Wealth tax---

---- Net wealth ---Assessee, a minor admitted to benefits of partnership---Has no interest in assets of firm---Value of interest in property of firm not includible in assessee's net wealth---Whether exemption in respect of residential property allowable in partner's hands or in valuation of firm's assets---Academic---Indian Wealth Tax Act, 1957, S. 5(1)(iv).

The assessee was a minor admitted to the benefits of a partnership and that partnership had a residential property. For the valuation dates December 31, 1975, and December 31, 1976, respectively, corresponding to the assessment years 1976-77 and 1977-78, the 1/8th share of the assessee in the net wealth of the firm was added in determining the net wealth of the assessee. But the exemption under section 5(l)(iv) of the Wealth Tax Act, 1957, in respect of the residential property owned by the firm was not allowed. On appeal, the Commissioner (Appeals) held that the sum in question, being less than Rs.1 lakh which was the maximum exempted under section 5(l)(iv), was not includible in the net wealth of the assessee. On appeal by the Department, the Appellate Tribunal held that the assessee being a minor admitted to the benefits of the partnership could not be regarded as a partner and, therefore, his share was not assessable to Wealth Tax. On a reference:

Held, that the assessee was a minor on the relevant valuation dates and he was only admitted to the benefits of the partnership. Therefore, the assessee did not have any share in the assets of the firm. Therefore, the value of the residential property itself was not includible, as the assessee had no share in the assets of the firm. Hence, the question whether he was entitled to the deduction under section 5(l)(iv) in respect of an asset not includible in the net wealth, was clearly academic.

CWT v. Chandrasekhara Rao (B.) (1989) 175 ITR 66(AP); CWT v. Narendra Ranjalker (1981) 129 ITR 203 (AP) and CWT v. Tandon A.K. (1992) 198 ITR 26 (Delhi) ref.

S.R. Ashok for the Commissioner.

C. Kodandaram for the Assessee.

JUDGMENT

T.N.C. RANGARAJAN, J.---At the instance of the Revenue, the following two questions have been referred under section 27(1) of the Wealth Tax Act, 1957:

"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in holding that the provisions of section 4(l)(b) of the Wealth Tax Act read with rule 2 of the Wealth Tax Rules and the principle decided by the Andhra Pradesh High Court in CWT v. Narendra Ranjalker (1981) 129 ITR 203 are not applicable in the case of the assessee, who is a minor?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in directing the Wealth Tax Officer to grant exemption under section 5(1)(iv) separately for a minor?"

The undisputed facts are that the assessee was a minor admitted to the benefits of a partnership and that partnership had a residential property. For the valuation dates being December 31, 1975, and December 31, 1976, respectively, corresponding to the assessment years 1976-77 and 1977-78, the 1 /8th share of the assessee in the net wealth of the firm was added in determining the net wealth of the assessee. But the exemption under section 5(1)(iv) in respect of the residential property owned by the firm was not allowed. On appeal, the Commissioner of Income-tax (Appeals) noted that on a revaluation, the property was valued at Rs.5,76,000 and the share of the assessee-partner came to Rs.72,000. This amount being less than Rs.l lakh, which is the maximum amount exempted under section 5(l)(iv) of the Act, he held that this amount is not includible in the Wealth Tax assessments of the assessee.

The Revenue appealed and contended that the deduction under section 5(1) should be made in computing the net wealth of the firm before apportionment of the share of the partners and consequently no such deduction should be given in the assessment of the assessee as a partner and relied upon the decision of this Court in CWT v. Narendra Ranjalker (1981) 129 ITR 203. However, the Appellate Tribunal noted that the assessee being a minor admitted to the benefits of the partnership, he could not be regarded as a partner and, therefore, his share was not assessable to Wealth Tax. The Appellate Tribunal, therefore, followed its own decision in the case of B. Sadasiva Rao v. WTO (1982) 30 CTR (Trib.) 10 and confirmed the exclusion of the share of the value of the residential property from the net wealth of the assessee.

Learned counsel for the Revenue pointed out that the decision of the Tribunal in Sadasiva Rao's case (1982) 30 CTR (Trib.) 10 has been reversed by this Court in CWT v. B. Chandrasekhara Rao (1989) 175 ITR 66 and, therefore, the decision of the Tribunal was not correct and the questions raised must be answered in favour of the Revenue. On the other hand, learned counsel for the assessee submitted that, on the question whether the deduction under section 5 should be taken into account in computing the net wealth of the firm before ascertaining the share of the partner or whether it should be taken into account after ascertaining the share of the partner and allowed as a deduction only in the hands of the partner, who alone is the assessee, there were several decisions, the most recent being that of the Delhi High Court in CWT v. A.K. Tandon (1992) 198 ITR 26 in favour of the assessee and, therefore, the judgment of this Court in Chandrasekhara Rao's case (1989) 175 ITR 66 requires reconsideration.

Even though we find that the question raised does admit of further consideration as suggested by learned counsel for the assessee, we are of the opinion that on the facts of this case, the question is academic. It is not in dispute that the assessee was a minor on the relevant valuation dates and he was only admitted to the benefits of the partnership. Therefore, the assessee did not have any share in the assets of the firm. That was the reason why the Appellate Tribunal upheld the order of the Appellate Commissioner excluding the value of the building from the net wealth of the assessee. Though the Appellate Commissioner excluded it on the ground that it was exempt under section 5(1)(iv), the value itself was not includible as the assessee had no share in the assets of the firm. That being the accepted position the question whether he is entitle to deduction under section 5(1)(iv) in respect of an asset not includible in the net wealth is clearly academic.

In the circumstances, we decline to answer the questions. No costs.

M.B.A./1348/FC??????????????????????????????????????????????? ????????Reference declined.