Commissioner of Wealth-tax vs B. Chandrasekhara Rao and B. Sadasiva Rao

Raghuvir, J.—The assessees in these two references, B. Chandrasekhara Rao and B. Sadasiva Rao, are both minors. The two are the partners of Tajmahal Hotel, a firm which runs hotels in the twin cities of Hyderabad and Secunderabad. The subject-matter of these two references relates to the wealth-tax assessment year 1975-76. The net wealth under the Act of these two assesses has been determined at Rs. 1,63,145 each. Similar contentions are raised in the two cases that the two assessees are each entitled to a deduction of Rs. 1,00,000 from the value of the interest in the immovable properties of the two individuals. The contention was rejected by the original authority as well as the appellate authority in similar terms.

The Appellate Tribunal allowed the appeal following its earlier decision in W.T.A. No. 392/Hyd/1981, dated February 23, 1982. It is in these circumstances that the Revenue sought a reference of the following two questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 4(1)(b) of the Wealth-tax Act, 1957, rule 2 of the Wealth-tax Rules 1957, and the principle decided by the Andhra Pradesh High Court in Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, , are not applicable in the case of the assessees who are ''minors'' ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in directing the Wealth-tax Officer to grant exemption u/s 5(1)(iv) separately for each minor ?"

The Appellate Tribunal, however, considered that one question may be referred covering the same subject-matter in the two cases, viz., "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in directing the Wealth-tax Officer to grant exemption u/s 5(1)(iv) separately for each minor."

We have considered whether it would be advisable to consider the two questions of which reference was originally sought by the Revenue. Having regard to the fact that the two questions or the single question that is now referred are covered by a decision of the Division Bench of this court in Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, , we thought it is not necessary to go into the framing of questions any further.

Before the original authority, the contention raised was that there should be a deduction of Rs. 1,00,000 from the immovable properties of the individual and that contention was rejected and the order was confirmed on appeal and in the two orders, the effect of sections 4(1)(b) and 5(1)(iv) was considered. The Appellate Tribunal, however, had regard to its earlier decision in W.T.A. No. 392/Hyd/1981 dated February 23, 1982. We experienced some difficulty in understanding the discernibility of the ratio in the above case. However, we feel that the decision on this court in Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, , applies for answering the instant reference.

Counsel for the assessees argued with reference to the difference of opinion, as respects the instant question, among the various High Courts and submitted that what has been stated by the Appellate Tribunal is the correct view. Once we understand that, on the same subject-matter, this court had rendered a decision in Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, , it is difficult to accept the decision of any other High Court.

It is seen that the question whether a deduction should be granted to a partner u/s 5 of the Wealth-tax Act was considered by the Madras High Court in Commissioner of Wealth Tax Vs. Vasantha, . The view of this court is consistent with the view of the Madras High Court and also with the view expressed by the Karnataka High Court in Commissioner of Wealth-Tax, Karnataka-I Vs. Christine Cardoza, . (The view expressed by the Orissa High Court in Commissioner of Wealth-tax Vs. I. Butchi Krishna, , is to the contrary). All the cases were adverted to in Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, .

In Commissioner of Wealth-tax, Andhra Pradesh Vs. Narendra Ranjalker, , this court formulated three issues as under (at p. 208) :

"(1) The net wealth of the firm has to be ascertained by deducting from its assets the bank deposits to the extent of Rs. 1,50,000 and the share of the individual in the net wealth of the firm computed in the light of rule 2 of the Wealth-tax Rules, and added to his other individual assets for determining his net wealth liable to tax under the Act.

(2) The value of the share of the individual in all the assets of the firm without making the deduction u/s 5(1)(xxvi) is ascertained in the light of rule 2 and added to the individual assets, and thereafter a deduction has to be made in respect of bank deposits u/s 5(1)(xxvi) up to a limit of Rs. 1,50,000.

(3) The net wealth of the firm has to be ascertained after making the deduction u/s 5(1)(xxvi) up to a limit of Rs. 1,50,000 and it is added to the assets of the individual and again a further deduction is made in the share of the assessee in the firm''s bank deposits u/s 5(1)(xxvi) read with section 5(1A)."

and accepted what is set out in No. (1) as the answer to the question. In so doing, it considered the provisions of sections 4 and 5 and also rule 2 of the Wealth-tax Rules. The expression "net wealth", it was mentioned, was not defined in the Rules. Rule 1A(m) provides that all other words and expressions used but not defined in the Rules and defined in the Act, shall have the meanings respectively assigned to them in the Act. That some provisions of the Wealth-tax Act are different from those of the Income Tax Act was noted and it was observed (at p. 210) : "It is no doubt true that the expression ''net wealth'' is used only with reference to the assets of an assessee and a firm is not an assessee under the Act, but when the same expression is used in the Rules and the net wealth of a firm has to be ascertained, there cannot be any doubt that the net wealth of a firm has to be ascertained as if the firm is an assessee." Adverting to rule 2 of the Wealth-tax Rules, it was held (at p. 210) : "We are, therefore, of the view that the first of the procedures referred to earlier in our judgment is in the consonance with the provisions of the Act and the Rules.", and at page 212 : "Therefore, in computing the net wealth, the firm should be deemed to be an assessee and all the provisions of the Act dealing with the computation of the assets of an assessee should be applied to the firm as if it were an assessee, though in fact it is not an assessee under the Act."

In the instant references, both the assessees are minors. They are not even, in that sense, "partners". Following the ratio of the above decision, we answer the question in the negative, in favour of the Revenue and against the assessee. No costs.