COMMISSIONER OF WEALTH TAX VS N. KAMATCHI AMMAL
2001 P T D 1895
[243 I T R 244]
[Madras High Court (India)]
Before R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF WEALTH TAX
Versus
N. KAMATCHI AMMAL
Tax Case No. 167 of 1990 (Reference No.90 of 1990), decided on 27/10/1998.
Income tax‑‑‑--
‑‑‑‑ Exemption ‑‑‑Firm‑‑‑Partner‑‑‑Assets eligible for exemption owned by firm‑‑‑Partner entitled to exemption in respect of her share in firm‑‑‑Indian Wealth Tax Act, 1957, S.5(lA).
The principles relating to exemption which can be claimed by a partner of a firm under section 5(lA) of the Wealth‑ Tax Act, 1957, are: (i) a firm has no legal existence and as such it cannot hold any property; (ii) it is the partners who own the partnership property as such; (iii) the partners alone should have the benefit of the exemption under section 5(lA) when their individual assessments are taken up to the extent of their respective shares in the net wealth of the partnership firm; (iv) the mere fact that a partner cannot claim to be entitled to any portion of the property owned by a firm as exclusively belonging to him will not completely disentitle him from seeking the benefit of exemption.
Venkatavaradha Reddiar (R.) v. CWT (1995) 214 ITR 76 (Mad. rel
R. Sivaraman for the Commissioner
P.P.S. Janarthana Raja for the Assessee.
JUDGMENT
MRS. A. SUBBULAKSHMY, J.‑‑The assessee is an individual. She was a partner in a firm. The firm owned certain assets which are eligible for exemption under section 5 of the Wealth Tax Act, 1957. The assessee contended that the net wealth of the firm was to be ascertained without making any deduction in respect of the exempted assets and the share in the firm so, ascertained was to be added to the net wealth of the assessee and the assessee was to be granted a deduction in respect of‑ the exempted assets held by her in her individual capacity as well as the value of exempted assets attributable to the share in the firm to the full extent possible under section 5(lA) of the Act. According to the Wealth Tax Officer, the exemption had to be allowed only in computing the net wealth of the firm. The Appellate Tribunal accepted the case of the assessee and allowed the claim of the assessee. On that this reference has been made to this Court and at the instance of the Revenue, the following question has been referred to us for consideration:
"Whether the deduction under section 5(lA) in respect of assets belonging to a firm should be allowed in the hands of the firm only in computing the deemed net wealth of the firm in terms of rule 2 of the Wealth Tax Rules and not in the hands of each individual partner?"
The year of assessment involved is 1979‑80.
A similar question was considered by this Court in the case of R. Venkatavaradha Reddiar v. CWT (1995) 214 ITR 76, wherein this Court has held that (headnote):
"The principles relating to exemption which can be claimed by a partner of a firm under section 5(1)(iv) of the Wealth Tax Act, 1957, are: (1) a firm has no legal existence and as such it cannot hold any property; (2) it is the partners who own the partnership property as, such; (3) the partners alone should have the benefit of the exemption under section 5(1)(iv) when their individual assessments are taken up to .the extent of their respective shares in the net wealth of the partnership firm; (4) the mere fact that a partner cannot claim to be entitled to any portion of the property owned by a firm as exclusively belonging to him will not completely disentitle him from seeking the benefit of exemption under section 5(1)(iv) of the Act, so long as he is, the owner of the house property even though as a partner in a firm; (5) for the purposes of the exemption under section 5(1)(iv), it is not necessary that the partner should be able to say that the property or any specific part thereof exclusively belongs to him.
For the purpose of the benefit of exemption under section 5(1)(iv) of the Wealth Tax Act, the concept of habitability is inherent in the word 'house' and unless it is habitable, the word would not answer the common sense meaning of 'house'. A cinema theatre cannot answer the requirement of the elements of habitation, as envisaged under the Act. A partner cannot claim exemption under section 5(1)(iv) in respect of his share in a cinema theater owned by the firm."
and the question has been answered in favour of the assessee
Following the decision reported in R. Venkatavaradha Reddiar v. CWT (1995) 214 ITR 76 (Mad.), and for the reasons stated therein, we answer the question referred to us in favour of the, assessee and against the Revenue.
M.B.A./455/FC?????????????????????????????????????????????????????????????????????????????????? Reference answered