- (1.) DOUBTING the correctness of the view expressed in Commissioner of wealth Tax v. Chandrasekhar Rao, 175 1tr 66, a Division Bench of this Court has referred this RC for consideration of the Full Bench. The rc arises out of the reference application filed by the Commissioner of wealth Tax under Section 256 (1) of the Income Tax Act. The questions of law referred are these: " (1) Whether on the facts and circumstances of the case, the appellate Tribunal was right in holding that the provisions of section 4 (1) (b) of the Wealth Tax Act, Rule 2 of the Wealth tax Rules and the principle decided by the A. P. High Court in 129 ITR 203, are not applicable in the case of the assessee who is a 'minor'? (2) Whether on the facts and circumstances of the case, the appellate Tribunal was right in directing the Wealth Tax Officer to grant exemption under Section 5 (1) (iv) separately for a minor. "
(2.) BEFORE we proceed to state the facts, we would like to extract the relevant provisions including those adverted to in the questions framed. "section 4 (1) In computing the net wealth of an individual, there shall be included, as belonging to that individual-a) xx xx xx b) Where the assessee is a partner in a firm or a [member of an association of persons (not being a Co-operative Housing society)], the value of his interest in the firm or association determined in the prescribed manner. Section 5 (1) Subject to the provisions of sub-section (1-A), wealth Tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-i ). . . . . ii ). . . . . iii ). . . . . iv) One house or part of a house belonging to the assessee : provided that where the value of such house or part exceeds one hundred thousand rupees, the amount that shall not be included in the net wealth of the assessee under this clause shall be one hundred thousand rupees; section 2 (m) defines 'net-wealth' 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 -. . . . . . . . . . . . . . (rest is omitted ). Rule 2 of Wealth Tax Rules 2 (1) The value of the interest of a person in a firm of which he is a partner or in an association of persons of which he is a member, shall be determined in the manner provided herein. The net wealth of the firm or the association on the valuation date shall first be determined. That portion of the net wealth of the firm or association as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them. The residue of the net wealth of the firm or association shall be allocated among the partners or members in accordance with the agreement of partnership for association for the distribution of assets in the event of dissolution of the firm or association, or in the absence of such agreement, in the proportion in which the partners or members arc entitled to share profits. The sum total of the amounts so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association, (rest is omitted ).
(3.) THE assessee who was a minor during the relevant assessment year, was admitted to the benefits of partnership in the firm known as taj Maha1 Hotel, Secunderabad. Me was having l/8th share in the profits of the firm. In the Wealth Tax assessment, the assessee returned as net wealth of Rs. 68, 897/ -. The Wealth Tax Officer added to that amount a sum of Rs. 1,06,656/-and arrived at the net wealth of Rs. 1,75,553/ -. The amount of Rs. 1,06,656/-that was added represents, to put it in the language of WTO "the difference in 1/sth share of interest in Taj Mahal Hotel, as determined in other co-owners' cases". The WTO quantified the interest of the assessee in the firm apparently under Section 4 (1) (b), though the details of such quantification are not available from record. Whether such interest can be included in the net wealth of the assessee at all, is not put in issue anywhere and the only issue that seems to have loomed large before the appellate Commissioner and the appellate Tribunal was whether the assessee can claim exemption under Section 5 (1) (iv) subject to the ceiling of Rs. 1,00,000/-to the extent of his share in the value of the house property of the firm. That is the indication we get from the statement of the case and the Appellate Assistant Commissioner's order. It is also seen from the order of the first appellate authority that the claim ofthe appellant was that he should be given the benefit of exemption under Section 5 (1) (iv) in respect of the house property of the firm after computing his share of interest in the firm. For putting forward such claim, the decision in CWT v. Narendra Ranjalkar, 129 itr 203, came in his way. It was held in that case as follows: "the net wealth of the firm in which the assessee has a share has to be computed under Rule 2 by excluding the bank deposits held by the firm under Section 5 (1) (xxvi) read with section 5 (1a) upto the limit of Rs. 1,50,000/- and the share of the assessee in the assets of the firm has to be ascertained. The assessee will not thereafter be entitled to exemption under Section 5 (1) (xxvi) in regard to his share of the bank deposits held by the firm. ";