon, learned senior Central Government standing counsel appearing for the applicant, submits that under the provisions of Section 5(1)(xxxiii), exemption is available only in respect of moneys, the value of assets brought by the assessee into India and the value of assets acquired by him out of such money. It is further submitted that since the assessee converted the asset, viz., the Benz car, into money by selling it, the said money is not eligible for exemption under the said sub-section. The senior counsel also submits that though the said sub-section refers to the value of assets, it has no significance in deciding the eligibility in view of the provisions of Section 7 of the Act, which specifically provides for valuation of assets under the Act. The senior counsel, accordingly, submitted that the Tribunal was not justified in holding that the sale consideration of the Benz car brought by him from abroad is entitled to the exemption provided u/s 5(1)(xxxiii) of the Act.

Though notice was served on the respondent/assessee, nobody entered appearance.

In order to appreciate the correctness of the contentions raised by learned senior Central Government standing counsel, it is necessary to refer to the provisions of Section 5(1)(xxxiii) of the Act. Section 5(1) of the Act provides that subject to the provisions of Sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee. Clause (xxxiii) of Sub-section (1) of Section 5, without the Explanations, reads as follows :

"(xxxiii) in the case of an assessee, being a person of Indian origin or a citizen of India (hereafter in this clause referred to as such person) who was ordinarily residing in a foreign country and who, on leaving such country, has returned to India with the intention of permanently residing therein, moneys and the value of assets brought by him into India and the value of the assets acquired by him out of such moneys within one year immediately preceding the date of his return and at any time thereafter :

Provided that this exemption shall apply only for a period of seven successive assessment years commencing with the assessment year next following the date on which such person returned to India."

Though Clause (xxxiii) contains various ingredients, we are only concerned with the question as to whether the sale consideration of the asset, viz., Benz car, brought by the assessee into India, is entitled to the exemption provided in the clause, for there is no dispute with regard to the other ingredients of that clause. The relevant portion of Clause (xxxiii) states that "moneys and the value of assets brought by him into India and the value of the assets acquired by him out of such moneys." Admittedly, what is brought by the assessee, for the sale proceeds of which exemption is claimed, is a Benz car. According to the assessee, the sale consideration of the Benz car is the value of the asset brought by him, and therefore, the sale consideration is eligible for exemption under this clause.

However, the contention of the Revenue is that exemption under this clause will not be available once the asset brought from abroad is converted into money. The contention of senior counsel is that if the legislative intention was to grant exemption even in respect of the sale consideration of the assets brought from abroad, it should have been specifically stated so in the section itself. He drew inspiration for this submission in view of the provision that the "value of the asset acquired by him out of such moneys" used in the said section. According to him, this refers to the acquisition of assets with the moneys brought by the assessee from abroad. In other words, Clause (xxxiii) does not permit grant of exemption when the assets brought from abroad are converted into money or in any other form.

On a reading of the provisions of Clause (xxxiii) of Section 5(1) of the Act, we are unable to agree with the contention of learned senior Central Government standing counsel. Clause (xxxiii) as already stated, grants exemption in respect of "moneys" and the value of assets brought by the assessee into India. According to us, the expression "value of assets" has got significance in deciding the issue. The word "value" as per Bouvier''s Law Dictionary, unabridged, 3rd revision, volume 3, 1984, at page 3387, reads thus :

"Value. The utility of an object. The worth of an object in purchasing other goods. The first may be called value in use; the latter, value in exchange. When applied without qualification to property of any description, necessarily means the price which it will command in the market; . . ."

In Black''s law Dictionary, 5th edition, page 1391, the meaning of the word "value" is given as follows :

"Value. The utility of an object in satisfying, directly or indirectly, the needs or desires of human beings, called by economists ''value of use,'' or its worth consisting in the power of purchasing other objects, called ''value in exchange''."

So, when Clause (xxxiii) of Section 5(1) refers to the value of assets, it is the money''s worth or the price of the assets, which is relevant. It is also relevant to note that Clause (xxxiii) itself provides that the value of assets acquired by him out of such moneys is also held to be exempt. Here, the expression "such moneys," according to us, refers to moneys brought, as well as the value of the assets brought by the assessee from abroad. The value of assets, as already noted, is the money''s worth or the sale consideration. Therefore, even if the assessee has converted the assets, which were brought by him from outside India, into money, and if the money has been used for acquisition of other assets, either the original asset, or the money''s worth of the assets, or the asset which is acquired with the sale consideration of the original asset, is eligible for exemption, so long as the said asset is available with the assessee.

In the instant case, the Tribunal also, on a consideration of the provisions of Section 5(1)(xxxiii), has taken the view that the assessee is entitled to claim exemption of the value of the Benz car brought by him from outside India or the price received by him on the sale of the car. We are of the view that the Tribunal is perfectly justified in taking such a view.

In the circumstances, we answer the question referred to us in the affirmative, i.e., in favour of the assessee.

A copy of this judgment, under the seal of the court and the signature of the Registrar, will be forwarded to the Tribunal as required by the law.