Commissioner of Wealth Tax vs Dr. Advocate Ram A. Joshi

N. Venkatachala, J.—In these references u/s 27(1) of the Wealth-tax Act, 1957 (''the Act'') the question which require our answer is:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in cancelling the order passed by the Commissioner of Wealth-tax Act u/s 25(2) of the Wealth-tax Act and holding that assessee is entitled for exemption u/s 5(1)(xxxiii) of the Wealth-tax Act even though the assessee had come to India before 1-4-1976?

The facts giving rise to the above question briefly stated are:

One Dr. Advocate Ram A. Joshi is a person of Indian origin who was residing in a foreign country. However, in June 1972, he returned from the foreign country to India with the intention of permanently residing in India. He possessed the money and the value of assets brought by him from the foreign country into India and the assets acquired by him in India out of the money so brought. When he filed returns of wealth-tax for the assessment years 1978-79 and 1979-80 before the concerned WTO, he claimed exemption in respect of the said assets u/s 5 (1)(xxxiii) of the Act. By his order of assessment, the WTO allowed the exemption claimed by the assessee. But the Commissioner purporting to exercise his suo motu power u/s 25(2) of the Act, set aside the order of assessment made by the WTO and remitted the matter to him with a direction that the assessments shall be re-done disallowing the exemption which had been granted by him to the assessee earlier. The said order was challenged by the assessee in appeals [IT Appeal Nos. 39 and 40 (Bang.) of 1981] filed before the Tribunal, Bangalore Bench. Those appeals came to be allowed and the order of the Commissioner came to be cancelled. However, at the instance of the Commissioner the Tribunal framed the question already set out and has sent the same to this Court for being answered by this Court.

Since our answer to the said question would depend upon the construction to be placed by us on clause (xxxiii) of sub-section (1) of section 5 we shall excerpt the same:

Exemptions in respect of certain assets. - (1) Subject to the provisions of sub-section (1 A), wealth-tax shall not be payable to an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-

(i) to (xxxii) ******

(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:

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.

The said clause was inserted into section 5 by the Finance Act, 1976, and was brought into operation with effect from 1-4-1977. When the said clause is read without reference to the proviso contained therein, its express language makes it obvious that the exemption provided therein relates to the monies of an assessee of Indian origin who has already returned to India from the foreign country and the value of the assets brought by him into India and the value of the assets acquired by him out of such moneys. When the proviso to the clause intended to specify the number of years during which the exemption provided for in the clause has to be operative'' fixes the assessment year of commencement of the exemption in relation to the person, next following the date on which such person returned to India, it becomes clear that the clause relating to exemption becomes operative with reference to the person who had returned to India by the time of commencement of its operation. Hence, we are unable to think that exemption contained in clause (xxxiii) above could be regarded as that relating to a person who returns to India after coming into operation of the said clause (xxxiii) on 1-4-1977. In other words, clause (xxxiii) of sub-section (1) of section 5 cannot be understood as that which makes the exemption therein inoperative in respect of a person of Indian origin who was in a foreign country but returned to Indian prior to 1-4-1977. Having regard to the said view, we have taken of the provision in clause (xxxiii) of subsection (1) of section 5, our answer to the question under consideration would be in the affirmative and against the revenue. These references are accordingly disposed of.