Commissioner of Wealth Tax, Kanpur vs H.M. Rafi

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 his 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 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. He claimed exemption of Rs. 1,50,000 in each of the years under reference u/s 5(1)(xxxii) of the Act in respect of his interest in the above firm. The Wealth-tax Officer required him to file computation on relief claimed alongwith a copy of the balance sheet. The particulars were not furnished before the Wealth-tax Officer. He, therefore, rejected the claim in the assessment year 1975-76 but confined it to Rs. 51,660 in the assessment year 1973-74. The assessee appealed to the Appellate Assistant Commissioner. It was submitted before him that the assessee''s capital in the firm of M/s Asia Tannery amounted to Rs. 1,68,856 in the assessment year 1975-76 and, therefore, exemption to the extent of Rs. 1,50,000 was admissible. It was contended before the appellate Assistant Commissioner that while calculating the capital employed in the industrial undertaking in Asia Tannery, the Wealth-tax Officer had excluded the value of the land and building and that this was contrary to the provisions of the Act. The Appellate Assistant Commissioner held that the assessee was entitled to the required exemption amount to Rs. 1,50,000. He passed the leading order in the assessment year 1975-76, which he followed in the assessment year 1973-74. The Department came in appeal to the Tribunal. The Tribunal following its order in the case of (1983) 3 ITD 710 relating to the assessment years 1973-74, 1974-75 and l975-76 directed the Wealth-tax Officer to compute the assessee''s share in the firm without deducting the land/building owned by the firm. This was also the finding in the case of Smt. Aisha Begum (Supra), The Tribunal, however, also directed, as was directed in the case of Smt. Aisha Begum (supra), that the assessee would furnish the necessary particulars before the Wealth-tax Officer, who would then have an opportunity to examine and verify the correct amount of exemption allowable under the above section.

We have heard Sri R.K.U. 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 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, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.