JUDGMENT

VENKATACHALIAH, J. : —Civil Appeal No. 1118/NT/1975, by special leave, by the Commissioner of Wealth-tax, Andhra Pradesh, and CA Nos. 1226 & 1227/NT/ 1975, on a certificate, under See. 29[1] of the Wealth-tax Act, 1957, [Act] by the assessee raise a question as to the proper construction of the proviso to Sec. 4[1] of the Act, which provides for exemption respecting transferred assets which would otherwise be includible in the wealth of the assessee under See. 4 [1] [a] of the Act.

The condition for the grant of the exemption under the proviso is that the transfer of the asset is either chargeable to gift tax or is not chargeable under Sec. 5 of the Gift tax Act, 1958. The particular point for consideration is whether, on the language of the proviso, the exemption is attracted only to such gifts as were chargeable to tax for any assessment year commencing "after the 31st day of March, 1964," as understood by the Revenue or whether the gifts even made earlier would attract the benefit of the exemption as claimed by the assessees.

2. There appears a divergence of judicial opinion on the point in the High Courts. In C. W. T. v. Smt. Sarala Debi 101 ITR 488, T Saraswathi Achi v. C. I. T. 104 ITR 185, C. W. T. v. Seth Nand Lal Ganeriwala, 107 ITR 758, M. G. Kollankulam v. C. I. T. 115 ITR 160, Mathi Harshey v. C. W. T. 121 ITR 676, and C. W. T. v. Rasesh N. Mafatlal 126 ITR 173, several High Courts have construed the provision in the manner suggested by the Revenue. C. W. T. v. Hashmatunnisa Begum (1977) 108 ITR 98 (Andh Pra) has taken the opposite view extending a wider benefit of the exemption.

The opinion of the Calcutta High Court in 101 ITR 488, which is representative of the view in favour of Revenue, is under appeal in CA 1226 and 1227 of 1985 and the opinion of the AndhraPradesh High Court in (1977) 108 ITR 98 which is favourable to the assessee is under appeal No. CA 1118 of 1975 preferred by the Revenue.

3. In CA 1118 of 1975 the assessee Smt. Hashmatunnisa Begam, the legal representative of the late Nawab Zaheer Yar Jung Bahadur, claimed in respect of the assessment year 1967-68, that the value of the immovable properties gifted by the late Nawab to his wives before 1-4-1964 should not be included in the net wealth of the Nawab as on the valuation date 31-9-1966. The Nawab under three deeds of gift one dated 25-5-1962, in favour of Smt. Hashmatunnisa Begum, his first wife, and two other deeds dated 17-8-1962 and 26-4-1962 in favour of Smt. Fareed Jehan Begum his second wife, gifted in their favour certain lands and buildings of a total value of Rs. 1,96,950/-. The gifts were chargeable to gift tax and were accordingly assessed to gift tax in the assessment year 1963-64. On behalf of the estate of the Nawab - who later died on 16-12-1968 - it was claimed in the proceedings for assessment to wealth for the Assessment Year 1967-68, that though the gifts were otherwise includible as belonging to the Nawab under Sec. 4[I][a][i], as the transfer made to the spouses otherwise than for adequate consideration, however, as the gifts were chargeable to gift tax, the proviso to Sec. 4[1] [a] was attracted and that the assets so transferred were not includible in the net wealth of the Nawab "for any assessment year commencing after the 31st day of March 1964". The Wealth-tax Officer rejected this claim. The Appellate Asst. Commissioner, in the assessees appeal, confirmed the assessment. In the assessees further appeal before the Appellate Tribunal, the Tribunal, on a particular construction on the proviso, allowed the appeal and held that the assets transferred, which had attracted gift-tax, were not includible in the net wealth of the Nawab for the assessment year 1964-65 onwards. At the instance of the Revenue, the following question of law was referred to the High Court for its opinion :

"Whether, on the facts and in the circumstances of the case, the assessee was entitled to exclude, under the proviso to section 4(1)(a) of We