TMI Blog1979 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... For the purpose of determining his net wealth, his interest in the firm requires to be included. Besides other assets, one of the assets owned was a house, which was being used by both the partners for the purpose of their residence. The assessee claimed exemption of a sum of Rs. 1,00,000 in terms of s. 5(1)(iv) of the W.T. Act, 1957 (Act 27 of 1957), hereinafter referred to as the Act, in respect of the value of the said residential house. The WTO refused the claim on the ground that the house was owned by the firm and not by the assessee. The AAC confirmed the disallowance for the reasons given by the WTO. On further appeal to the Tribunal, submission was made on behalf of the assessee that the assets belonging to the firm should be taken to belong to the partners. Since the partners are residing in the house, it should be held that the house was being used by the firm for residential purpose, to which the exemption, as provided under s. 5(1)(iv) of the Act, was to be extended. The department, however, reiterated the reasons given by the WTO for non-admissibility of the exemption under the said provision of the Act to the assessee. The Tribunal held that since the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et wealth of the assessee ? " Mr. Rajgarhia, learned counsel for the department, has submitted that the exemption under s. 5(1)(iv) of the Act is available only to the owner of the house. Since the assessee is not the owner of the house, the exemption was not available to him. He further submitted that in the case of the firm, which was the owner of the house, exemption would not be permissible, because it was not residing in the house. Unless both the conditions, namely, of ownership and of the owner himself residing in the house, were fulfilled, the exemption admissible under s. 5(1)(iv) of the Act was not allowable. In support of his contention, he has relied on a decision of the Madras High Court in the case of Purushothamdas Gocooldas v. CWT [1976] 104 ITR 608, based upon a decision of the Supreme Court in the case of Addanki Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300. Mr. Rajgarhia has, therefore, submitted that the Tribunal clearly went wrong in its decision. The question referred or as reframed should be answered in the negative and in favour of the department. Mr. Jain, appearing for the assessee, has submitted that in the W.T. Act a firm was not an assessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse belonging to the assessee exclusively used by him for residential purposes : Provided that, where the value of such house or part exceeds one hundred thousand rupees, the amount that shall not be included in the net wealth of the assessee under this clause shall be one hundred thousand rupees. " (The words "exclusively used by him for residential purpose" in cl. (iv) have been omitted with effect from April 1, 1972. Since, however, the exemption has been claimed in respect of an assessment year which fell prior to the said amendment, the amendment has to be ignored). "Net wealth" has been defined under cl. (m) of s. 2 of the Act to mean "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 ". (The exceptions referred to under cl. (m) of s. 2 of the Act are not relevant for the purpose of this case and, therefore, they are not quoted). Now, therefore, reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollective noun, a compendious expression to designate an entity, not a person". It was further observed quoting from Lindley on Partnership thus (p. 298) : " The law, ignoring the firm, looks to the partners composing it any change amongst them destroys the identity of the firm ; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. In point of law, a partner may be the debtor or the creditor of his co-partners, but he cannot be either debtor or creditor of the firm of which he is himself a member, nor can he be employed by his firm, for a man cannot be his own employer." Learned counsel for the revenue has drawn our attention to the decision of the Supreme Court in the case of Addanki Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300, particularly to the observations at p. 1304 : " The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 298) : " ...What is called the property of the firm is their property and what are called the debts and liabilities of the firm are their debts and their liabilities." It cannot be gainsaid that during the continuance of the partnership, no partner can say that any particular part of the firm's assets were his assets but certainly he can always say that he together with his other partners are the owners of the assets possessed by the firm. He may not be able to say that "a particular asset of the firm belongs to me," but he can always say that "the partnership assets belong to us". Now, therefore, when the assessment is of the net wealth of a partner, which under the rules framed under the W.T. Act is determined by first determining the net wealth of the firm, in my opinion, it would be wholly unreal to leave out the exemptions to which a partner thereof would be entitled for the purpose of assessment of his net wealth. The Madras High Court in the case of Purushothamdas Gocooldas v. CWT [1976] 104 ITR 608 has held that a partner will not be entitled to receive the exemption under section 5(1)(iv) of the Act in respect of an asset owned by a firm, but with great respect to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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