TMI Blog1986 (8) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... e net wealth of the firm, exemption under section 5(1)(iva) of the Wealth-tax Act should be allowed up to the admissible limit. But the benefit of the said section could not be given to each of the partners separately. He directed the Wealth-tax Officer to revise the assessments accordingly. Both the assessee and the Revenue preferred appeals to the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner. Before the Tribunal, the assessee relied upon an order of the Special Bench of the Madras Income-tax Appellate Tribunal as also the orders of the Calcutta Tribunal in the case of the assessee in earlier years where the assessee was allowed exemption under section 5(1)(iva) in respect of his 1/5th share of the agricultural land of the firm. The Revenue, on the other hand, relied upon another order of the Tribunal where a different view had been taken in favour of the Revenue. The Revenue also relied upon a decision of this court in Sarvamangala Properties Ltd. v. CWT [1973] 90 ITR 267 and a decision of the Supreme Court in CWT v. Bishwanath Chatterjee [1976] 103 ITR 536, and contended that in view of the principles laid down in the said decisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule. " The other sections which are relevant for our purpose are " Section 2. (c) 'assessee' means a person by whom wealth-tax or any other sum of money is payable under this Act, and includes (i) every person in respect of whom any proceeding under this Act has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person ; every person who is deemed to be an assessee under this Act; every person who is deemed to be an assessee in default under this Act. Section 2 (m). 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than (i) debts which under section 6 are not to be taken into account; (ii) debts which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association. (2) Where the net wealth of a firm or association computed in accordance with sub-rule (1) includes the value of any assets located outside India, the value of the interest of any partner or member in the assets located in India shall be determined having regard to the proportion which the value of the assets located in India diminished by the debts relating to those assets bears to the net wealth of the firm or association. (3) Where the net wealth of a firm or association computed in accordance with sub-rule (1) includes the value of any assets referred to in section 5(2) of the Act, the value of the interest of a partner or member shall be deemed to include the value of his proportionate share in the said assets, and the provisions of section 5(2) of the Act shall be applied to him accordingly." At the hearing of this reference, learned advocate for the assessee submitted that the controversy raised in the questions referred stood covered by two decisions of this court and he cited and relied upon the same. The first is CWT v. Sri Naurangrai Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had been included in the net wealth of the assessee proportionately. The second decision was CWT v. Mira Mehta [1985] 155 ITR 765 (Cal). In this case, another Division Bench of this court again 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 claim exemption in respect of his share in a house property of the partnership firm under section 5(1)(iv) of the Wealth-tax Act, 1957, in the computation of his wealth. In this case, the court considered the decision of the Supreme Court in Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485, and held that the interest of a partner in a partnership firm would be includible in the expression " asset " and as such the value of his interest represented by the house owned by the firm had to be included in the net wealth of the partner who would be entitled to exemption to the extent allowed by section 5(1) of the Act. Learned advocate for the assessee also drew our attention to a decision of the Karnataka High Court in CWT v. Mrs. Christine Cardoza [1978] 114 ITR 532. In this case, a Division Bench of the Karnataka High Court held that in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act and was not a full person it was further held that there cannot be any contract between a firm and one of its partners and payment of salary to a partner of the firm would represent the special share of the latter of the profits of the firm. As such, the salary retained the same character as that of the income of the firm and, therefore, the partner concerned would be entitled to claim exemption from income-tax to the extent such salary represented agricultural income within the meaning of rule 24 of the Indian Income-tax Rules, 1922. Learned advocate for the Revenue contended on the other hand that the law had been clearly laid down by a Division Bench of this court earlier in Sarvamangala Properties Ltd. v. CIT [1973] 90 ITR 267. After construing the relevant sections of the Income-tax Act, it was held in this case that a firm was an entity recognised by law. It was further observed that the law which recognised and dealt with firms under the Indian Partnership Act also recognised the fact that such an entity known as a firm could have property, both movable and immovable. The position was made clear under sections 4, 14 and 19 of the Indian Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a partnership firm to income-tax. So far as the Wealth-tax Act is concerned, a partnership firm is not an assessable entity. Therefore, the concept of a partnership in the context of the Income-tax Act cannot be imported into the Wealth-tax Act. The Wealth-tax Act is a separate Act and contains its own scheme for assessment of wealth-tax. A partnership having been excluded from assessment under the Wealth-tax Act and provision having been made for assessment of the properties standing in the name of the firm in the hands of the partners, according to their respective shares, the general concept of the nature of a partnership has to be taken into account. In Dulichand Laxminarayan's case [1956] 29 ITR 535, the Supreme Court has categorically laid down that the name of the firm was a compendious name for all the partners and it was not an entity in law. It is on that basis that the shares of the partners in the assets of the firm have to be considered as assets or wealth in the hands of the partners liable to be assessed to wealth-tax. The assessability of a firm to income-tax under the special provisions of the Income-tax Act, which treats a firm as distinct assessable unit, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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