Law: Wealth Tax Act, 1957

Section: 27,5(1)(iv),2(m),4(1)(b)

Law: Wealth Tax Rules, 1957

Section: 2

Law: Registration Act, 1908

Section: 17(1)

Wealth tax--- ----Exemptions---House or part of house belonging. to assessee---Assessee partner of firm---House belonging to firm---Partner entitled to exemption--­Indian Wealth Tax Act, 1957, Ss.2(c), 2(m), 3, 4(1)(b) & 5(l)(iv) --- Indian Wealth Tax Rules, 1957, R.2--[Purushothamdas Gocooldas v. CWT (1976) 104 ITR 608 (Mad.); CWT v. Narendra Ranjalker (1981) 129 ITR 203 (AP); CWT v. B. Chandrasekhara Rao (1989) 175 ITR 66 (AP) CWT v. Nand Lal Jalan (1980) 122 ITR 781 (Pat.) and CWT v. Radha Krishna Jalan (1984) 145 ITR 217 (Pat.) dissented from]. Section 5 of the Wealth Tax Act, 1957, which grants the exemptions under the Act, refers to an assessee and a firm, not being an assessee under the Wealth Tax Act, is not covered under section 5. It is an assessee under the Wealth Tax Act alone who can avail of the exemption under section 5(1)(iv). Section 4(1)(b) relates to a firm. It makes reference to the prescribed manner. The only prescribed manner is the one contained in rule 2 of the Wealth Tax Rules, 1957. Rule 2 does not contain any procedure for granting exemption under section 5(1)(iv) at the stage of computation of the net wealth of a firm. Rule 2 is quite exhaustive and provides the procedure to be followed and where exemption has to be allowed. In sub-rule (3), the benefit of section 5(2) has been extended to a partner. If the benefit of section 5(1) was to be extended to the firm, the same could have been so stated in rule 2 itself. There is nothing in section 4(1)(b) or rule 2 to suggest that a firm is to be deemed an assessee so as to allow the benefit of exemption ,under section 5(1)(iv) to it. A firm has no legal existence and as such it cannot hold any property. It is the partners who own the partnership property or assets. Therefore, it is only fair that they alone should have the benefit of the exemption under section 5(1)(iv) when their individual assessments are taken up which will include their respective shares in the net wealth of the partnership firm. 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…

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