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Commissioner of Wealth Tax Vs. Tarachand Agarwalla and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGuwahati High Court
Decided On
Case NumberCivil Rule No. 40(M) & 41(M) of 1979 & 85(M) of 1977
Reported in(1980)15CTR(Gau)161
AppellantCommissioner of Wealth Tax
RespondentTarachand Agarwalla and ors.
Excerpt:
- .....for short 'the rules', made the deduction of the exemption u/s 5(1)(iva) in computing the net wealth of firm and allocated distributed the balance amongst the partners for assessment. appeals were taken by the assessees to the aac of wealth-tax which were abortive. further appeals were taken to the itat, gauhati bench, gauhati. the tribunal inter alia held that the net wealth of the firm ought to be determined first deducting the exemption allowable and thereafter it should be apportioned or allocated amongst the partners according to the shares of the partners. it further held that the net wealth of the partners should be computed by including the shares so allocated u/s 2(m) of the 'the act'. after the said computation the necessary deduction allowable u/s 5(1)(iva) of 'the act'.....
Judgment:
ORDER

K. Lahiri, J. - These are applications u/s 27(3) of the WT Act, 1957, 'the Act' for short, asking for a reference of certain questions of law arising out of the order of the ITAT, Gauhati. We propose to dispose of the Civil Rules by a common order.

Civil Rule Nos. 85(M) to 89(M) of 1977

2. The petitioners case is that the Respondents are partners of different firms. The firms had agricultural land as one of the items of assets amongst various other assets held by it. In the WT assessment, the assessee-partners claimed that exemption u/s 5(1)(iva) of 'the Act' should be allowed in respect of individual shares pertaining to the agricultural land held by the firm. The WTO purporting act u/r 2 of the WT Rules/ 1957 (as amended), for short 'the Rules', made the deduction of the exemption u/s 5(1)(iva) in computing the net wealth of firm and allocated distributed the balance amongst the partners for assessment. Appeals were taken by the assessees to the AAC of wealth-tax which were abortive. Further appeals were taken to the ITAT, Gauhati Bench, Gauhati. The Tribunal inter alia held that the net wealth of the firm ought to be determined first deducting the exemption allowable and thereafter it should be apportioned or allocated amongst the partners according to the shares of the partners. It further held that the net wealth of the partners should be computed by including the shares so allocated u/s 2(m) of the 'the Act'. After the said computation the necessary deduction allowable u/s 5(1)(iva) of 'the Act' should be allowed in favour of each partner (assessees). The Tribunal by its common order dated 29-4-77 passed in W.T.A. Nos. 351 to 357 (Gau) of 1975-76 allowed the 7 appeals, set aside the order of the WTO and the AAC Wealth-tax with necessary direction to the WTO to determine the net wealth of the firm and to allow the exemptions in respect of the assets u/s 5(1)(iva) pertaining the agricultural land. It also laid down the principles for determination of the shares of each partner, allocation of the shares and method to be adopted in computing the net wealth of the assessee-partners. There are directions by the Tribunal to the WTO to grant exemptions allowable u/s 5(1)(iva) of 'the Act' to the partners.

3. The Revenue filed 7 applications before the Tribunal u/s 27(1) of 'the Act' with prayers to draw up the statements of the cases and refer them to this court with the following questions of law said to have arisen out of the common order of the Tribunal passed in R.A. Nos. 28 to 34(Gau) of 1977-78. The questions required to be referred read as follows :-

'(i) Whether on the facts and in the circumstances of the case and on a proper construction of r. 2 of the WT Rules read with s. 2(m) and s. 5 of the WT Act 1957, the Tribunal was justified in holding that the net wealth of the firm should be determined including the value of exempted assets and thereafter it should be allocated among the partners indicating the nature of the assets and liabilities allotted to the share of the partner and that net wealth of the partner should be determined by including the share so allotted and only thereafter the deduction u/s 5(1)(iva) should be allowed ?

(ii) Whether on a proper construction of s. 2(m) r/w s. 5 of the WT Act, 1957, in determining the net wealth of firm for purposes of r. 2 of the WT Rules, the deduction admissible u/s 5(1)(iv)(a) of the WT Act, 1957 is not properly allowable in the process of such computation and whether separate deduction u/s 5 in the hands of the partner in respect of assets held by the firm, as directed by the Tribunal is not unwarranted by the relevant provisions of the Rules and of the Act ?

(iii) Whether the directions given by the Tribunal in para 13 of its order passed on appeal for purposes of computation of the value of assessees interest in the partnership in the manner laid down by the Tribunal do not run counter to r. 2 or is not inconsistent with the relevant provisions of r. 2 of the WT Rules and whether such directions are therefore not untenable in law ?'

4. We have heard Mr. G. K. Talukdar, Standing Counsel for the Revenue at length. We have ourselves considered the importance of the questions. The determination of the questions turns on the true and correct interpretation of r. 2 of 'the Rules', ss. 2(m), 2(e), 4, 5, 5(1)(iva), 5(2) and 7 of 'the Act'. We have considered the ration of the decision reported in Purushothamdas Gocooldas v. CWT, Madras. We have also considered the importance of the questions sought to be referred. We have further taken in consideration that there is no direct or indirect decision as the interpretation of the aforesaid provisions law by any High Court including this court excepting the decision referred to above. The decision requires scrutiny. On scrutiny of the order of the Tribunal we feel inclined to ask the Tribunal to draw up statements of the cases and refer them to this court with the following questions :

'(i) Whether on the facts and in the circumstances of the case and on a proper construction of r. 2 of the WT Rules r/w s. 2(m) and s. 5 of the WT Act, 1957 the Tribunal was justified in holding that the net wealth of the firm should be determined including the value of exempted assets and thereafter it should be allocated among the partners indicating the nature of the assets and liabilities allotted to the share of the partner and that net wealth of the partner should be determined by including the share so allotted and only thereafter the deduction u/s 5(1)(iv)(a) should be allowed ?

(ii) Whether on a proper construction of s. 2(m) r/w s. 5 of the WT Act, 1957, in determining the net wealth of the firm for purposes of r. 2 of the WT Rules, the deduction admissible u/s 5(1)(iv)(a) of the WT Act, 1957 is not properly allowable in the process of such computation and whether separate deduction u/s 5 in the hands of the partner in respect of assets held by the firm, as directed by the Tribunal is not unwarranted by the relevant provisions of the Rules and of the Act ?

We do not consider the question No. (iii) to be relevant is as much as the determination of the questions (i) and (ii) will automatically determine the fact of the question No. (iii).

5. At this stage the learned Standing Counsel appearing on behalf of the Revenue prays that he may be allowed to submit one set of paper book. The prayer is allowed.

In the result, the petitions are allowed and the Rules issued are made absolute.

Civil Rule Nos. 40(M) and 41(M) of 1979.

6. These two petitions relate to exemption in respect of houses and not in respect of agricultural lands. For the reasons set forth in Civil Rule Nos. 85(M) to 89(M) of 1977 we require the ITAT Gauhati to draw up statements of the cases and refer the following questions of law prima facie appearing arising out of the order of the Tribunal, for due determination of this Court :-

'(i) Whether on the facts and in the circumstances of the case and on proper construction of s. 2(m), s. 4(1)(b), s. 5(1)(iv) of the WT Tribunal was justified in holding the direction share of the interest in the building belonging to the firm should be allowed u/s 5(1)(iv) in the hands of the assessee partner ?'

In the result, the applications are allowed and the Rule issued are made absolute.


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