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Commissioner of Wealth-tax, Karnataka-i, Bangalore Vs. Purushotham, Pai - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberTax Revision Case No. 55 of 1974
Judge
Reported in[1978]114ITR270(KAR); [1978]114ITR270(Karn)
ActsWealth Tax Act, 1957 - Sections 5(1)
AppellantCommissioner of Wealth-tax, Karnataka-i, Bangalore
RespondentPurushotham, Pai
Appellant AdvocateS.R. Rajasekhara Murthy, Adv.
Respondent AdvocateK.S. Ramabhadran, Adv.
Excerpt:
.....any tenderer. - any assessment made on the basis of the total wealth of the assessee and his tenants-in-common whose titles are distinct and separate from the title of the assessee and the calculation of the exemption allowable under the proviso to section 5(1)(iv-a) as if all of them are being assessed jointly is clearly not warranted by law......the shares of the other tenants-in-common at rs. 2,50,178 and deducted rs. 1,50,000 which was the exemption allowable under the proviso to section 5(1)(iv-a) of the act, from that total value and arrived at the net value of the estate including the shares of the other tenants-in-common at rs. 75,178. one-third thereof was treated as the value of the interest of the assessee in agricultural land and, on that basis, proceeded to complete the order of assessment. aggrieved by the order of the wealth-tax officer, the assessee file an appeal before the appellate assistant commissioner of income-tax who dismissed it. on appeal to the income-tax appellate tribunal, bangalore bench, it was held that the method adopted by the wealth-tax officer in calculating the taxable wealth was not in.....
Judgment:

Venkataramiah, J.

1. The following question has been referred to this court by the Income-tax Appellate Tribunal, Bangalore Bench, under the provisions of the Wealth-tax Act :

'Whether, on the facts and in the circumstances of the case, the Tribunal is right, in law, in holding that the assessee is entitled to the deduction of Rs. 1,50,000 under section 5(1)(iv-a) of the Wealth-tax Act, 1957 ?'

2. The assessee, P. Purushotham Pai, is the owner of one-third share in a coffee estate. The remaining two-thirds share in that coffee estate is held by other tenants-in-common. The appellant the value of the one-third share of the coffee estate in his return for the year 1970-71, under the Wealth-tax Act, 1957 (hereinafter referred to as 'the Act'), and claimed allowance to the extent of Rs. 1,50,000 under the proviso to section 5(1)(iv-a) of the Act. The Wealth-tax Officer did not allow the exemption as claimed by the assessee. What he did was that he first valued the entire coffee estate including the shares of the other tenants-in-common at Rs. 2,50,178 and deducted Rs. 1,50,000 which was the exemption allowable under the proviso to section 5(1)(iv-a) of the Act, from that total value and arrived at the net value of the estate including the shares of the other tenants-in-common at Rs. 75,178. One-third thereof was treated as the value of the interest of the assessee in agricultural land and, on that basis, proceeded to complete the order of assessment. Aggrieved by the order of the Wealth-tax Officer, the assessee file an appeal before the Appellate Assistant Commissioner of Income-tax who dismissed it. On appeal to the Income-tax Appellate Tribunal, Bangalore Bench, it was held that the method adopted by the Wealth-tax Officer in calculating the taxable wealth was not in accordance with law. The Tribunal was of the opinion that the exemption allowable under the proviso to section 5(1)(iv-a) of the Act should have been allowed in favour of the assesses after determining the value of his one-third share in the coffee estate. In other words, the Tribunal directed the Wealth-tax Officer first to arrive at the value of the one-third share of the assessee and then to allow the exemption allowable under section 5(1)(iv-a) of the Act, in the hands of the assessee. At the instance of the department, the above reference has been made by the Tribunal.

3. There is no dispute that the assessee holds the share in question as a tenant-in-common with two others and his interest is one-third. When the value of the one-third share of the assessee in the estate which he holds as a tenant-in-common is added in the computation of the wealth, he is entitled to the full exemption allowable under section 5(1)(iv-a) of the Act. The Wealth-tax Officer was in error, in deducting first the exemption allowable under section 5(1)(iv-a) of the Act, from the total value of the coffee estate, including the shares of the other tenants-in-common and in determining the value of the interest of the assessee, thereafter, by dividing the net wealth by three, because the exemption allowable under section 5(1)(iv-a) of the Act has to be given in its entirety to the assessee. In a case of this type we have to bear in mind that the wealth-tax is leviable on the basis of the ownership of the assets of the assessee concerned. Any assessment made on the basis of the total wealth of the assessee and his tenants-in-common whose titles are distinct and separate from the title of the assessee and the calculation of the exemption allowable under the proviso to section 5(1)(iv-a) as if all of them are being assessed jointly is clearly not warranted by law. The method adopted by the wealth-tax Officer which virtually denies the full exemption allowable under law is erroneous. The method of computation followed by the Tribunal has, therefore, to be upheld. The question referred to us is, therefore, answered in the affirmative and in favour of the assessee. The assessee is entitled to costs. Advocate's fee Rs. 250.


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