Commissioner of Wealth Tax vs Smt. Aisha Begum

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law u/s 27(1) of the Wealth Tax Act, 1957(hereinafter referred to as ''the Act'') for opinion of this Court:

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that the assessee was entitled to claim exemption in respect of the land and building owned by the firm in computing the value of her interest in the said firm u/s 5(1)(xxxii) of the Wealth Tax Act, 1957 ?

The reference relates to the assessment years 1973-74, 1974-75 and 1975-76.

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

The assessee is a partner in the firm of M/s. Asia Tannery Jajmau, Kanpur. In her wealth-tax returns, she had claimed exemption of Rs. 1,50,000 each u/s 5(1)(xxxii) of the Act, in respect of the value of her interest in the above firm. The Wealth Tax Officer gave exemption of Rs. 94,721 in the assessment year 1973-74 and Rs. 1,09,514 in the assessment year 1974-75. He however, rejected the assessee''s claim in the assessment year 1975-76 with the following remarks:

The assessee has claimed exemption of Rs. 1,50,000 u/s 5(1)(xxxii) in respect of his interest in M/s. Asia Tannery. Vide this office order sheet entry dated 17-3-1980 the assessee was requir ed to furnish by 25-3-1980 a copy of balance sheet along with computation of working u/s 5(1)(xxxii) so that his claim may be examined. Till today the required particulars have not been furnished. Limitation in this case expires after this month and as such the assessment cannot be pending. The claim of the assessee u/s 5(1)(xxxii) is, therefore, disallowed.

The assessee appealed to the Appellate Assistant Commissioner. It was once again urged before him that she was entitled to exemption of Rs. 1,50,000 in each of the years under consideration u/s 5(1)(xxxii) of the Act, in respect of the value of her interest in the firm of M/s. Asia Tannery. The Appellate Assistant Commissioner accepted the claim in the assessment year 1975-76 in the following manner:

Shri J.P. Gupta, CA contended before me that the appellant''s capital employed in the said firm am ounted to Rs. 2,69,774 and the appellant was entitled to exemption u/s 5(1 )\\(xxxii) to the extent of Rs. 1.50 lakhs and the W.T.O. was not correct in rejecting the clairn without giving any reasonable explanation. It was contended by Shri Gupta, CA that the full claim amounting to Rs. 1.5 lakhs was admissible as per rules but the same has been denied by the Wealth Tax Officer. While calculating the capital employed in the Industrial undertaking the W.T.O. has excluded the value of land and building which is contrary to the provisions of Wealth Tax Act. The assets including the land and building which are otherwise exempt u/s 5 of the Wealth Tax Act are to be included. The factory land and building is not exempt under any other clause of Section 5, hence it should not have been excluded for the purposes of giving exemption for capital employed, while calculating the exemption u/s 5(1)(xxxii) of the Wealth Tax Act. Details of total assets including exempted assets have been filed as per chart filed by the counsel for the appellant. The appellant is entitled to exemption amounting to Rs. 1.5 lakhs. The Wealth Tax Officer is directed to allow the claim u/s 5(1)(xxxii) of the Wealth Tax Act.

He followed the above order in appeals for the assessment years 1973-74 and 1974-75. The department came in appeal to the Tribunal. The representative of the department invited the Tribunal''s attention to Section 5(1)(xxxii) of the Act, which reads as under:

the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in any land or building or any asset referred to in any other clause of this subsection) forming part of an industrial undertaking belonging to a firm or an association of persons of which the assessee is a partner or, as the case may be, a member.

and submitted that in view of the words appearing in parenthesis, the assessee was not entitled to any exemption in respect of the land/building owned by M/s. Asia Tannery of which she was a partner. According to the learned representative for the department the words ''referred to in any other clause of this sub-section'' in the said parenthesis were applicable to ''any asset'' and not to ''not being any land or building or any right in any land or building''. Thereafter, he invited Tribunal''s attention to the order of the Wealth Tax Officer in respect of the assessment year 1975-76 and highlighted the fact that the assessee had not furnished the particulars to the Wealth Tax Officer, as was required of her. He, therefore, urged that the orders of the Appellate Assistant Commissioner on this point should be reversed. The Tribunal dealt with the matter in paragraphs 6 and 7 of its order in the following words:

We have carefully considered the rival submissions of the parties and we find force in the submissions made on behalf of the assessee. At the outset, we are constrained to observe that perhaps the controversy could have been avoided if the assessee had furnished the necessary particulars before the Wealth Tax Officer, as was required of her. It may be that since the assessee had filed the balance sheets along with the returns, she may have thought that nothing further was required to be done. However, this approach of the assessee was not at all commendable, more so, when she was asked to furnish the ''computation of working u/s 5(1)(xxxii)''. It appears from the order of the Appellate Assistant Commissioner in respect of the assessment year 1975-76 that ''details of total assets including exemption assets'' was filed before him by way of a chart. However, it would appear from the order of the Appellate Assistant Commissioner (reproduced below), he did not think it fit to reproduce the chart, while giving his decision in favour of the assessee. Again, at the time of hearing before us, neither of the parties could give us a copy of the chart filed before the Appellate Assistant Commissioner. Under these circumstances, we are not in a position to give the actual working of the exemption claimed by the assessee. Even in his assessment orders for the assessment years 1973-74 and 1974-75, the Wealth Tax Officer has not given computation of allowing exemption of Rs. 94,721 and Rs. 1,09,514 respectively, u/s 5(1)(xxxii) of the Act. Since the appeals can be decided on the legal issue, we are proceeding to give our decision, but at the same time, we cannot restrain to observe that both the W.T. authorities as well as the assessee could have made the appeals more meaningful if all the relevant figures had been brought on record.

On the plain reading of the provisions of Section 5(1)(xxxii) of the Act, we are clearly of the view that the assessee would be entitled to claim exemption in respect of the land/building owned by the firm, in computing her value of the interest in the said firm. In our view, the words appearing in parenthesis have to be read as a whole and in that view of the matter, since while computing the value of the interest of the assessee in the assets of the firm, no deduction/exemption was considered in respect of the land/building owned by the firm, the assessee would be entitled to claim exemption as contemplated u/s 5(1)(xxxii) of the Act. In this view of the matter, we are not prepared to accede to the submissions made on behalf of the revenue that the concluding words in the parenthesis are applicable to ''any assets'' mentioned therein and not applicable to the other portion of the words used in the parenthesis. In any event, since two views are possible in favour of the assessee has to be preferred. For all these reasons, we do not find any infirmity in the orders of the Assistant Appellate Commissioner under appeal. However, in order to protect the interest of the revenue, we direct the assessee to furnish the necessary particulars before the Wealth Tax Officer, who will then have an opportunity to examine and verify the correct amount of exemption allowance u/s 5(i)(xxxii) of the Act. The Wealth Tax Officer is, therefore, directed to modify the assessments accordingly''.

We have heard Sri R.K. Upadhyaya, learned Standing counsel appearing for the revenue. No body has appeared on behalf of the assessee.

It is not in dispute that the respondent-assessee was a partner in the firm -M/s. Asia Tannery, Jajmau, Kanpur which owns certain assets. u/s 5(1)(xxxii) of the Act by the assessee is not required to pay wealth-tax or the assets are not to be included in the wealth of the assessee to the extent the value which may be determined in the prescribed manner or the interest of the assessee in the assets forming part of an industrial undertaking belonging to the firm of which the assessee is a partner. It is also not in dispute that M/s. Asia Tannery, Jajmau, Kanpur is not an industrial undertaking. The assessee is admittedly a partner in the said firm and, therefore, entitled to deduction/exemption u/s 5(1)(xxxii) of the Act. We are fortified in our view by the decision of the Madras High Court in the case of Commissioner of Wealth-tax Vs. D.C. Barley Dharmaraja and Others, and of Patna High Court in the case of Commissioner of Wealth Tax Vs. Dungarmal Tainwala, . Therefore, we do not find any infirmity in the order of the Tribunal.

We, accordingly, answer the question referred to us in affirmative, ie. in favour of the assessee and against the revenue. There will be no order as to costs.