TMI Blog1990 (10) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... called 'Prakash Talkies; which has seating capacity for 1027 cine-goers. This property was constructed in the year 1970-71 and has a future life of 80 year from the date of its construction. It is the valuation of this property which is in dispute in all the years under consideration. 4. The parties have given the following treatment of the valuation of the property in dispute in different years: Asst. yr. As per assessees As per DVO/WTO . Rs. Rs. 1974-75 14,34,062 29,35,600 1976-77 15,50,000 27,57,500 1977-78 19,94,000 27,57,500 1978-79 19,94,000 29,53,000 1979-80 20,90,000 29,53,000 1980-81 20,90,000 29,53,000 1981-82 20,90,000 29,53,000 The valuations returned by the appellants were based on the valuation, reports of three approved valuers while the WTO adopted the valuation as determined by the Department Valuation Office under s. 16A of the WT Act, 1957(the Act). In appeals the learned AAC confirmed the order of the ITO 5. At the very outset it was submitted on behalf of the appellants that with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per rules contained in sch. III of the Act. 8. Rules 8 of the said schedule empowers the WTO not to apply the rules contained in part B of sch. III under certain conditions specified therein. We keep his powers under r.8 wide open in these cases. Grounds relating to this point are allowed accordingly 2. Exemption under ss.5(1)(iv) 5(1)(xiii) r/w.s.5(1a): 9. The appellants had claimed exemptions under s. 5(1)(iv) of the Act in respect of their proportionate shares in the value of the theatre building, aforementioned, and under s.5(1)(xiii) in respect to their respective proportionate shares in the values of the shares of the limited companies as belonging to the partnership firm on the relevant valuation dates. The WTO accepted such claims of the appellants for asst. yr. 1976-77 to 1981-82 but disallowed the same for asst. yr. 1974-75. The appellants objected to the disallowance of their claim for exemption under ss. 5(1)(iv) 5(1)(xiii) in their appeals to the AAC for asst. yr. 1974-75 only. 10. While disposing of appellant's appeals for asst. yr. 1974-75 the learn AAC examined the issue in the point quite minutely. On the basis of his study of ss. 4(1)(b) 4(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an earlier decision of the Tribunal has been relied upon and which was not produced before us, Mr. K.C. Patel, advocate appearing for the appellants submitted that the appellants were entitled to exemption under s. 5(1)(iv) in respect to their shares in the value of the property in question, belonging to the partnership firm of M/s Prakash Talkies on the valuation date on the same analogy, upon which the Tribunal had accepted assessee's claim under s. 5(1)(iv) in that case and pressed for acceptance of appellants claim for exemption under s. 5 (1)(xiii) also. In his turn Mr. K. K. Bolia the learned Sr. Deptl.Representative supported the order under appeal and relied upon the cases of Smt. Ganga Devi vs. CWT (1987) 166 ITR 325 (Raj) and CWT vs. B. Chandra Shekhar Rao (1989) 175 ITR 66 (AP) in addition to those referred to by the learned AAC in his order. We, however, find force in Mr. Patel's submissions. 12. It is beyond any dispute that a firm as such is not an "assessee" under the Act. But at the same time the Act does not exclude the taxable assets belonging to a firm from the net of wealth tax. In the partnership in the hands of its partners. That in the mandate contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (Ori) 299 : (1979) 119 ITR 8(Ori) High Courts. The basis of this view is that the team "net wealth" according to commercial principles means the "real wealth of a person. The net wealth under r. 2 is to be determined according to such principal and when so done, all the debts owned by a firm of whatever nature and of whatever duration (and not by the individual partners) have to be deducted. According to this view r. 2 provides a complete mode and machinery for the determination of the net wealth of the firm for the purpose of allocating it among the partners. It may be stated that both these views borrow support form the 'concept' of ' personality of the firm' and 'ownership of the assets belonging to the firm' as explained by supreme court in the case of Addanki Narayanappa vs. Bhaskara Krishara Krishnappa and several other cases Supreme Court. 16. In the case of Dulichand Laxminarayana vs. CIT (1956) 29 ITR 535 (SC), the Supreme Court, quoting the words of James L.J. in Expenses Oarte Corbett: In re Shand (1880) 14 Ch. D. 122, 126 (CA) that "there is no such thing as a firm known to the law', both English and Indian, for the purpose of determining legal rights, held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. In the case of Addanki Narayanappa the supreme court was concerned with the question, namely, whether a particular document by which the interest of a partner in partnership assets comprising of immovable properties also was relinquished was compulsorily registerable under s. 17(1)(c) of the registration Act. It was held that the interest of a partner was not immovable property as such and was movable property and according s. 17(1)(c) of the registration Act was not attracted. 20. In the case of CIT vs. Bhagya Laxmi Co. (1965)55 ITR (SC), the Supreme Court had explained the concept of dual personality of a person in the context of an HUF becoming partner in a firm. It was held that the Karta of an HUF or, for that matter, a member thereof becoming partner in a firm does not make his HUF a partner in the firm. He has a dual capacity or personality one qua the partnership and the other qua the HUF. 21. On the principals formulated in the above case there is good scope for the view that the value of the interest and rights of a partner in the assets belonging to the firm are required to be viewed, treated and computed differently from those belonging to him in his other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove the WTO had allowed exemption under ss.5(1)(iv) and 5(1)(xiii) r/w. S. 5(1a) of the Act to the appellants for asst. yr. 1976-77 to 1981-82 but the AAC withdrew the some for reason discussed hereinabove thereby enhancing the assessments for those years. Since we have not approved of his order in that behalf in respect of asst. yrs. 1974-75, as discussed above on point No. 2, his orders in respect of asst. yrs. 1976-77 to 1981-82 shall stand vacated and ITO's restored. Independently of that, his order for asst. yr. 1976-77 to 1981-82 enhancing the assessment for those years is also not sustainable for other reason. 25.Sec. 23(5) no doubt confers power on the AAC to enhance an assessment. There is also no dispute that once an appeal is preferred by the assessee, the assessment is opened up and any other errors can be examined by the learned AAC, as held by Gujarat High Court in the case of Karsandas Bhagwandas Patel vs. G.V. Shah, ITO (1975) 98 ITR 255 (Guj) and reiterated in Kastubhai Mayabhai's case. But it is the undisputed position that the learned AAC exercised his power of enhancing the assessment for asst. yr. 1976-77 to 1981-82 without giving any notice to do that to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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