Commissioner of Wealth Tax vs Inder Sharma

R.C. Lahoti, J.—The Tribunal has referred the following question of law for the opinion of the High Court u/s 27(1) of the Wealth-tax Act, 1957 (''the Act'') : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in upholding the order of the Commissioner (Appeals), who directed to allow exemption u/s 5(1)(iv) of the Wealth-tax Act, 1957 from the value of the flat which has not been registered in the name of the assessee ?

The assessee is an owner of a commercial flat in Himalaya House, New Delhi. Exemption u/s 5(1)(iv) of the Act was claimed by the assessee in respect of this flat. The WTO did not allow the assessee''s claim on the ground that the ownership in respect of this flat did not vest with the assessee as no registered deed of conveyance had been executed in his favour. In the assessee''s appeal, the Commissioner (Appeals) has directed the WTO to allow exemption u/s 5(1)(iv) from the value of the flat. The department went in appeal to the Tribunal which has upheld the order of the Commissioner (Appeals) and also held that the requirement u/s 5(1)(iv) is that the property in question should belong to the assessee and that the term ''belonging'' covered rights less than full ownership. 2. Mr. Sanjeev Khanna, the learned senior standing counsel for the department, has submitted that the law of wealth-tax stands on a footing little different from the law of income tax. Wealth-tax is attracted to the assets held by an assessee. The burden lies on such assessee to establish if he comes within the exemption laid down u/s 5. In the case at hand, the assessee has himself included the value of the flat in his assets liable to the payment of wealth-tax. However, to be entitled to an exemption u/s 5(1)(iv), the dwelling unit and the land appurtenant thereto must be ''belonging to the assessee''. As there is no registered deed of conveyance executed in favour of the assessee, the unit cannot be called one belonging to him and, hence, would not be entitled to exemption.

On the concept of ownership, their Lordships of the Supreme Court have thrown a fresh light in the case of Commissioner of Income Tax, Bombay etc. Vs. M/s. Podar Cement Pvt. Ltd. etc., which arose out of a reference under the income tax Act, 1961. It was submitted by Shri Khanna that the question of law needed to be answered in the light of the abovesaid decision though in his submission the concept of ownership as brought out in Podar Cement (P.) Ltd.''s case (supra) may not be very apposite for interpreting the expression ''belonging to'' as occurring in section 5(1)(iv) of the Wealth-tax Act. He placed strong reliance on the law laid down by the Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax, Hyderabad,

In view of the importance of the question arising for decision and as it would be covering a large number of pending references, we requested Shri M.S. Syali and Shri D.N. Sawhney, advocates, usually appearing before the Court in tax matters, to assist the Court during the hearing of this reference. They readily accepted the assignment and addressed the Court. We record appreciation of the useful assistance rendered by them. A good number of authorities were brought to the notice of the Court and several relevant aspects were highlighted.

However, what has appealed to us is the submission made by Mr. Sawhney, advocate, according to whom the question of law as framed is academic merely and does not deserve to be answered in the facts and circumstances of the present case. According to him, it is the ''net wealth'' of the assessee which is chargeable to wealth-tax u/s 3 of the Act. ''Net wealth'' has been defined by section 2(m) of the Act according to which only such assets would be taken into account as are belonging to the assessee. The term ''assets'' has been defined in section 2(e) which includes property of every description. According to him, the charging section - section 3 - read with section 2(m), takes into account only the assets ''belonging'' to the assessee. Section 5(1)(iv) also allows exemption to the dwelling unit ''belonging'' to the assessee. Meaning thereby that if an asset would be liable to be included in the net wealth of the assessee as belonging to him, then the same would also be entitled to exemption subject to satisfying the requirements of section 5(1)(iv) if it belongs to the assessee. Inasmuch as the dwelling unit has been included in the net wealth of the assessee as belonging to him, the exemption cannot be denied to him by treating the very same unit as not belonging to the assessee. Mr. Sawhney has also invited our attention to the decision of the Supreme Court in Salem Co-operative Central Bank Limited Vs. Commissioner of Income Tax, , wherein their Lordships have held that if a question referred to it is based on an erroneous assumption by the Tribunal, then the High Court while answering the question is not bound by the terms of the question referred and can correct the assumption erroneously made by the Tribunal; this is consistent with the interest of law and justice.

In our opinion, Mr. Sawhney is right. In the case at hand so far as the provisions contained in section 3 read with section 2(m) and section 5(1)(iv) are concerned, the legal position is very clear. If the dwelling unit belongs to the assessee, then it is liable to be included in his net wealth and at the same time liable to be taken into consideration for the purpose of exemption u/s 5(1)(iv). If section 5(1)(iv) cannot be attracted to the dwelling unit in question as not includible in the expression ''belonging to the assessee'', then it could not also have been included in the net wealth of the assessee attracting applicability of the charging section. In the abovesaid facts and circumstances, the question is academic merely and does not need to be answered. The reference is returned without being answered. No order as to the costs.