COMMISSIONER OF WEALTH TAX VS N. THAVAMANI
1999 P T D 3736
[237 I T R 152]
[Madras High Court (India)]
Before N. V. Balasubramanian and P. Thangavel, .J
COMMISSIONER OF WEALTH TAX
Versus
N. THAVAMANI
Tax Case No.1372 of 1985 (Reference No.873 of 1985), decided on 04/11/1997.
Wealth tax---
----Exemption---"House"---Partner---"House" in S.5(1)(iv) includes workshop building---Partner entitled to exemption in respect of his share in a workshop owned by firm---Indian Wealth Tax Act, 1957, S.5.
The word "house" in section 5(l)(iv) of the Wealth Tax Act, 1957, is not limited to a structure designed for human habitation and it includes any building or shed intended or used as a habitation or shelter for animals of any kind, a building in the ordinary sense or any building, edifice or structure enclosed with walls and covered, regardless of the fact of human habitation. ,
Partners alone will have the benefit of exemption under section 5(1)(iv) of the Act.
CWT v. M. Appuswamy (1998) 233 ITR 460 (Mad.) fol.
Held accordingly, that the workshop building could also be regarded as a house within the meaning of section 5(1)(iv) of the Act. The assessee who was a partner was entitled to exemption in respect of his share in the workshop owned by the firm.
Venkatavaradha Reddiar (R.) v. CWT (1995) 214 ITR 76 (Mad.) fol.
CWT v. N. Gnanamani (1987) 163 ITR 313 (Mad.) distinguished.
Tata Engineering and Locomotive Co. Ltd. v. Gram Panchayat (1976) 4 SCC 177 ref.
C. V. Rajan for the Commissioner
A Moiz for the Assessee.
JUDGMENT
N. V. BALASUBRAMANIAN, J.---In pursuance of the directions of this Court in T. C. P. No. 474 of 1982 the Income-tax Appellate Tribunal has stated a case and referred the following questions of law under section 27(3) of the Wealth Tax Act, 1957, for our opinion:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal had valid materials to hold that the individual partners of the firm (i.e., the assessee herein) are the real owners of the assets of the firm and hence the exemption under section 5(1)(iv) of the Wealth Tax Act, 1957, was allowable?
(2) Whether the Appellate Tribunal was right in holding that the term 'house' in section 5(1)(iv) of the Wealth Tax Act, 1957, would refer to any building irrespective of the purpose for which it was used?"
The assessee is a partner in a firm called S. M. K. Nataraja Nadar & Sons, Virudhunagar, and the assessee in the course of the assessment proceedings for the assessment year 1974-75 under the Wealth Tax Act, 1957, (hereinafter referred to as "the Act"), claimed exemption under section 5(1)(iv) of the Act in respect of his one-third share in the value of the workshop building. The Wealth Tax Officer, however, held that the immovable properties owned by the assessee were not transferred in the name of the assessee as there was no registered document effecting the transfer. He further held that the workshop building was owned by the firm and not by the partner and in any event the workshop building cannot be regarded as a "house". In this view of the matter, he disallowed the claim of the assessee for exemption under section 5(1)(iv) of the Act.
??????????? The assessee filed an appeal before the Appellate Assistant Commissioner and contended that there was a valid transfer of the immovable property by the firm to the partner and the house was used for commercial purpose as well. The assessee also claimed that the house is jointly owned by the assessee alongwith the other partners and the proportionate value of each co-owner would be eligible for exemption. The Appellate Assistant Commissioner accepted all the contentions of the assessee and held that the assessee would be entitled to claim exemption under section 5(1)(iv). Dissatisfied with the order of the Appellate Assistant Commissioner, the Revenue preferred an appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal held that the term "house" would include the workshop building as well and the assessee would be entitled to claim exemption under section 5(1)(iv) of the Act. The Appellate Tribunal also held that as a partner, the assessee would be entitled to claim exemption under the said provision. It is against this order of the Appellate Tribunal, the Department has sought for and obtained a reference on the questions of law set out earlier.
C. V. Rajan, learned counsel for the Revenue, submitted that this Court in the case of CWT v. N. Gnanamani (1987) 163 ITR 313 has considered the other partners' claim with reference to the same firm and refused the claim for exemption under section 5(1)(iv) of the Act in respect of the share owned by the said partner in the firm. He, therefore, submitted that since the assessee is a partner in the same firm and since this Court has taken the view that the assessee in N. Gnanamani's case (1987) 163 ITR 313 (Mad.) was not entitled to claim exemption, the ratio would apply to the facts of this case as well. The view of the Appellate Tribunal that the assessee is entitled to claim exemption is not sustainable in law.
C. V. Rajan, learned junior standing counsel for the Revenue, also contended that the workshop building cannot be regarded as a house and, therefore, the assessee in any event, is not entitled to claim exemption under section 5(1)(iv) of the Act.
A. Moiz learned counsel for the assessee, submitted that subsequent to the decision rendered by this Court in the case of CWT v. Gnanamani (N.) (1987) 163 ITR 313 in Venkatavaradha Reddiar (R.) v. CWT (1995) 214 ITR 76 this Court has taken the view that the partners alone will have the benefit of exemption under section 5(1)(iv) of the Act, and therefore, the later decision should be applicable to the facts of the case: He also submitted that the workshop building is also a house and the assessee is entitled to claim exemption under section 5(1)(iv) of the Act
We have carefully considered the rival submissions of learned counsel appearing for the parties. It is no doubt true that this Court in N. Gnanamani's case (1987) 163 ITR 313 has held that the partners are not the owners of the property and are not entitled to claim exemption under section 5(1)(iv) of the Act in respect of the share held by the firm. However, the said decision was considered by a subsequent decision of this Court in R. Venkatavaradha Reddiar's case (1995) 214 ITR 76 and this Court held that N. Gnanamani's case (1987) 163 ITR 313 is distinguishable. This Court after noticing N. Ghanamani's case (1987) 163 ITR 313 held as under (page 90):
.... in our view, is not exactly to the point. It has, in fact, considered the case in a different angle altogether, that is when a co? partner claims that a certain immovable property, owned by the life firm, has been transferred to him and the answer that even if the properties of a firm are treated as properties held in common by all the partners as a firm is not a legal entity and cannot hold properties, there cannot be a division of the properties purchased in the name of the firm as amongst the partners by making entries in the accounts of the firm without actual dissolution of the firm and that even assuming that the firm's properties were owned and enjoyed in common by the partners, such common properties cannot be possessed and enjoyed in severality unless there is a document in writing and that such a document will require registration if the value of the partner's interest in the property exceeds Rs.100 is confined to the facts and the said case has really given out no ratio decidendi, which can restrain us from accepting the judicial consensus that . . . . "
In the subsequent decision of this Court, it was held that there is no ratio decidendi in N. Gnanamani's case (1987) 163 ITR 313 with reference to the claim of the assessee under section 5(1)(iv) of the Act. In view of the later decision, we are of the opinion that the principle laid down in the later decision alone would apply, though this Court in N. Gnanamani's case (1987) 163 ITR 313 has held in another partner's case of the said firm, that the partner is not entitled to exemption. It is significant to notice that the later decision noticed the decision in N. Gnanamani's case (1987) 163 ITR 313 and held that the ratio decidendi in N. Gnanamani's case (1987) 163 ITR 313 was different and the case is distinguishable. We, therefore, hold that the partners alone will have the benefit of exemption under section 5(1)(iv) of the Act, when their individual assessments are taken up to the extent of their respective shares in the net wealth of the partnership firm as the firm is not an -assessee under the provisions of the Wealth Tax Act. That apart, this Court in R. Venkatavaradha Reddiar's case (1995) 214 ITR 76 has followed several decisions of other High Courts and noticed the earlier decision of this Court and then came to a conclusion that the firm has no legal existence and, as such, it cannot hold that property and the partners alone are entitled to claim exemption under section 5(1)(iv) of the Act. In view of the later decision of this Court in R. Venkatavaradha Reddiar's case (1995) 214 ITR 76, which was followed in other cases, we are of the view that the Tribunal was correct in holding that the assessee as a partner of the firm is the real owner of the asset and is entitled to claim exemption under section 5(1)(iv) of the Wealth Tax Act.
In so far as the second question is concerned, the issue that arises is' whether the workshop building can be regarded as a house within the meaning of section 5(1)(iv) of the Act. Mr. C.V. Rajan, learned counsel for the Revenue, relied upon the decision in R. Venkatavaradha Reddiar's case (1995) 214 ITR 76 (Mad) and submitted that the house contemplates habitability and the workshop cannot be regarded as house within the meaning of section 5(1)(iv) of the Act. However, he fairly brought to our notice the subsequent decision of this Court in T. C. Nos. 763 to 765 of 1982, dated February 25, 1997--CWT v. M. Appuswamy (1998) 233 ITR 460 (Mad.), wherein this Court after considering the decision of R. Venkatavaradha Reddiar's case (1995) 214 ITR 76, as well as a circular issued by the Central Board of Direct Taxes; and the decision of the Supreme Court in Tata Engineering and Locomotive Co. Ltd. V. Gram Panchayat (1976) AIR 1976 SC 2463; (1976) 4 SCC 177 held that the expression "house" is not limited to a structure designed for human habitation and it includes any building or shed intended or used as a habitation or shelter for animals of any kind, a building in the ordinary sense or any building, edifice, or structure enclosed with walls and covered, regardless of the fact of human habitation. This Court also held that the godown owned by the firm is also "house" within the meaning of section 5(1)(iv) of the Act. We are of the view that the later decision of this Court in T. C. Nos. 762 to 765 of 1982-CWT v. M. Appuswamy (1998) 233 ITR 460 (Mad) which considered the case of R. Venkatavaradha Reddiar (1995) 214 ITR 76 would -apply to the facts of the case and following the said decision we hold that the workshop building can also be regarded as a house within the meaning of section 5(1)(iv) of the Wealth Tax Act. We find no infirmity in the order of the Appellate Tribunal in holding that the "house" under section 5(l)(iv) of the Act would refer to any building irrespective of the purpose for which it is used. In this view of the matter, we answer both the- questions of law referred to us in the affirmative and against the Revenue. No costs.
M.B.A./4199/FC ??????????????????????????????????????????????????????????????????????????????? Question answered