A. & F. Harvey Ltd. ... v. Commissioner Of Weal...

The Judgment of the Court was delivered by

Ismail, J.:— The Income-tax Appellate Tribunal, Madras Bench, under section 27(1) of the Wealth-tax Act, 1957, hereinafter referred to as “the Act”, has referred the following questions of law for the opinion of this court:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was liable to wealth-tax for the assessment year 1957-58 on a sum of Rs. 20,50,000?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that there were duplicate assessments in respect of the same wealth and that the assessments and the corresponding departmental appeals have become otiose and as such the departmental appeals do not merit any consideration or decision?

(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the value of the assessee's interest in the income from shares in Messrs. A. & F. Harvey Ltd. should be excluded in computing the net wealth of Mrs. Harvey under section 6(i) of the Wealth-tax Act?”

2. We may point out immediately that the first question was referred to this court at the instance of the assessee, while the latter two questions were referred to this court at the instance of the department.

3. The facts that gave rise to this reference may now be considered. One Mr. Andrew Harvey held 90,000 ordinary shares in a company incorporated in India called Messrs. A. & F. Harvey Ltd. He died on March 28, 1957, domiciled in England. He had executed a will on November 30, 1956. That will was proved in England and probate was granted in England. Mr. Harvey had appointed five executors and trustees of his will and one of them was his wife, Mrs. Ethel Maud Devere Harvey. The administration of the estate devolved on and vested in the executors from the date of the testator's death, namely, March 28, 1957, The above-mentioned 90,000 shares of the deceased testator in the Indian company referred to above were transferred in the name of the executors on January 11, 1961. At the relevant time the administration of the estate was not yet over. The executors and trustees are admittedly residing in England and are not citizens of India. Equally, admittedly, Mrs. Harvey is a citizen of England and is also residing in England.

4. In clause 6 of the will, the testator gave the following directions:

“I direct that my Trustees shall deal with the ordinary shares in A. & F. Harvey Limited which I hold at the date of my death (hereinafter referred to as ‘the said shares’) in the following way:—

(a) Within six months of my death offer to Sir James Doak one-hall of the said shares if my wife survives me or three-quarters thereof if she predeceases me at the book-value or the market price of the said shares whichever is less at the date of my death.

(b) If my wife survives me as to the remaining one-half of the said shares my Trustees shall stand possessed of the income thereof upon trust for my said wife during her lifetime for her own use and benefit absolutely.

(c) Should my wife survive me then on her death my Trustees will within six months of her death offer to Sir James Doak one quarter of the said shares on the same terms and conditions and in the same manner as is set out in sub-paragraphs (a), (e) and (f) hereof.

(d) Subject to the provisions of the preceding paragraphs my Trustees shall stand possessed of one quarter of the said shares as to both capital and income of my said step-daughters Patricia and Daphne and if more than one in equal shares as tenants-in-common.

(e) Provided always that my Trustees shall in any event as soon as possible after my death obtain certificate from the Auditors of A. & F. Harvey Limited as to what is the book value and the market price of the said share at the date of my death and that they will make their offer in accordance with such certificate and that on the death of my wife they will likewise obtain a similar certificate and make the offer under paragraph (c) hereof in accordance with such certificate.

(f) Provided further that in making any such offer my Trustees shall provide that if the same be not accepted by Sir James Doak within one month from the date thereof it will be deemed to have lapsed or not to have been accepted by him.”

5. In terms of clause 6(b) of the will, on the death of the testator the executors stood possessed of the income of one-half of 90,000 shares, namely, 45,000 shares of the Indian company upon trust for Mrs. Harvey during her lifetime for her own use and benefit. This reference relates to the assessment to wealth-tax of the interest of Mrs. Harvey in the said 45,000 shares. For the assessment years 1957-58 to 1965-66 steps were taken by the Wealth-tax Officer to assess the interest of Mrs. Harvey in the said 45,000 shares. This he sought to achieve by two methods, namely, (1) direct assessment on Mrs. Harvey herself; and (2) assessment on Messrs. A. & F. Harvey Ltd., as agents of Mrs. Harvey. In respect of the value of the entire 90,000 shares there was an assessment on the executors, represented by Messrs A. & F. Harvey Ltd., as agents. It may be pointed out that the assessment made on Messrs. A. & F. Harvey Ltd., as agents of Mr. Harvey, was admittedly only a duplicate or protective assessment because the assessment was made in respect of the same wealth as an alternative to direct assessment made on Mrs. Harvey. The Wealth-tax Officer held that the interest which Mrs. Harvey had was an asset in India and could not be executed under section 6(i) of the Act and that, therefore, she was liable to be assessed in respect of her interest in the said 45,000 shares. Under section 22(1) of the Act, he also held that Messrs. A. & F. Harvey Ltd., in India, constituted the agents of Mrs. Harvey in England and that, therefore, that company also could be assessed as her agents. With regard to the executors also he held that because the entire 90,000 shares vested in them immediately on the death of Mr. Harvey, they were liable to be taxed and the company in India can be taxed as the agents of the executors under section 22(1) of the Act.

6. Against the orders of assessment of the Wealth-tax Officer, appeals were preferred to the Appellate Assistant Commissioner and he took the view that the interest which Mrs. Harvey had was only a right to claim from the executors the dividend referable to the said 45,000 shares, that she had no interest in the shares as such, that, therefore, the right which Mrs. Harvey had with reference to the income from the said 45,000 shares registered in the names of the executors, the dividends from which were collected by the said executors, could not be said to be an asset located in India and that, therefore, Mrs. Harvey could not be taxed in respect of the same. He also held that if Mrs. Harvey could not be taxed in respect of the wealth, Messrs. A. & F. Harvey Ltd. could not also be taxed in respect of the same wealth as the agents of Mrs. Harvey. So far as executors are concerned, though the Appellate Assistant Commissioner stated that the company could be treated as the agents of the executors, he held that the executors themselves were not liable to be taxed, because though in law the estate of the deceased vested in them they were not the owners of the estate and that, therefore, they were not liable to wealth-tax for any of the years in question. It was, thereafter, that the department preferred appeals to the Income-tax Appellate Tribunal against the decision of the Appellate Assistant Commissioner in respect of these three categories of assessments. There were cross-objections filed by the assessees questioning the valuation of interest of Mrs. Harvey. The Tribunal held that the interest of Mrs. Harvey in respect of the income from 45,000 shares in Messrs. A. & F. Harvey Ltd. was located in England and that, therefore, under section 6(i) of the Act it was liable to be excluded and that, consequently, she could not be taxed in respect thereof. It also held that if she could not be taxed, Messrs. A. & F. Harvey Ltd. could not be taxed as the agents of Mrs. Harvey in respect of the same wealth and that, therefore, the appeals preferred by the department in respect of the assessments made in the name of Messrs. A. & F. Harvey Ltd., as agents of Mrs. Harvey, were otiose and had to be dismissed as such. It is unnecessary for us to consider the question relating to the valuation because that was not referred to this court. With regard to the assessment made on the executors with Messrs. A. & F. Harvey Ltd., as agents, the Tribunal held that the assessment was valid only in respect of the assessment year 1957-58 and was not valid wifh reference to the subsequent years. It is against the background to the above decision of the Tribunal that we have to consider the three questions referred to above.

7. The first matter that requires to be considered is whether Mrs. Harvey was liable to be taxed under the provisions of the Act in respect of the interest which she got under the will of her husband, Mr. Harvey. The Tribunal has recorded the following common case of the parties:

“Both the parties before us agree that the asset in question belonging to the assessee is Mrs. Harvey's right against the executors in England to receive income of 45,000 shares of the Indian company and it is not the department's case that the assets belonging to the assessee are the shares of Indian company.”

8. The Tribunal has again pointed out:

“There is no dispute that the asset which is the subject-matter of the charge for wealth-tax purposes is the assessee's right against the executors in England to receive income of the Indian shares and no more or in other words her right to have the estate duly administered. She has no proprietary interest over the property situated in India. The property in her hands is merely the right to receive from the executors income of certain Indian shares which right is enforceable in England or a fight to have the estate duly administered.”

9. Having regard to the actual provisions in the will, the parties could not have taken any other stand before the Tribunal. As we have pointed out already, under clause 6(b) of the will of Mr. Harvey, the executors and trustees in respect of the said 45,000 shares “shall stand possessed of the income thereof upon trust for my said wife during her lifetime for her own use and benefit absolutely”. We have also referred to the fact that the shares were transferred in the names of the executors and that they alone had been collecting the dividends in respect of those shares from the Indian company. Under these circumstances, Mrs. Harvey had no right whatever to proceed against the Indian company for recovery of the dividends and the only right she had was to proceed against the executors for payment to her the income referable to the said 45,000 shares or for the administration of the estate. That she could have done only in England because the executors were citizens of England and were residents of England and she also was a citizen of England and was resident in England. Therefore, the forum for any such action that could be taken by Mrs. Harvey was only in England. Under these circumstances, the rights which Mrs. Harvey had and which was merely a right to proceed against the executors for the purpose of claiming the income referable to the said 45,000 shares cannot be said to be an asset situate in India and it will, consequently, fall within the scope of section 6(i) of the Act, namely, the value of the assets and debts located outside India and, therefore, the same could not be brought to tax. Therefore, it is clear that the assessments made by the Wealth-tax Officer on Mrs. Harvey directly and on Messrs. A & F. Harvey Ltd., as the agents of Mrs. Harvey, in respect of the same wealth were erroneous in law and, therefore, they were rightly set aside by the Appellate Assistant Commissioner as well as the Tribunal. Consequently, questions Nos. 2 and 3 extracted already have to be and are answered in the affirmative and against the department.

10. That leaves out question No. 1. That question, as we have pointed out already, related to the assessment of the value of the entire 90,000 shares in the hands of the executors for the year 1957-58. We have already pointed out that the Appellate Assistant Commissioner held that under section 22 of the Act, the Indian company could be treated as the agents of the executors in England and that conclusion was confirmed by the Tribunal. However, the Appellate Assistant Commissioner held that even for the year 1957-58, the executors could not be assessed in respect of the said 90,000 shares. On the other hand, the Tribunal took a different view. According to the Tribunal, the executors could be assessed on the value of the said 90,000 shares only for the assessment year 1957-58, and not for the subsequent years and for the purpose of coming to the conclusion, it relied on a decision of the Bombay High Court in Jamnadas v. Commissioner of Wealth-tax [1965] 56 ITR 648 (Bom-Nag). The department has not come up to this court by way of reference challenging the conclusion of the Tribunal that for the years other than 1957-58, the executors could not be assessed. However, the executors have come up to this court contending that even for the assessment year 1957-58, they could not be assessed in respect of the shares referred to above.

11. Before we proceed to deal with the question in detail, we may immediately point out that the ground for holding that for the year 1957-58, the executors could be assessed was that Mr. Harvey died during the middle of the financial year and that, therefore, for the assessment year relevant to that year the executors could be assessed. It is the correctness of this assessment and the conclusion that require to be considered now, in relation to the first question referred to already.

12. Before we deal with the decision of the Bombay High Court it is desirable to refer to the statutory provisions in this behalf. Section 3 of the Act is admittedly the charging section and that section says:

“Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as ‘wealth-tax’) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule.”

13. We may point out that the expression “assessment year” occurring in this section was substituted for the expression “financial year” which originally found place, by the Amending Act, 1964, with effect from April 1, 1965. The crucial thing to be noticed with reference to this section is that the charge is on the net wealth as on the corresponding valuation date. Therefore, we shall have now to find out what exactly are meant by “net wealth” and “valuation date”. The expression “net wealth” has been defined in section 2(m) as follows:

“‘Net wealth’ means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than,……”

14. Section 2(q) defines “valuation date” as follows:

“‘Valuation date’, in relation to any year for which an assessment is to be made under this Act means the last day of the previous year as defined in section 3 of the Income-tax Act, if an assessment were to be made under that Act for that year: ……”

15. There is a proviso to this clause and it is unnecessary to refer to that proviso for the purpose of this case and it is enough to point out that it is the common case of the parties that the valuation date for the purpose of this case was 31st March of the particular year. Consequently, the effect of section 3 read with section 2(m) and section 2(q) is that the wealth-tax is chargeable on the aggregate value of all the assets of a person as on the valuation date. Even though section 3 starts by saying that there shall be charged for every assessment year a tax in respect of the net wealth, still the wealth with reference to which charge has to be made has to be ascertained as on the valuation date. It may happen that a particular person may possess or own a certain wealth on the date immediately preceding the valuation date, but he may lose that wealth on the valuation date and, if so, he cannot be made liable to any tax. Unlike the income-tax, which is in relation to income which is spread over a period in the form of accrual or receipt of income, the wealth-tax is in relation to the wealth quantified or crystallized with reference to a particular date, namely, the valuation date. Therefore, for a person to be liable to pay wealth-tax, he must be alive on the valuation date and must have the wealth which is liable to tax as provided in that section on that date. If he had died prior to the valuation date, then his wealth on the valuation date would not have belonged to him. If he died intestate it would belong to his heirs and if he died after executing a will, it would belong to the legatees and if executors or administrators had been appointed under the will, though the estate might vest in them for administration, still the ownership of the wealth would belong to the legatees under will. Therefore, purely as a matter of construction of the statutory provivisons contained in section 3 read with section 2(m) and section 2(q), it will be clear that no dead man can be assessed to wealth-tax and if a man is to be assessed to wealth-tax in respect of his wealth as on the valuation date, he must be alive on that date and if he had died earlier, his wealth would belong to others and not to him, and, therefore, he could not be assessed to wealth-tax.

16. It is against this background of the statutory provisions only we have to consider the question whether there was any justification for holding that if a person died during the course of a year, even though he was not alive on the valuation date, his executors would be liable to tax for the assessment year relevant to that year. From what we have indicated already, if a person had died during the course of the previous year and was not alive on the valuation date, his estate as such could not be assessed in the hands of anybody representing the deceased, since the estate would have by that time devolved on his heirs or legatees, as the case may be. From this point of view there can be no difference between the assessment year referable to the previous year in which he died or the succeeding years.

17. For the purpose of the present case it is only necessary to refer to two other sections, namely, sections 19(1) and (2) and 19A. Section 19 has been in the statute from the very beginning and that states as follows:

“19. (1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person, to the extent to which the estate is capable of meeting the charge, the wealth-tax assessed as payable by such person, or any sum, which would have been payable by him under this Act if he had not died.

(2) Where a person dies without having furnished a return under the provisions of section 14 or after having furnished a return which the Wealth-tax Officer has reason to believe to be incorrect or incomplete, the Wealth-tax Officer may make an assessment of the net wealth of such person and determine the wealth-tax payable by the person on the basis of such assessment, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person if he had survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which might under the provisions of section 16 have been required from the deceased person.”

18. In relation to the assessment of wealth to wealth-tax, as in the case of income-tax and other taxes, there are three different stages. The first stage is the filing of return by the assessee. The second stage is the quantification of the tax by the Wealth-tax Officer. The second stage may also involve an enquiry by the officer concerned for the purpose of arriving at the aggregate value of the net asset and bringing it to charge. The third stage is the recovery of the tax so levied. Section 19 deals with the three situations. Section 19(1) deals with the situation where an assessee has been already assessed to tax, but is dead before the payment of tax. In that context it says that the tax shall be payable by the executor, administrator or other legal representative out of the estate of the deceased to the extent to which the estate is capable of meeting the charge. The same legal position has been made applicable to any sum which would have been payable by the deceased under the Act, if he had not died. Sub-section (2) of section 19 deals with a situation where the assessee is dead after having filed the return, but before the tax is quantified. Section 14 of the Act itself provides that a return has to be filed before 30th June of the corresponding assessment year. A person may die after the valuation date but before 30th June, without filing the return. In such circumstances, Sub-section (2) of section 19 provides for the filing of the return by and the succeeding steps to be taken with reference thereto in the hands of the executor, administrator or other legal representative of the deceased person. Therefore, a reading of sub-section (1) and Sub-section (2) of section 19 makes it absolutely clear that the said section has nothing whatever to do with the assessment to wealth-tax of the estate of a deceased who died even before the valuation date. The provisions contained therein clearly show that that section is concerned with a case where an assessee dies after the valuation date and has been assessed to tax before his death or dies after the valuation date but before filing a return or dies after the valuation date and after having filed a return which the Wealth-tax Officer considers to be incomplete or incorrect.

19. Section 19A is entirely different and it was introduced by the Wealth-tax (Amendment) Act, 1964, and it came into force with effect from April 1, 1965. This section is as follows:

“19A. (1) Subject as hereinafter provided, the net wealth of the estate of a deceased person shall be chargeable to tax in the hands of the executor or executors.

(2) The executor or executors shall for the purposes of this Act be treated as an individual.

(3) The status of the executor or executors shall for the purposes of this Act as regards residence and citizenship be the same as that of the deceased on the valuation date immediately preceding his death.

(4) The assessment of an executor under this section shall be made separately from any assessment that may be made on him in respect of his own net wealth or on the net wealth of the deceased under section 19.

(5) Separate assessments shall be made under this section in respect of the net wealth as on each valuation date as is included in the period from the date of the death of the deceased to the date of complete distribution to the beneficiaries of the estate according to their several interests.

(6) In computing the net wealth on any valuation date under this section, any assets of the estate distributed to, or applied to the benefit of, any specific legatee of the estate prior to that valuation date shall be excluded, but the assets so excluded shall, to the extent such assets are held by the legatee on any valuation date, be included in the net wealth of such specific legatee on that valuation date.

Explanation.—In this section, ‘executor’ includes an administrator or other person administering the estate of a deceased person.”

20. It is clear from the express language of this section that it provides for assessment of the assets of a deceased in the hands of the executor or executors. From the very nature of the case, the section will apply only to a case where an assessee dies having executed a will and appointed an executor or executors. If he had died intestate, the estate would have gone to his heirs, and, therefore, it is in the hands of the heirs that the assessment will have to be made and not in the hands of anybody else. Consequently, section 19A is confined only to a case where an assessee dies after executing a will and appointing an executor or executors. In such a case section 19A provides for the assessment of the estate of the deceased in the hands of the executor or executors till the administration is completed. A specific provision has been made in this section itself for the exclusion of a part of the asset of the deceased if the executor or executors had handed over that part to the persons who were entitled to it under the terms of the will. Hence, this section 19A which creates a special machinery for the purpose of assessing an executor or executors in respect of an estate of a deceased having come into force with effect from April 1, 1965, has no application to the present case. Therefore, we have to consider the present case without reference to section 19A and only with reference to section 3 read with section 2(m) and section 2(q) and, if necessary, section 19.

21. We have sufficiently explained the scope of section 19 and according to us, section 19 will not help the department to assess an executor in respect of the assets of a deceased who was not alive on the valuation date and who had died previous to the valuation date. This conclusion, as we have pointed out already, we have reached simply as a matter of construction of the relevant statutory provisions. Now, against the background of this inference drawn by us from the statutory provisions, we shall consider the decision of the Bombay High Court in Jamnadas v. Commissioner of Wealth-tax [1965] 56 ITR 648 (Bom-Nag) referred to already.

22. In that decision liability to assessment for the assessment year following the previous year during the course of which the assessee died was conceded. The judgment itself states (page 649):

“The relevant facts are as follows: Smt. Sodradevi N. Daga died on October 5, 1959, prior thereto executing her last will dated April 8, 1959. The petitioners are the joint executors appointed under that will. The deceased left a large estate amounting to about Rs. 9 lakhs and odd. For the financial year expiring on 31st October, 1959, i.e, the assessment year 1960-61, the petitioners as executors were assessed to pay wealth-tax in respect of the estate left by the deceased and there is no dispute between the parties as regards that assessment.”

23. Consequently, in respect of the assessment for the assessment year immediately following the previous year during which the assessee died, there was no controversy and, therefore, the Bombay High Court had no occasion to make any pronouncement with reference thereto. Only in respect of the subsequent years the Bombay High Court after referring to the relevant statutory provisions came to the conclusion that the executors could not be taxed. As a matter of fact that conclusion of the Bombay High Court is in accordance with the view we have already expressed on the scope of section 3 read with section 2(m) and section 2(q) and section 19. After referring to the provisions of the Act as well as the definitions contained therein, the Bombay High Court observed (pages 651, 652):

“It appears to us that on a true construction of the provisions of section 3 read with the definitions of the various phrases which we have referred to above and also read with the provisions in sections 4 and 5 relating to ascertainment and computation of net wealth for the purposes of wealth-tax, it is clear that the assessee who is an individual is taxed in respect of wealth of his ownership. There is no direct provision in these sections for taxing a deceased individual with wealth-tax. There is no direct provision in respect of assessing wealth-tax on the estate left by a deceased individual except to the extent as provided in section 19. There is no dispute between the parties that in this case the question relates to an assessee who is an individual. The impugned assessment order and the impugned notice of demand have been issued on the footing that wealth-tax can be charged and recovered in respect of the wealth of a deceased individual assessee. It is clear that the assessment, if it is not made and authorised by the provisions in section 19, would have to be found to be without any authority of law and jurisdiction. The net wealth that is mentioned in sections 4 and 5 has reference to the net wealth of an individual. The assets referred to in these sections obviously and patently must be of the ownership of the individual assessee. There is nothing in sections 3, 4 and 5, being sections relating to charging provisions and provisions for computation of assets, to show that wealth which is not of the ownership of the individnal assessee can be considered to be net wealth for the purpose of assessing wealth-tax. It is for this reason that, on behalf of the respondents, reliance has been placed on the provisions of section 19 in support of their contention that this section entitles the revenue to charge wealth-tax even against executors, administrators or legal representatives of a deceased individual assessee.”

24. Thus, it will be clear that the above observation is fully in accordance with the view we have taken of the relevant provisions of the Act and that this decision does not lay down that wealth-tax can be claimed from the executors or administrators for the assessment year immediately preceding the previous year during the course of which the assessee died. However, there is one other statement in the course of the judgment which may lend support to such a view. The Bench of the Bombay High Court, after referring to section 19, proceeded to state [1965] 56 ITR 648, 653 (Bom-Nag.):

“The provisions in sub-section (2) when read with sub-section (1) (section 19) clearly indicate that the provisions in this section were to enable the revenue to recover wealth-tax in respect of the net wealth of the deceased person for the financial year in which the person died. Though such deceased person ceased to be the owner of all his properties at a moment which was not the end of the financial year, by legal fiction the tax was intended to be levied on the footing that he continued to own the estate left by him during the complete duration of the relevant financial year. The executors, administrators and other legal representatives were made liable to pay such wealth-tax for that relevant financial year from out of the estate left by the deceased person.”

25. After having made the above observation, the Bench referred to the provisions contained in section 24B of the Indian Income-tax Act, 1922, and the decisions bearing thereon and concluded [1965] 56 ITR 648, 656 (Bom-Nag.):

“It is difficult not to adopt the whole ratio of the decision of the Supreme Court in the above two cases [Commissioner of Income-tax v. Amarchand N. Shroff [1963] 48 ITR (SC) 59 and Commissioner of Income-tax v. James Anderson [1964] 51 ITR 345 (SC)] in connection with the construction of the provisions of section 19 of the Wealth-tax Act which are in all particulars similar to the provisions in section 24B of the Income-tax Act.”

26. In the first place, the above observation of the Bombay High Court can be said to be only obiter because, as we have pointed out already, it was conceded by the executors in that case that for the assessment year immediately following the previous year during the course of which the assessee died, the assessment could be made in the hands of the executors. On the other hand, if the Bombay High Court is held to have laid down the law in the observations extracted above, with respect, we express our dissent from the said observation. There is no fiction in section 19 to the effect that even though the deceased died before the valuation date, he must be deemed to have lived till the valuation date. For the reasons we have already indicated, section 19 is purely procedural and the purpose and object of the provisions contained therein are as shown by us already.

27. We may also point out that there can be no analogy of the provisions of the Income-tax Act with reference to the assessment under the Act. In the case of the Income-tax Act, a person, even if he died in the middle of an accounting year, might have earned taxable income during the course of that year before his death and, therefore, with reference to that income, he was liable to pay tax and assessment proceedings could be taken and tax could be recovered in the hands of his legal representatives out of the assets left behind by the deceased. But, as far as the Act is concerned, it is not an assessment in respect of the wealth continuing over a period, but in respect of the wealth as available on a particular date, namely, the valuation date. Therefore, there cannot be any analogy, true or false, between the relevant provisions of the Income-tax Act and the Act in this behalf, in view of this basic and fundamental difference existing between the chargeable events themselves.

28. Under these circumstances, we are of the opinion that since Mr. Harvey was dead in the present case on March 28, 1957, and was not alive on March 31, 1957, which was the valuation date, his assets could not be taxed in the hands of the executors for the assessment year 1957-58, because immediately on the death of Mr. Harvey the assets ceased to belong to him and they belonged to the legatees for whom he had made provisions under the will executed by him.

29. An alternative contention was contemplated by the learned counsel for the department to the effect that on the death of Mr. Harvey on March 28, 1957, the estate vested in the executors, that it was the executors who were the owners of the estate on March 31, 1957, which was the valuation date and that, therefore, the executors could be assessed for the assessment year 1957-58. We are unable to accept this argument for the simple reason that section 2(m) uses the expression “assets belonging to the assessee” and for the purposes of the Succession Act and the administration of an estate, even if it is held that the estate legally vested in the executors, the same does not belong to them. As a matter of fact, the extract from the judgment of the Bombay High Court which we have given already repeatedly refers to the ownership of the asset and that itself will show that the executors, not being the owners of the asset, cannot be made liable to wealth-tax.

30. Independent of the above reasoning, there is a direct decision of this court dealing with this point in M. Thirumani Mudaliar (By Lrs.) v. Commissioner Of Wealth-Tax [1974] 96 ITR 152 (Mad). In that case this court had directly to consider the scope of the expression “belonging to” occurring in section 2(m) read with sections 3 and 19A of the Act. Dealing with the point similar to the one raised before us, this court held (page 161):

“The revenue does not dispute the fact that wealth-tax is payable only by an individual who owns wealth in respect of which tax is made payable. But it is said that as the entire property of the deceased had vested in the executors in this case, they as a group of individuals could be assessed under section 3 in respect of the property which had vested in them. Section 3 of the Act imposes a charge to wealth-tax in respect of the net wealth of every individual or Hindu undivided family and companies and the expression ‘net wealth’ has been defined in section 2(m) as meaning the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee. Thus section 3, read along with the definition of ‘net wealth’ in section 2(m), has to be taken to impose a charge of wealth-tax only on individuals to whom the wealth belongs. Therefore, the question is whether the properties of the deceased which have vested in the executors ‘belonged to’ the executors.

According to the revenue, in view of the legal vesting of the properties of the deceased on the executors, the properties can be said to belong to the executors, and the expression ‘belonging to’ occurring in the definition of ‘net wealth’ in section 2(m) has to be construed in a general sense of holding or possessing and not in the strict sense of being owned.”

31. After referring to certain decisions construing the word “property” and the words “belonging to”, this court concluded [1974] 96 ITR 152, 162 (Mad.):

“But, however wide the words ‘belonging to’ are construed, it is not possible for us to say that the properties in the hands of the executors for administration belong to them. Normally, when we speak of certain physical objects as belonging to a person without any qualifying expression, the primary natural meaning is that they are his own absolute property. When a person by virtue of a contractual obligation takes up the management of the properties as per the directions of a testator, he cannot be said to own the property absolutely.”

32. In view of this decision of this court, we have no hesitation in rejecting the contention advanced on behalf of the revenue in the present case.

33. Mr. A.N Rangaswami, learned counsel for the revenue, brought to our attention a decision of the Supreme Court in Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur AIR 1965 SC 1923 and contended that the Supreme Court in that case held that the words “belonging to” could signify even possession of an interest less than that of full ownership. We are of the opinion that that decision has no application to the present case. The Supreme Court in that case had to consider whether the use of the words “belonging to” could connote a lesser right. The Supreme Court stated (page 1929):

“Though the word ‘belonging’ no doubt is capable of denoting an absolute title, it is nevertheless not confined to connoting that sense. Even possession of an interest less than that of full ownership could be signified by that word. In Webster ‘belong to’ is explained as meaning, inter alia, ‘to be owned by, be in the possession of’. The precise sense which the word was meant to convey can, therefore, be gathered only by reading the document as a whole and adverting to the context in which it occurs.”

34. Consequently, what the expression “belonging to” occurring in a particular statute means has to be understood in the context in which it is used and, in the context in which that expression is used in section 2(m) of the Act, we are clearly of the opinion that it means only the full and absolute ownership.

35. Under these circumstances, our answer to the first question is in the negative and in favour of the assessee.

36. The assessee will be entitled to its costs. Counsel's fee is fixed at Rs. 500.