Commissioner of Wealth-tax vs V.M. Sp. L. Ar. Arunachalam Chettiar

N.V. Balasubramanian, J.—The assessee is a partner of a firm. The firm owned certain assets eligible for exemption u/s 5(1A) of the

Wealth-tax Act, 1957. In the wealth-tax assessment of the assessee for the year 1976-77, the Wealth-tax Officer valued the agricultural lands

owned by the firm in which the assessee is a partner, but did not grant exemption u/s 5(1)(iva) of the Wealth-tax Act, on the ground that the

assessee was not the owner of the agricultural lands and that the assessee was not having any specific interest in the assets of the partnership. On

appeal, the Appellate Assistant Commissioner allowed the exemption u/s 5(1)(iva) of the Act as claimed by the assessee. The Appellate Tribunal

on further appeal by the Department dismissed the appeal holding that the assessee is entitled to exemption u/s 5(1)(iva) of the Wealth-tax Act.

The above order of the Tribunal is the subject-matter of reference and the following question of law has been referred to us for our consideration

u/s 27(1) of the Wealth-tax Act :

Whether the deduction u/s 5(1A) in respect of the assets belonging to a firm should be allowed in the hands of the firm only in computing the

deemed net wealth of the firm in terms of rule 2 of the Wealth-tax Rules and not in the hands of each individual partner ?

We are of the opinion that the reference to section 5(1A) in the question is a typographical mistake as the claim of the assessee in the wealth-tax

proceedings was that he is entitled to exemption u/s 5(1)(iva) of the Wealth-tax Act. Since it is an apparent mistake, the reference to section 5(1A)

in the question of law referred to us should be construed as section 5(1)(iva) of the Wealth-tax Act. In so far as the point raised in the question of

law is concerned, it is concluded by the decision of this court in the case of R. Venkatavaradha Reddiar Vs. Commissioner of Income Tax,

wherein this court has held that the partners alone should have the benefit of the exemption u/s 5(1)(iv) of the Act when their individual assessments

are taken up to the extent of their respective share in the net wealth of the partnership firm. The decision of this court, though rendered with

reference to section 5(1)(iv) of the Wealth-tax Act would equally apply to the case falling u/s 5(1)(iva) of the Wealth-tax Act. Following the earlier

decision of this court in R. Venkatavaradha Reddiar Vs. Commissioner of Income Tax, , we are of the view that there is no infirmity in the order of

the Appellate Tribunal in holding that the assessee is entitled to exemption in respect of the agricultural lands held by the firm to the extent of his

share in the net wealth of the partnership firm. Accordingly, we answer the question of law as substituted in the negative and against the

Department. However, in the circumstances of the case, there will be no order as to costs.