Commissioner of Wealth Tax vs Dhanpat Rai, Darshan Rai and Yash Pal

At the instance of Revenue, the following common question of law has been referred for the opinion of this Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing that exemption under s. 5(1)(iv) of the WT Act, 1957 was available to the assessed in respect of the property that belongs to the firm in which he was a partner ?"

This Court in Commissioner of Wealth Tax Vs. A.K. Tandon and others, , has held that a firm has no legal existence and as such it cannot hold any property. It is the partners who own the partnership property or assets. Therefore, it is only fair that they alone should have the benefit of the exemption under s. 5(1)(iv) when their individual assessments are taken up which will include their respective shares in the net wealth of the partnership firm.

The ratio in the case of A. K. Tandon (supra) also covers the commercial properties as well. In respect of commercial properties reference may also be made to the Circular issued by CBDT No. 317/23/73-WT, dt. 24th July, 1973 wherein for the purposes of s. 5(1)(iv) no distinction has been made between a residential house and commercial properties. A reference may also be made to a decision of Patna High Court in Commissioner of Wealth Tax Vs. Smt. Shushila Devi Tamakuwala, .

Following the said decision we answer the question in the affirmative, against the Revenue and in favor of the assessee. No costs.