R.R.RASTOGI, J. - (1.) THESE three references arise out of the same set of facts and are inter-related. Hence, all of them are being disposed of by this common judgment.
(2.) THE assessee, Sarvasri G. N. Khanna, N. K. Khanna, M. N. Khanna, S. K. Khanna, K. N. Khanna, are partners in Annapurna Biscuit Manufacturing Company, Kanpur. The assessment year involved in the cases of G. N. Khanna and M. N. Khanna are 1971-72 and 1972-73, while in the cases of others the year involved is 1972-73. The dispute in the assessments to wealth-tax for these assessees related to the addition of their respective shares in the development rebate reserve as appearing in the books of the firm. In the balance sheets of the firm relevant for the years under consideration under the head "development rebate reserve account" on the liabilities side the following figures were shown: The WTO in the case of each of these assessees made an addition of the amount corresdponding to their shares respectively by relying on S. 7(2)(a) of the WT Act (hereinafter referred to as "the Act") r/w r. 2F of the WT Rules, 1957 (hereinafter referred to as "the Rules"). The appeals before the AAC having failed, further appeals were filed before the Tribunal. The submissions made before the Tribunal on behalf of the assessee were that the provisions contained in S. 4(1)(b) and S. 4(2) of the Act and r. 2 (1) of the Rules being special provisions would have preference over S. 7(2)(a) r/w rr. 2A to 2G of the Rules for the purpose of evaluating the interest of a partner in a partnership firm. The second submission made was that it would be S. 7(1)(a) and not S. 7(2)(a) which could be applicable and the last submission made was that for the purpose of finding the value of the interest of a partner in a firm for the purposes of assessment to wealth-tax a notional dissolution of the partnership is to be assumed and since in the event of dissolution and distribution of assets of the firm including the development rebate reserve, the firm have to pay extra tax under S. 155(5)(ii)(c) of the IT Act, 1961, that amount should be deducted from the development reserve with a view to arrive at the correct amount of that reserve which would be liable to be included in the hands of the partners. The Tribunal agreed with the assessees' contention that the value of the interest of a partner in a firm has to be included under S. 4(1)(b) of the Act in the prescribed manner. For that purpose, the Central Board of Revenue framed r. 2 which is almost in conformity with S. 48 of the Partnership Act. On the basis of these provisions the development rebate reserve which is neither a debt nor a liability but belongs to the partners of the firm is to be included along with the capital contributed by the partners. Thus, the proportionate share of each partner in the development rebate reserve is to be included to determine the value of Assessment year Amount Rs. 1972-72 3,85,833 1972-73 3,88,622 the interest of the partners in the firm. The Tribunal did not, however, agree with the assessees' submission that this case was covered by S. 7(1) and not by S. 7(2) of the Act. The Tribunal also did not agree with the assessees that the tax which the firm may be called upon to pay under s. 155(5)(ii)(c) of the IT Act was to be taken into consideration because the fiction created by S. 4(1) (b) is only for the limited purpose of evaluating the interest of a partner in a firm as on the relevant evaluation date. Apart from this, unless there is an order made under S. 155(5)(ii)(c) of the IT Act, no deduction of any such tax can be allowed and, lastly, that such deduction is not permissible in view of the Supreme Court in Pandit Lakshmi Kant Jha vs. CWT 1973 CTR (SC) 260 : (1973) 90 ITR 97 (SC) : TC63R.322. Now, at the instance of these assesses, the following questions has been referred to us : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's share in the development rebate reserve of the firm, Annapurna Biscuit Mfg. Co., was includible in entirety while estimating the value of the assessee's interest in the said partnership firm for asst. yrs. 1971-72 and 1972-73 ?"
(3.) IN Wealth-tax Reference No. 320 of 1977, in which the assessee is M. N. Khanna and which relates to the asst. yr. 1971-72, after the word "includible", the words "in entirety" do not find a place. However, there was no controversy before us that the assessee's share in the development rebate reserve is liable to be included while computing the value of his interest in the firm. The controversy is confined only to the question as to whether the entire development rebate reserve is to be included or the tax which the firm might be called upon to pay under S. 155(5)(ii)(c) of the IT Act should be deducted therefrom.;