Commissioner Of Wealth Tax vs G.P. Kanodia (Huf)

ORDER

1. The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under section 27(1) of the Wealth-Tax Act, 1957 ('the Act') for opinion to this Court.

"1. Whether on the facts and in the circumstances of the case, the I.T.A.T. was correct in law in holding that the question of valuation was not referred to the proper valuer and directing the W.T.O. to refer the valuation again to the competent valuer, to determine the assessee's share in the firm and not to go by valuation made by the Valuation Officer who had valued the assets of the firm ?

2. Whether in law and on facts of the case, the Tribunal was justified in allowing exemption to a partner of a firm under section 5(1)(iv) of the Wealth-Tax Act, 1957 in respect of property owned by the firm ?"

2. The reference relates to the assessment year 1979-80.

3. Briefly stated the facts giving rise to the present reference are as follows:

The respondent assessees are partners in the firm M/s. Sadi Ram Ganga Prasad. The Wealth-Tax Officer made a reference to the Departmental Valuation Officer under section 16A of the Act to value land, building, plant and machinery belonging to the above firm. After obtaining the valuation report, the Wealth-Tax Officer completed the assessments of the assessee in accordance with the valuation report of the Departmental Valuation Officer.

4. Being aggrieved by the orders of the Wealth-Tax Officer, the assessees preferred appeal 'to the Appellate Assistant Commissioner. It was contended before the Appellate Assistant Commissioner that the matter relating to the valuation should have been referred to the Authorised Valuation Officer for the purpose and not to the Valuation Officer appointed for valuation of land and building. Agreeing with the contention of the assessee, the Appellate Assistant Commissioner set aside the assessment orders on the point to be framed afresh af ter ref erring the valuation of the assessees'share in the partnership firm to the Authorised Valuation Officer having jurisdiction for the purpose.

5. At the time of hearing before the Tribunal, it was submitted that similar issue had cropped up in the case of Sl ShriB.M. Kanodia and D.P. Kanodia in W. T A. Nos. 210 to 225 (All.) of 1986 which were decided by the Appellatc Tribunal by its order dated 27-1-1987, wherein it was held that the decision in the case of J.K. Bankers (supra) relied upon by the Departmental Representative is on different facts and -is distinguishable. Therefore, the department's contention on the point was rejected and the direction issued by the First Appellate Authority was held to be valid. The Appellate Tribunal observed that the facts in the appeals before it were identical. Respectfully following the aforesaid decision, the Appellate Tribunal rejected the contention of the department.

6. The next issue before the Tribunal related to the exemption claimed by the assessee's under section 5(1)(iv) of the Act from the value of the building belonging to the firm M/s. Shadi Ram Ganga Prasad in which the assessees are partners. The exemption claimed was refused by the assessing officer but on appeal the claim was allowed by the Appellate Assistant Commissioner and in doing so he had followed the decision of the Appellate Tribunal in the case of Sudhir Bhargava in W.T.A. No. 477 (All.) of 1984 dated 28-11-1986.

7. Being aggrieved by the order of the Appellate Assistant Commissioner, the department came in appeal to the Tribunal. After hearing the parties, the Tribunal dealt with the matter in the following words:

"We have given our anxious consideration to the rival submissions. In the case of J.K. Bankers v. W.T.O. 145 ITR 485, the Hon'ble Supreme Court had held that the interest of a partner in the partnership firm belongs to him, would be includible in his expression 'assets', and will have to be taken into account while computing the net wealth of the individual. Following this decision of the Hon'ble Supreme Court, the High Court of Calcutta had held in the case of CWT v. Mira Mehra (155 ITR 765) that where the interest of an individual partner in the assets of a firm is chargeable to wealth-tax, the partner will be entitled to exemption under section 5(l)(iv) of the Act, in the computation of such wealth. The High Court of Madhya Pradesh has also adopted the similar views in the case already mentioned above. We may also refer to the decision of a Special Bench of the Tribunal in the case of Lala Gulab Chand as reported in I S.B.T. 613. In that case the assessee was a partner in a firm had claimed exemption under section 5(1)(iv) of the Wealth-Tax Act, in respect of the agricultural land belonging to the firm. It was held by the Appellate Tribunal that though the impugned agricultural land was a property of the firm, it could still be held to belong to the assessee. Thus, the view expressed by the Special Bench of the Tribunal also supports the view advanced on behalf of the assessee.

It would not be out of place to mention here that similar issue had arisen in a group of appeals of Smt. Zeenath Begum and others in WTA Nos. 494 to 498 (All.) of 1984 which were disposed of by Allahabad Bench-A of the Tribunal by its order dated 26-11-1986. While disposing of the said appeal the Tribunal had considered the earlier decisions of the Tribunal on the point. Some of the decisions had been in favour of the assessees and in some cases the exemption claimed by the assessee was refused. On consideration of the matter in the 'light of the decision of the Hon'ble Supreme Court as also the Special Bench decision in the case of Lala Gulab Chand Jhabakh (supra), it was held that the assessee is entitled to get exemption under section 5(1)(iv) of the Act in respect of the house property belong to the firm in which he is a partner. It may also be mentioned that the Tribunal's order dated 25-6-1986 delivered in WTA Nos. 490 to 492 (All.) of 1983 was also considered in the said cases and it was held that in view of the decision of the Hon'ble Supreme Court and of the Special Bench of the Tribunal, the view taken in the said cases cannot be followed any more and it is not at all necessary to refer the matter to a larger Bench. Since the view of the Special Bench of the Tribunal is already there, we feel at reference to a Special Bench in the present case would serve no purpose. In the circumstances, we uphold the order of the ACC on the point."

8. We have heard Sri A.N. Mahajan, learned Standing Counsel appearing on behalf of the revenue and Sri S.K. Garg, learned counsel assisted by Sri R.S. Agrawal, on behalf of the respondent assessee.

9. We find that so far as first question is concerned in Wealth Tax Reference No. 158 of 1987, the Commissioner of Wealth-Tax v. Sri Ram Saran Kejriwal decided on 9-11-2004, this Court has considered similar question referred to by the Tribunal and has held that it does not arise and we accordingly return the question unanswered.

10. So far as second question is concerned, we find that the Tribunal has simply gone on the question that the building was owned by the firm and the respondent assessee being partners of the firm were entitled for claiming exemption under section 5(1)(iv) of the Act. The approach of the Tribunal is wholly incorrect and contrary to law. Under section 5(1)(iv) of the Act, exemption is allowable in respect of a house or a part of the house belonging to the assessee. If the assessee is partner in a firm and the firm owns a house only then exemption may be available to a house, which is owned by the firm. However, building ' is a much wider term than a house. A building may not be a house but a factory building of commercial building let out on rent or otherwise. The exemption under section 5(1)(iv) of the Act is not available in such buildings, which is not a house. A house is a dwelling place where people reside. There is no finding that building in question is a house. Thus, in the absence of any finding the Tribunal was not correct in granting exemption to the building owned by the firm.

11. We, accordingly, answer the question No. 2 referred to us in favour of the revenue and against the assessee with the observations that the Tribunal should go into the question as to whether the building in question is a house or not and whether it is used for residence or not.