Law: Wealth Tax Act, 1957

Section: 27(1),5(1)(iv)

Wealth tax--- ---- Net wealth---Computation of net wealth---Partner of firm ---Exemptions--­Partner to be given benefit of exemption to extent of share in net wealth of firm---Exemption in respect of all items under S.5(1) to be ascertained and limit under S. 5(1-A) to be applied---Share of exemption available to firm not to be added back---Indian Wealth Tax Act, 1957, S.5(1) & (1-A). The assessee owned properties in India and outside India. For the assessment year 1975-76, the Wealth Tax Officer added back in the net wealth of the assessee a sum of Rs.55,000 being a 11/30 share of Rs.1,50,000, refusing the exemption claimed under section 5(1)(iva) of the Wealth Tax Act, 1957, in respect of bank deposits and agricultural lands belonging to a foreign firm in which the assessee was a partner. Similarly, for the assessment year 1976-77, the Wealth Tax Officer disallowed a sum of Rs.36,666 being a 11/30 share of Rs.1,00,000 refusing exemption under section 5(1)(iv) of the Act in respect of a house at Bangalore belonging to the firm. The Tribunal deleted the additions. On a reference: Held, that a firm has no legal existence and as such it cannot hold any property. It is the partners who own the property as such and the partners alone should have the benefit of the 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. Therefore, the finding given by the Tribunal that the Wealth Tax Officer ought to have granted exemption under section 5(1) in the hands of the firm and not in the hands of the partners individually and separately was not sustainable. Also, even though the Wealth Tax Officer was correct in allowing exemption under section 5(1)(iv) of the Act to the limit prescribed under section 5(1-A) of the Act during the assessment years under consideration he was not correct in adding back the share of exemption available in the foreign firm to the extent of the asessee's 11/30 share. The Tribunal was to ascertain the exemption available to the assessee as an individual partner from all sources under section 5(1) of the Act and limit the…

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