NARSIBHAI PATEL Vs. COMMISSIONER OF WEALTH TAX
LAWS(MPH)-1980-10-21
HIGH COURT OF MADHYA PRADESH
Decided on October 13,1980

NARSIBHAI PATEL Appellant
VERSUS
COMMISSIONER OF WEALTH-TAX Respondents





Cited Judgements :-

COMMISSIONER OF WEALTH TAX VS. VIMLABAI KANTILAL PORWAL [LAWS(MPH)-1982-4-15] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. NAURANGRAI AGARWALLA [LAWS(CAL)-1983-6-17] [REFERRED TO]
JAGDISH CHANDRA GROVER VS. COMMISSIONER OF WEALTH TAX [LAWS(MPH)-1985-7-25] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MADHU KANTA BEN [LAWS(MPH)-1986-4-20] [REFERRED TO]
RATANSI NARAYAN PATEL VS. COMMISSIONER OF INCOME TAX [LAWS(MPH)-1987-7-30] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. SATI MULCHANDANI [LAWS(CAL)-1989-6-1] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. DEEPAM KUMAR PATEL [LAWS(MPH)-1996-10-38] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. KUNHALI VARMA [LAWS(KER)-1989-7-62] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. KAETHIKAMAL KUMARI VARMA [LAWS(KER)-1989-7-60] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MEHTA J M AND BROS [LAWS(BOM)-1992-9-67] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. MOHAN LAL KAPUR [LAWS(P&H)-2006-9-195] [REFERRED TO]


JUDGEMENT

G.P. Singh, C.J. - (1.)THIS judgment will also dispose of Misc. Civil Cases Nos. 434, 435 and 436 of 1977 as also Misc. Civil Cases Nos. 389, 390, 391 and 393 of 1978. These arc all references made under Section 27(1) of the W.T. Act, 1957.
(2.)MISC. Civil Cases Nos. 433 to 436 relate to the assessment year 1973-74 and MISC. Civil Cases Nos. 389 to 391 and 393 relate to the assessment year 1974-75. The questions of law referred in the references relating to the assessment year 1973-74 are as follows :
"(1) Whether, on the facts and in the circumstances of the case, the assessment made by the Wealth-tax Officer was erroneous and prejudicial to the interests of the revenue in so far as a deduction of Rs. 1,00,000 was allowed under Section 5(1)(xxvi) ?

(2) Whether a partner is entitled to exemption under Section 5(1)(xxvi) in proportion to his share in the firm in which he is a partner when the relevant property is a partnership asset?"

The questions of law referred in the references relating to the year 1974-75 are the same except as to the amount of deduction and they read as follows:

"(1) Whether, on the facts and in the circumstances of the case, the assessment made by the Wealth-tax Officer was erroneous and prejudicial to the interests of revenue in so far as a deduction of Rs. 1,20,000 was allowed under Section 5(1)(xxvi)?

(2) Whether a partner is entitled to exemption under Section 5(1)(xxvi) in proportion to his share in the firm in which he is a partner when the relevant property is a partnership asset?"

The four assessees in these references are partners in a partnership firm carrying on business in the name of M/s. P.D. & Company. The partnership consists of five partners, each having 20% share in the partnership. The firm had certain bank deposits. The assessees claimed exemption under Section 5(1)(xxvi) in their wealth-tax assessments to the extent of their respective share in the bank deposits. For the assessment year 1973-74, each partner's share (20%) in the bank deposits worked out to Rs. 1,00,000 and for the assessment year 1974-75 to Rs. 1,20,000. The WTO allowed these exemptions to the assessees. The Commissioner revised the assessments under Section 25(2) and held that the assessees were not entitled to the said exemption and the WTO was directed to make fresh assessments. The appeals filed before the Tribunal by the assessees, were partly allowed. The Tribunal held that the exemption under Section 5(1)(xxvi) will be available in computing the net wealth of the firm to the extent of the maximum, i.e., Rs. 1,50,000, and that the exemption will not be allowed as a deduction to each individual partner to the extent of Rs. 1,50,000. On applications made by the assessees, the aforesaid questions of law set out by us above have been referred by the Tribunal.

(3.)SECTION 3 of the Act, which is the charging section, imposes wealth-tax in respect of the net wealth, on the corresponding valuation date, of every individual, HUF and company at the rates specified in Schedule I. "Net wealth" is defined in SECTION 2(m) as follows :
"'Net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-

(i) debts which under SECTION 6 are not to be taken into account;

(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and

(iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958),--

(a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him ; or

(b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date."

The definition of "assets" as given in Section 2(e) is as below;

" 'Assets' includes property of every description, movable or immovable, but does not include,--...

(2) in relation to the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year-

(i) animals;

(ii) a right to any annuity (not being an annuity purchased by the assessee or purchased by any other person in pursuance of a contract with the assessee) in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; (iii) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee :......"



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