The Judgment of the Court was delivered by
Deb, J.:— This is a reference under section 27(1) of the Wealth-tax Act, 1957, concerning the estate left by late Sir Edward C. Benthal. The assessment years are 1961-62 to 1963-64. The relevant valuation date is the 31st March, each year.
2. Sir Edward died on March 5, 1961, leaving a will and several codicils. M/s. Dalhousie Holdings Ltd. are the representatives in India of the executors to the estate left by him. They were assessed to wealth-tax, but the Appellate Tribunal has set aside the assessment by holding that they were not assessable under the Act in view of the death of Sir Edward before the valuation date. Thereafter, the Tribunal referred the following question to this court at the instance of the Commissioner:
“Whether, on the facts and in the circumstances of the case, wealth-tax assessments upon the executors to the estate of Sir E.C Benthal (deceased) for the assessment years 1961-62, 1962-63 and 1963-64 were legally made?”
3. Mr. B.L Pal, the learned counsel for the revenue, has confined his submissions solely to the assessment year 1961-62 by conceding that the executors cannot be assessed to wealth-tax in the assessment years 1962-63 and 1963-64, in view of the decision of the Bombay High Court in the case of Jamnadas v. Commissioner of Wealth-tax, [1965] 56 ITR 648 (Bom). He, however, placed reliance on the said decision in support of his contention that the assets left by Sir Edward in the year of his death was taxable in the hands of the executors. His further submission is that though no return was filed by Sir Edward prior to his death, his executors are liable to be taxed under section 19(2) of the Act. His final submission is that section 19A of the Act is retrospective in its operation and, therefore, the net wealth of the deceased is liable to be taxed in the hands of the executors under this section.
4. We are, however, not impressed by his submissions. Section 3 of the Act provides as follows:
“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 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.”
5. The net wealth on the corresponding valuation date of an individual is charged under this section. The legal personality of a person is extinguished on his death. No deceased can possess any property. On his intestate death, the property passes to his heirs. And on his testate demise, it passes to the legatees under his will. This section contemplates a living person on the relevant valuation date. Sir Edward was not alive on that date. Hence, he ceased to be an individual on the corresponding valuation date within the meaning of this section. Accordingly, there could be no charge on these properties on the relevant valuation date inasmuch as they ceased to be the properties of Sir Edward on that date. The estate left by him, therefore, cannot come within the mischief of this section.
6. The question now is whether the executors can be brought to tax in the year of his death under section 19(2) of the Act, which reads as follows:
“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.”
7. Section 19(2) is attracted only under these two circumstances: (1) where no return was filed by the assessee under section 14 of the Act before his death, and (ii) the tax officer has reason to believe that the return furnished by the assessee is an incorrect or incomplete return. Under section 14(1) of the Act, if the net wealth of an individual on the valuation date is of such an amount as to render him liable to pay tax under the Act he must, before the 30th June of the corresponding year, furnish to the Wealth-tax Officer a return in the prescribed form and verified in the prescribed manner setting forth his net wealth as on that valuation date. It is unnecessary to refer to the proviso to section 14(1), for admittedly it does not apply to the facts and the circumstances of the case. Broadly speaking, notwithstanding section 14(1) of the Act, the Wealth-tax Officer, under section 14(2) of the Act, may issue a notice upon the executor requiring, him to furnish a return as to the net wealth as on the relevant valuation date of the deceased if the Wealth-tax Officer forms an opinion that the deceased was liable to pay the tax.
8. Section 3, as already stated, imposes a charge upon the net wealth of an individual on the corresponding valuation date. Section 14 and section 19(2) do not impose any charge on the net wealth of any individual and, therefore, they must be read and understood subject to and in the context of the charge imposed by section 3 of the Act. Accordingly, the question of filing of any return for the year of his death under section 14 of the Act by a person who is no longer alive prior to the corresponding valuation date can never arise, for he has died before the accrual of charge under the Act and was accordingly not liable to be assessed under the Act. Hence, no notice under section 14(2) of the Act can at all be issued or served on his executor. Therefore, section 19(2) of the Act cannot have any application in the facts and the circumstances of the case, and, accordingly, the executors to the estate of Sir Edward cannot be taxed under the Act because there was no such provision in the Act prior to its amendment in 1964.
9. Where section 19 was not attracted, the executors could not be assessed or taxed under the Act and, therefore, to meet this situation, section 19A was introduced in the Act by the Wealth-tax (Amendment) Act, 1964, with effect from April 1, 1965. Section 19A, inter alia, reads as follows:
“19. Assessment in the case of executors.— (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……
Explanation.— In this section, ‘executor’ includes an administrator or other person administering the estate of a deceased person.”
10. Section 19A(1) for the first time created a charge on the net wealth of a person who was no longer alive on the corresponding valuation date and such charge is now enforceable against the estate left by him in the hands of his executors and the administrators who are also for the first time treated as individuals by the Amending Act. The Act, prior to its amendment, came into effect on April 1, 1957. Section 19A, as already stated, came into force on April 1, 1964. This section does not say that “it shall be deemed to have come into force on April 1, 1957” and not a word has been used in it even to suggest that it shall have retrospective operation with effect from any earlier date. Therefore, the submission of Mr. Pal that this section was in operation retrospectively from April 1, 1957, must fail.
11. There was no dispute between the parties in Jamnadas's case, [1965] 56 ITR 648 (Bom) regarding the assessment year 1960-61 in which year the executors were assessed to wealth-tax in respect of the estate left by the deceased who died on October 5, 1959, after executing her last will but before the arrival of the corresponding valuation date which was October 31, 1959. The said assessment was accepted by the executors and, thereafter, they were served with a notice under section 14(2) of the Act by the Wealth-tax Officer requiring them to file a return of the estate left by the deceased. The High Court set aside the said notice by holding that they were not liable to be assessed for the assessment year 1961-62 and the said notice was issued without jurisdiction. In support of his contention that the executors before us are liable to be assessed under section 19(2) of the Act for the year of assessment in which Sir Edward died, Mr. Pal has placed reliance on the following observations made by their Lordships of the Bombay High Court at pages 653-654 of the report: See [1965] 56 ITR 648 (Bom):
“The provisions in sub-section (2) when read with sub-section (1) 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.”
12. But, with due respect to their Lodships, we are unable to agree with their above observations for the reasons already given and also for the reasons hereinafter stated. It has been held by their Lordships of the Madras High Court in the case of M. Thirumani Mudaliar (By Lrs.) v. Commissioner Of Wealth-Tax, [1974] 96 ITR 152 (Mad) that section 19 of the Act created a liability on the executors only for a limited purpose, and that it was only after the Amending Act of 1964, introducing section 19A came into operation, that the executors became liable to be taxed as persons representing the deceased and that prior to the insertion of section 19A the position was that no liability to pay wealth-tax was attached to the estate of a deceased individual which continued in the hands of the executors. And to the extent stated above we agree with their Lordships of the Madras High Court.
13. The question as to whether the petitioners were liable to be assessed or taxed in the assessment year 1960-61 was not even mooted before their Lordships of the Bombay High Court and, therefore, it was not necessary for them to make the above observations. Reliance was placed by their Lord ships of the Bombay High Court on the decision of the Supreme Court in the case of Commissioner of Income-tax v. Amarchand N. Shroff, [1963] 48 ITR (SC) 59. But Amarchand's case, [1963] 48 ITR (SC) 59 is not on the Wealth-tax Act but on section 24B of the Indian Income-tax Act, 1922. The scheme of the Income-tax Act and the Wealth-tax Act and the subject-matter of their respective charges are totally different. The charge under the Income-tax Act is on the total income of the assessee for the entire period of the accounting year and the liability to pay income-tax arises at the point of accrual of income in that year. This liability is an accrued liability and is, therefore, enforceable in the hands of the executors on the death of the assessee even if the assessee's death took place before the close of the accounting year. Section 24B by fictio juris has extended the legal personality of the deceased assessee up to the end of the accounting year in which he has died and accordingly the income earned by him or accrued to him is assessable in the hands of his heirs or legal representatives under the Act, whereas the charge is on the net wealth of an individual on the corresponding valuation date under the Wealth-tax Act. The expression “assets” as defined in section 2(e) of the Act includes property of every description, barring those specified therein and in the Act. The term “net wealth”, as defined in section 2(m) of the Wealth-tax Act, “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,………… is in excess of the aggregate value of all the debts owed by the assessee on the valuation date…………” The words *underlined by me are of pivotal importance, for, they, read with section 3 of the Act, in no uncertain terms reveal that the “net wealth” is the net wealth on the corresponding valuation date and such net wealth is the net wealth belonging to the assessee on that valuation date which in relation to the wealth-tax assessment year “means the last day of the previous year as defined” in the Income-tax Act, as stated in section 2(q) of the Wealth-tax Act. The proprietary right in the property of a natural person is extinguished with the extinguishment of his life and, therefore, it cannot be said that he is owner of any property or assets on the valuation date if he is dead on that date.
14. Though the language used in section 24B of the Income-tax Act, 1922, and section 19(2) of the Wealth-tax Act are similar, the subject-matter of the charge and the scheme of these two Acts being totally different, these two sections cannot, in our opinion, operate on the same field. These two sections must be read and understood in their own context and must also be construed in the light of the respective schemes of the respective Acts including the respective charges under the respective Acts. These two Acts are not in pari materia as held by this court in the case of Commissioner of Income-tax v. Balai Chandra Paul, [1976] 105 ITR 666 (Cal) and, accordingly, I am not inclined to be inspired by the above decision of the Supreme Court in construing section 19(2) of the Wealth-tax Act.
15. That apart, the date of death contemplated by section 19(2) of the Wealth-tax Act is the date on and after the corresponding valuation date, otherwise section 19A of the Act becomes wholly redundant. And our reading of the entire scheme of the Act is that, prior to its amendment, the wealth-tax was payable by the owner on his net wealth on the corresponding valuation date and if he was dead on that date his heirs and legal representaives were not assessable to tax. We are also of the opinion that section 19A is not retrospective but prospective, and, accordingly, the executors cannot be assessed to wealth-tax even in the year of assessment in which Sir Edward died inasmuch as he died prior to the relevant date for the reasons already stated.
16. In the premises, we are unable to accept the contentions of Mr. Pal and return our answer to the question in the negative and in favour of the assessee.
17. In the facts and the circumstances of the case, we do not propose to make any order as to costs.
Dipak Kumar Sen, J.:— I agree with the judgment just now delivered by my learned brother, but would like to add the following:
The undisputed position is that prior to the introduction of section 19A in the Wealth-tax Act the estate of a deceased person could not be assessed to wealth-tax. The Act as it stood prior to such introduction contemplated assessment of an individual only. That meant an existing individual.
18. The assistance which Mr. B.L Pal, learned counsel for the revenue, seeks to derive from the observations of the decision of the Bombay High Court in Jamnadas's case, [1965] 56 ITR 648 (Bom) if accepted and applied literally would lead to anomalies. The relevant date for the purpose of the Wealth-tax Act being the date of valuation, if an individual ceases to exist before the valuation date then, for that financial year, the said individual is non-existent for the purpose of the Wealth-tax Act and that unit of wealth for that particular financial year must be considered to be the wealth of his estate which would exist on the date of the valuation. That being the position, the same unit of wealth cannot under section 19(2) be assessed as the wealth of the individual and at the same time also be assessed as the wealth of the estate of the deceased under section 19A. The manner of assessment as laid down under section 19(2) and section 19A are materially different. This will lead to different manners and methods of assessment of the same unit of wealth for the same financial year. The legislature cannot be deemed to have intended such a position.
19. In any event, the charging section, that is, section 3, is quite clear and it is only the individual, viz., an existing individual, who can be assessed to wealth-tax only if he is in possession of such wealth on the date of valuation. The construction as suggested by Mr. B.L Pal, for the above reasons, is not acceptable.