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Commissioner of Wealth-tax Vs. B.M. Bhandari (Executor of the Estate of the Late R.S. Pannalal Heralal Lahoti) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 101 of 1976
Judge
Reported in(1980)14CTR(AP)18; [1980]123ITR554(AP)
ActsWealth Tax Act, 1957 - Sections 2, 5(1) and 19A(1)
AppellantCommissioner of Wealth-tax
RespondentB.M. Bhandari (Executor of the Estate of the Late R.S. Pannalal Heralal Lahoti)
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateNone
Excerpt:
.....under section 5 (1) (4) - appellant contended that executor of will of deceased who had been using house for residential purposes was not assessee - all proceedings for determination of wealth tax were taken against executor - definition of assessee under section 2 (c) (1) clearly shows that executor was assessee - held, said house used for residential purpose and entitled for exemption under section 5 (1) (4). - - the tribunal held that the conditions of section 5(1)(iv) were satisfied in the present case and allowed the claim of the assessee. in fact, the tribunal has found as a fact that the executor as well as the beneficiaries were using the residential house for their residence. judged from any angle, we are satisfied that what the tribunal has done is perfectly right and..........other words, according to the standing counsel, the executor who is found to have been using the house for residential purposes whenever he finds it necessary is not an assessee. in fact, the tribunal has found as a fact that the executor as well as the beneficiaries were using the residential house for their residence. in the statement of case, in para. 3 the following sentence may be noticed : 'the executor has been using the house for residential purposes whenever he finds it necessary and the beneficiaries of the will have also been using it for their residence.' the aforesaid findings of fact have to be examined in the light of the provisions of section 5(1)(iv) as they stood in the relevant years of assessment with which we are concerned in this reference. section 5(1)(iv) says.....
Judgment:

C. Kondaiah, C.J.

1. This is a reference made by the Income-tax Appellate Tribunal, Hyderabad Bench, at the instance of the Commissioner of Wealth-tax under Section 27(1) of the Wealth-tax Act, hereinafter called ' the Act ', for the opinion of this court on the following question of law :

' Whether, on the facts and in the circumstances of the case, the executor is entitled to the exemption under section 5(1)(iv) of the Wealth-tax Act, for the assessment years 1965-66, 1966-67 and 1967-68 '

2. In order to appreciate the scope of the question, we may briefly state the facts found by the Tribunal and incorporated in the statement of case. The assessee, an executor of the will executed by late Pannalal Lahoti, died on 26th April, 1956, leaving behind him his wife, who was authorised to adopt a son after his death. Pursuant to the authority given by her husband, Bhima Bai has taken a boy in adoption. However, the execution is not yet complete for the assessment years 1965-66 to 1967-68. The executor has been assessed under Section 19A(1) of the Act.

3. One of the questions that fell for decision before the wealth-tax authorities was that a residential house which is a part of the estate of late Pannalal Lahoti was or was not entitled for exemption under Section 5(1)(iv) of the Act. The WTO negatived the claim of the assessee. On appeal, the AAC confirmed the view of the WTO. On further appeal by the assessee to the Income-tax Appellate Tribunal, the claim was reiterated. The Tribunal held that the conditions of Section 5(1)(iv) were satisfied in the present case and allowed the claim of the assessee. Hence this reference.

4. Sri P. Rama Rao, the learned standing counsel for the I.T. Dept., contends that the Tribunal erred in granting exemption under Section 5(1)(iv) of the Act in respect of the residential house as the legal representative of the deceased Pannalal Lahoti was not residing in that house in the relevant years of account and the house belongs to the legal heirs of Pannalal Lahoti. In other words, according to the standing counsel, the executor who is found to have been using the house for residential purposes whenever he finds it necessary is not an assessee. In fact, the Tribunal has found as a fact that the executor as well as the beneficiaries were using the residential house for their residence. In the statement of case, in para. 3 the following sentence may be noticed : 'The executor has been using the house for residential purposes whenever he finds it necessary and the beneficiaries of the will have also been using it for their residence.' The aforesaid findings of fact have to be examined in the light of the provisions of Section 5(1)(iv) as they stood in the relevant years of assessment with which we are concerned in this reference. Section 5(1)(iv) says :

' Subject to the provisions of Sub-section (1A) wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee :--... (iv) one house or part of a house belonging to the assessee and exclusively used by him for residential purposes.'

5. The aforesaid provision exempts a house or a part of a house belonging to the assessee and exclusively used by him for residential purposes for the purpose of wealth-tax. In this context arid in order to find out whether the executor is or is not an assessee, we may notice the definition of ' assessee ' under Section 2(c) of the Act which reads thus:

' (c) ' assessee ' means a person by whom wealth-tax or any other sum of money is payable under this Act, and includes-

(i) every person in respect of whom any proceeding under this Act has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person ;

(ii) every person who is deemed to be an assessee under this Act; (iii) every person who is deemed to be an assessee in default under this Act.'

6. From the very assessment order and other orders, it is clear that it is Sri B. M. Bhandari, the executor of late Sri Pannalal Lahoti, who is shown as the assessee. In the reference also, the assessee is the executor of the estate. The definition of assessee in Section 2(c)(i) strongly applies to the case on hand, as not only proceedings under the Act had been taken for determination of wealth-tax payable by the executor but all other proceedings have been taken against him representing the estate. We, therefore, hold that the executor was the assessee within the meaning of the definition of ' assessee ' under the Act for the respective years of assessment with which we are concerned. In view of the finding of the Tribunal, which is binding on us, that the executor has been using the house for residential purposes whenever he finds it necessary, it must be held that the assessee has been using the residential house for the purpose of his residence whenever he finds it necessary. That apart, the finding of the Tribunal that the beneficiaries of the will have also been using it for their residence would further strengthen our view that it is being used exclusively for residential purposes and by the assessee. From the statement of case, it is not indicated that this particular residential house has been used in any other way except for the residential purposes of the assessee in question. It admits of no doubt that the house in question belongs to the assessee as it is part of the estate of Pannalal Lahoti. Judged from any angle, we are satisfied that what the Tribunal has done is perfectly right and justified in law. The requirement of exclusive use by the assessee of the house property for residential purposes must be construed pragmatically, fairly and reasonably. But it cannot be construed in a pedantic sense or impracticable method. An assessee may himself live or use the building for residential purpose. He may allow any member of his family to live or use the same for residential purpose. The assessee need not also or is not expected to use his building throughout the year or without any interruption. He may not actually use the house by himself. He may go out for some time and some of his relatives or friends may be there for a few months with his permission. Unless, he has let out the same for rent or has allowed it to be used for any commercial purpose, it cannot be said that he has not exclusively used it for residential purpose. The requirement of exclusive use of the building for residential purpose must, therefore, be construed in a practical and pragmatic way rather than in a pedantic sense. The trend of law also is in favour of such a construction. The very fact is that this requirement of exclusive use of the building or property for residential purposes has been omitted by the Finance Act No. 2 of 1971 with effect from April 1, 1972. But, at present, the exemption is permissible for the house or part of a house belonging to an assessee is established. We may notice the decision of the Delhi High Court in CWT v. Mrs. Avtar Mohan Singh [1972] 83 ITR 52 wherein it was held that the physical residence of the family of the assessee without any legal right to share the use of the house by the assessee does not come in the way of exclusiveness of the use of the house by the assessee. For all the reasons stated, we answer the reference against the department and in favour of the assessee. As none appeared for the assessee, there will be no order as to costs.


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