S.K. Mal Lodha, J. - (1.) THESE thirteen references before us involve common questions and so, they were heard together and it will be convenient to dispose of them by a common judgment.
(2.) FOR proper appreciation, we may notice the facts leading to DBWT Reference No. 27 of 1977 (Smt. Ganga Devi v. CWT) in which the Tribunal has made a consolidated reference in respect of the assessment years 1970-71, 1971-72, 1972-73 and 1973-74. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur ("the Tribunal" herein), has referred the following two questions for the opinion of this court : " (1) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the provisions of the Wealth-tax Act, 1957, read with the relevant rules, the Tribunal was right in holding that the agricultural lands belonged to the firm and that exemption under Section 5(1)(iva) ought to be given effect to while working out the net wealth of the firm in accordance with Rule 2 and that the agricultural lands could not be allocated directly amongst the partners to enable them to claim exemption under Section 5(1)(iva), in their individual assessment ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the entire order of the Wealth-tax Officer had not merged in the order of the Appellate Assistant Commissioner and that in respect of that part of the order, with reference to which there was no appeal before the Appellate Assistant Commissioner and which the Appellate Assistant Commissioner had not considered in his order, action under Section 25(2) by the Commissioner was justified ? " 3. Smt. Ganga Devi Taparia is the assessee. She is a partner in the firm, M/s. Bichadi Agricultural Farm, Badanayageon. The partners of the firm are: (1) Shri Bhagwati Prasad Taparia ; (2) Shri Laxminarayan Taparia ; (3) Smt. Ganga Devi Taparia ; (4) Shri Shriram Taparia ; (5) Smt. Rukmani Taparia ; and (6) Shri Jaiprakash Taparia. The firm owned the aforesaid farm. In respect of the wealth-tax assessment years 1970-71 and 1973-74, the question arose as to how the value of the interest of the partner in M/s. Bichadi Agricultural Farm should be computed. It was contended on behalf of the assessee before the Wealth-tax Officer that the value of the agricultural lands, which appeared in the balance-sheet of the firm on the (valuation) dates, should be allocated to the partners directly and exemption in terms of Section 5(1)(iva) of the Wealth-tax Act, 1957 (No. XXVII of 1957) (hereinafter referred to as " the Act"), with regard to the agricultural lands should be granted to the partners in their individual assessments. The Wealth-tax Officer accepted the contention of the assessee and accordingly he granted full exemption mentioned in Section 5(1)(iva) of the Act to the assessee on the footing that her net wealth included agricultural lands. It is apparent from the order of the Wealth-tax Officer that the share of the assessee in the non-agricultural assets in M/s. Bichadi Agricultural Farm only has been included in the wealth, and that no part of her share in agricultural assets of Bichadi Agricultural Farm has been included in the wealth on account of the same being less than the exemption limit prescribed under Section 5(1)(iva) of the Act. The Commissioner of Wealth-tax, Rajasthan, was of the opinion that the order of the Wealth-tax Officer was erroneous and prejudicial to the interests of the Revenue. He, therefore, issued a notice under Section 25 of the Act to the assessee requiring her to explain as to why the aforesaid mistake be not set right. The assessee filed a reply to the notice stating that the order of the Wealth-tax Officer was neither erroneous nor prejudicial to the interests of the Revenue and so the proposed action under Section 25(2) of the Act was illegal and without jurisdiction, and, as such, the same is not called for. It was prayed that the proceedings may be dropped and the notice may be withdrawn. The Commissioner of Wealth-tax did not accept the submission made by the assessee and he directed the Wealth-tax Officer to compute the net wealth of the firm according to the provisions of the Act and the Wealth-tax Rules, 1957 (" the Rules " herein), and then determine the value of interest of each partner in accordance with the Rules. The following may be excerpted from the order of the Commissioner of Wealth-tax : " A plain reading of Section 4(1)(b) makes it clear that no such fiction as is alleged by Shri Lodha had been created and the said section merely enables the Wealth-tax Officer to include in the net wealth of the partner, his interest in the partnership firm which has to be determined as per Rule 2 of the Wealth-tax Rules. It is noteworthy that the words used are his interest in the firm and not his share in the assets of the firm. Thus, it is impossible to agree that Section 4(1)(b) envisages that each one of the partners should be regarded as the owner of a proportionate share of each one of the assets belonging to the firm and shown in its books. In fact, the Supreme Court in the case of Addanki Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300, had laid down that the property brought in by a partner for investment in a firm, ceases to be his exclusive property and during the subsistence of the partnership firm, no partner has got any exclusive claim or right over any particular asset of the firm." The assessee appealed to the Tribunal. The Tribunal, after examining the rival submissions made on behalf of the assessee and the Revenue by its order dated January 29, 1977, found that the agricultural land belonged to the firm and as such the exemption under Section 5(1)(iva) with respect to the land could not be available to the partners as they did not own any agricultural land in their individual capacity and that while computing the wealth of the firm, exemption in terms of Section 5(1)(iva) ought to be given effect to in the hands of the firm in accordance with the decision in CWT v. Vasantha [1973] 87 ITR 17 (Mad). Before the Tribunal, a contention was also raised in appeal on behalf of the assessee regarding the theory of merger of the order of the Wealth-tax Officer into that of the Appellate Assistant Commissioner. The Tribunal repelled that contention and held that that part of the order of the Wealth-tax Officer which was not made the subject matter of appeal before the Appellate Assistant Commissioner by the assessee and which he had not examined suo motu did not get merged in the order of the Appellate Assistant Commissioner and, therefore, the Commissioner of Wealth-tax was entitled to pass an order under Section 25(2) of the Act with reference to that part of the order of the Wealth-tax Officer which had not merged in the order of the Appellate Assistant Commissioner. On a reference application filed by the assessee, the Tribunal has referred the aforesaid question. The following tabular statement will show the questions referred by the Tribunal in the other twelve references : JUDGEMENT_325_ITR166_1987Html1.htm We heard Mr. K. C. Bhandari for the assessees and Mr. J. P. Joshi for the Revenue.
(3.) QUESTION No. 1.--It was urged by learned counsel for the assesses that Section 5 of the Act was applicable for computing the net wealth of the assessee only. It was submitted that the view taken by the Tribunal' is erroneous when it held that the lands belonged to M/s. Bichadi Agriculture Farm, of which the assessee was a partner and as such the exemption under Section 5(1)(iva) of the Act in respect of that land could not be available to the partners, for, they did not own any agricultural land in their individual capacity and so, while computing the wealth of the firm, exemption in terms of Section 5(1)(iva) of the Act should be given effect to in the hands of the firm. In this connection, our attention was drawn to the definitions of " assessee " and " net wealth " as given in Sections 2(c) and 2(m) of the Act and reference was made to the provisions contained in Sections 4(1)(b), 5(1)(iva) of the Act and Rule 2 of the Rules. Learned counsel for the Revenue supported the order of the Tribunal for the reasons mentioned therein. The question, therefore, that arises is whether the view taken by the Tribunal is correct or not. We may first consider the relevant provisions of the Act having a bearing on the question. ;