Law:

Section:

Section 4(1)(b) of the Wealth-tax Act, 1957, read with rule 2 of the Wealth-tax Rules, 1957 - Assessment - Share of a partner in a firm - Whether for valuing of assessee's share in assets of a firm in which he was partner, net wealth of firm has to be calculated according to manner provided in rule 2 and not according to provisions of section 7(2)(a) and rules 2A to 2G of Rules - Held, yes Facts In the relevant assessment years the assessee who had one-fourth share in a firm, computed his share in accordance with rule 2 and disclosed it in his return. The WTO, however, held that the net wealth of the firm should be computed under section 7(2) read with rules 2A to 2G. The computation by the WTO exceeded the computation of the assessee and the WTO, thus, completed the assessments on the basis of the computation made by him. On .appeal, the AAC held that relevant rule for valuation of the interest of a partner in a firm was rule 2 and not rules 2A to 2G. He, therefore, directed the WTO to correct the assessments of the assessee. On appeal by the revenue, the Tribunal also upheld the order of the AAC. On reference : Held Under section 4 the value of the interest of an assessee in a firm has to be included in the net wealth of the assessee for the purpose of assessment. It is also clear from section 3 that a firm is not an assessee within the meaning of the Act and cannot be assessed. Rule 2 specifically provides the procedure for valuation of the interest of an assessee in a firm. Under the said rule it is not wealth of the firm which has to be determined first and thereafter allocations have to be made to the partners on the basis of their participation in capital and share of profits. Section 7, however, lays down provision for valuation of assets under sub-section (1) of section 7. The general rule is that the value of an asset has to be estimated on the basis of its market price. The exception is provided in sub-section (2) which comes into operation in valuation of assets of a business which the assessee is carrying on and for which accounts are maintained by the assessee. Only in such a case the general rule of valuation of assets on the basis of the market…

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