Law: Wealth Tax Act, 1957

Section: 59(2)

Wealth Tax - Exemptions - "Deposit with Government"-- Whether includes deposit of cash or securities made as security for due performance of Government contracts-Construction of S. 5(2) Wealth Tax Act, 1957, S. 5(2). The word "deposit" in section 5(2) of the Wealth Tax Act is used in a special sense of investments which the public may make with the Government or a local authority such as deposits in treasury savings deposit certificates, deposits in post office savings banks, etc., and do not include ordinary commercial deposits, e.g., deposits made with Government as security for due fulfilment of Government contracts or as security for service in Government. The words "which the Central Government may, by notification in the official Gazette, exempt", in subsection (2) of section 5 govern both the categories contemplated by the opening words of the subsection, namely, "any deposit" and "any security, etc." Obiter : Subsection (2) of section 5 is unhappily worded and requires re-drafting. JUDGMENT KOTVAL, C. J.-This reference raises a rather substantial question as to the interpretation of the provisions of section 5(2) of the Wealth Tax Act, 1957. The question arises upon these facts : The assessee is Messrs Sindhu Hochtief (India) Ltd. who, inter alia, carry on the business of construction work. They had entered into a contract with the Government of India for the construction of the Port of Kandla and for that purpose there was a written contract, the material clauses of which were as follows: Clause 2 of the conditions of the contract was: "The person... whose tender may be accepted , . . . shall within thirty days of the receipt by him of the notification of the acceptance of his tender, deposit as security for the due fulfilment of the contract, an amount in cash or Government securities endorsed to the President of Indict of value equivalent of 2 % of the value of the work as per his tender rates, into any branch of the reserve Bank of India or the Imperial Bank of India . . . . ." The opening part of clause 9(1) was: "(1) In order that the work may be carried out efficiently,…