TMI Blog1990 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... i) and 5(l)(xxvi) of the Wealth-tax Act, 1957, as regards his proportionate share of the fixed deposits and National Savings Certificates held by the two firms in which he is partner ?" Both these references are made at the instance of the Commissioner of Wealth-tax, Patiala-1, and the question of law arises out of the orders of the Income-tax Appellate Tribunal, Patiala Bench, relating to the assessment of two individuals who are partners in two firms, namely, M/s. Sunder Lal Choudhry Mal, Shimla, and M/s. Shimla Roller Flour Mills, Shimla. The assessments related to the year 1971-72. Both the firms had fixed deposits in a banking company governed by the Banking Regulation Act, 1949. The firms' assets included also Post Office National S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of partner in the firm is assessable wealth in the hands of the partner as provided for in section 4(1)(b) of the Act. The computation of the net wealth of the firm and its allocation to the individual partners are as provided for in rule 2 of the Wealth-tax Rules. The expression "net wealth" is defined in section 2 (m) of the Act. Since the firm is not an assessee, there is no question of exemption under section 5 of the Act in the matter of computation of the net wealth of the firm. The expression "net wealth" as used in rule 2 is to be understood in the sense as defined in section 2 (m) of the Act. Rule 1A(m) expressly provides that expressions not defined in the rules have the same meaning as assigned to them in the Act. A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted for the purposes of determining legal rights, 'there is no such thing as a firm known to the law' as was said by James L. J., in Ex parte Corbett : In re Shand [1880] LR 14 Ch 122 (CA).In these circumstances to import the definition of the word 'person' occurring in section 3(42) of the General Clauses Act, 1897, into section 4 of the Indian Partnership Act will, according to lawyers, English or Indian, be totally repugnant to the subject of partnership law as they know and understand it to be. It is in this view of the matter that it has been consistently held in this country that a firm as such is not entitled to enter into partnership with another firm or individuals. It is not necessary to refer in detail to those decisions many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as belonging to him and includible in his net wealth. It is impossible to accept the contention that but for clause (b) of section 4(1), the interest of a partner (where he happens to be an individual assessee) in firm would not have been exigible to wealth-tax under the Act. As we shall presently point out, a partner's interest in a firm either in his individual capacity or in his capacity as the karta of an Hindu undivided family is otherwise exigible to wealth-tax under the other provisions of the Act and the deeming provision contained in section 4(1)(b), properly understood, must be held to be referable to the quantification of his interest in the firm determined in the prescribed manner that is made includible in his net we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me High Court in CWT v. Mira Mehta [1985] 155 ITR 765 (Cal). In this case, it was held that where the interest of an individual partner in the assets of a firm was chargeable to wealth-tax, the partner would be entitled to exemption in respect of his share in the house property of the firm under section 5 (1) (iv) of the Act in the matter of computation of his net wealth. The Karnataka High Court in C WT v. Mrs. Christine Cardoza [1978] 114 ITR 532, held that, in the assessment of wealth-tax of an assessee who is a partner of a firm owning agricultural land, exemption under section 5(1)(iva) of the Act is admissible to the extent permitted in the computation of the net wealth of the assessee. One of us (Balakrishna Menon J., as he then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. Wealth-tax is charged under section 3 on the net wealth of every individual, Hindu undivided family and company who alone are the assessees. As was held by the Supreme Court in Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485, the interest of a partner in a firm belongs to him even apart from section 4(1)(b) of the Act and is exigible to wealth-tax. It is clear that the provision contained in section 4(1)(b) of the Act relates only to the quantification of the assessee's interest in the firm and rule 2 prescribes the manner of determining such interest. The exemptions under section 5(1) of the Act are applicable only with respect to an assessee under the Act and that is clear from the wording of the section itself. firm not bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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