- (1.) THE Tribunal, Allahabad has referred the following question of law under s. 27(1) of the WT Act, 1957 (hereinafter referred to as the Act) for opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the assessee was entitled to claim exemption in respect of the land and building owned by the firm in computing the value of his interest in the said firm under s. 5(1)(xxxii) of the WT Act, 1957 -
(2.) THE reference relates to the asst. yrs. 1973 -74, 1974 -75 and 1975 -76.
(3.) BRIEFLY stated the facts giving rise to the present reference are as follows : The assessee is a partner in the firm of M/s Asia Tannery Jajmau, Kanpur. In her WT returns, she had claimed exemption of Rs. 1,50,000 each under s. 5(1)(xxxii) of the Act, in respect of the value of her interest in the above firm. The WTO gave exemption of Rs. 94,721 in the asst. yr. 1973 -74 and Rs. 1,09,514 in the asst. yr. 1974 -75. He however, rejected the assessee's claim in the asst. yr. 1975 -76 with the following remarks: "The assessee has claimed exemption of Rs. 1,50,000 under s. 5(1)(xxxii) in respect of his interest in M/s Asia Tannery. of balance sheet along with computation of working under s. 5(1)(xxxii) so that his claim may be examined. Till today the required particulars have not been furnished. Limitation in this case expires after this month and as such the assessment cannot be pending. The claim of the assessee under s. 5(1)(xxxii), is, therefore, disallowed." The assessee appealed to the AAC. It was once again urged before him that she was entitled to exemption of Rs. 1,50,000 in each of the years under consideration under s. 5(1)(xxxii) of the Act, in respect of the value of her interest in the firm of M/s Asia Tannery. The AAC accepted the claim in the asst. yr. 1975 -76 in the following manner : "Shri J.P. Gupta, CA contended before me that the appellant's capital employed in the said firm amounted to Rs. 2,69,774 and the appellant was entitled to exemption under s. 5(1)(xxxii) to the extent of Rs. 1.50 lacs and the WTO was not correct in rejecting the claim without giving any reasonable explanation. It was contended by Shri Gupta, CA that the full claim amounting to Rs. 1.5 lacs was admissible as per rules but the same has been denied by the WTO. While calculating the capital employed in the industrial undertaking the WTO has excluded the value of land and building which is contrary to the provisions of WT Act. The assets including the land and building which are otherwise exempt under s. 5 of the WT Act are to be included. The factory land and building is not exempt under any other clause of s. 5, hence it should not have been excluded for the purposes of giving exemption for capital employed, while calculating the exemption under s. 5(1)(xxxii) of the WT Act. Details of total assets including exempted assets have been filed as per chart filed by the counsel for the appellant. The appellant is entitled to exemption amounting to Rs. 1.5 lacs. The WTO is directed to allow the claim under s. 5(1)(xxxii) of the WT Act." He followed the above order in appeals for the asst. yrs. 1973 -74 and 1974 -75. The Department came in appeal to the Tribunal. The representative of the Department invited the Tribunal's attention to s. 5(1)(xxxii) of the Act, which reads as under: "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in any land or building or any asset referred to in any other clause of this sub -section) forming part of an industrial undertaking belonging to a firm or an AOP of which the assessee is a partner or, as the case may be, a member." and submitted that in view of the words appearing in parenthesis, the assessee was not entitled to any exemption in respect of the land/building owned by M/s Asia Tannery of which she was a partner. According to the learned representative for the Department the words "referred to in any other clause of this sub -section" in the said parenthesis were applicable to "any asset" and not to "not being any land or building or any right in any land or building". Thereafter, he invited Tribunal's attention to the order of the WTO in respect of the asst. yr. 1975 -76 and highlighted the fact that the assessee had not furnished the particulars to the WTO, as was required of her. He, therefore, urged that the orders of the AAC on this point should be reversed. The Tribunal dealt with the matter in paras 6 and 7 of its order in the following words: "6. We have carefully considered the rival submissions of the parties and we find force in the submissions made on behalf of the assessee. At the outset, we are constrained to observe that perhaps the controversy could have been avoided if the assessee had furnished the necessary particulars before the WTO, as was required of her. It may be that since the assessee had filed the balance sheets along with the returns, she may have thought that nothing further was required to be done. However, this approach of the assessee was not at all commendable, more so, when she was asked to furnish the "computation of working under s. 5(1)(xxxii)." It appears from the order of the AAC in respect of the asst. yr. 1975 -76 that "details of total assets including exemption assets" was filed before him by way of a chart. However, it would appear from the order of the AAC (reproduced below), he did not think it fit to reproduce the chart, while giving his decision in favour of the assessee. Again, at the time of hearing before us, neither of the parties could give us a copy of the chart filed before the AAC. Under these circumstances, we are not in a position to give the actual working of the exemption claimed by the assessee. Even in his assessment orders for the asst. yrs. 1973 -74 and 1974 -75, the WTO has not given computation of allowing exemption of Rs. 94,721 and Rs. 1,09,514 respectively, under s. 5(1)(xxxii) of the Act. Since the appeals can be decided on the legal issue, we are proceeding to give our decision, but at the same time, we cannot restrain to observe that both the WT authorities as well as the assessee could have made the appeals more meaningful if all the relevant figures had been brought on record. 7. On the plain reading of the provisions of s. 5(1)(xxxii) of the Act, we are clearly of the view that the assessee would be entitled to claim exemption in respect of the land/building owned by the firm, in computing her value of the interest in the said firm. In our view, the words appearing in parenthesis have to be read as a whole and in that view of the matter, since while computing the value of the interest of the assessee in the assets of the firm, no deduction/exemption was considered in respect of the land/building owned by the firm, the assessee would be entitled to claim exemption as contemplated under s. 5(1)(xxxii) of the Act. In this view of the matter, we are not prepared to accede to the submissions made on behalf of the Revenue that the concluding words in the parenthesis are applicable to "any assets" mentioned therein and not applicable to the other portion of the words used in the parenthesis. In any event, since two views are possible in favour of the assessee has to be preferred. For all these reasons, we do not find any infirmity in the orders of the AAC under appeal. However, in order to protect the interest of the Revenue, we direct the assessee to furnish the necessary particulars before the WTO, who will then have an opportunity to examine and verify the correct amount of exemption allowance under s. 5(1)(xxxii) of the Act. The WTO is, therefore, directed to modify the assessments accordingly." We have heard Sri R.K. Upadhyaya, learned standing counsel appearing for the Revenue. Nobody has appeared on behalf of the assessee.;