Commissioner of Wealth-tax vs Mahal Chand Pandia

Manisana, Actg. C.J.

At the instance of the Commissioner of Wealth-tax, the following question has been referred by the Appellate Tribunal u/s 27(1) of the Wealth-tax Act, 1957 ("the Act", for short), in respect of the assessment years 1977-78 to 1980-81 ;

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner of Wealth-tax holding that both godown and residential units which formed part of the same holding would qualify for exemption u/s 5(1)(iv) ?"

The facts : The assessee, Mahal Chand Pandia, owned a house standing on the land under holding No. 95 of Ward No. 22, at Kharupetia belonging to him. He occupied a part of the house for business purposes (godown) and the remaining part as a residence. The assessee claimed that exemption u/s 5(1)(iv) should be for the entire unit comprising the residential unit and godown which constituted one building, The Assessing Officer did not accept the claim and divided the house into residential unit and godown and allowed exemption in respect of one house only. The assessee took up the matter before the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner, the assessee contended that the house was to be regarded as one unit as it was within one holding number. The Appellate Assistant Commissioner held that if the holding was one and house was also one, the same was to be regarded as one house and directed the Assessing Officer to determine the entire value of the house as one for exemption u/s 5(1)(iv). The order of the Appellate Assistant Commissioner was appealed against to the Appellate Tribunal by the Revenue. The Appellate Tribunal held that, as only one door number was given, the dwelling unit and the godown were part and parcel of the same building and, therefore, the Appellate Assistant Commissioner was justified in allowing exemption. Hence, this reference.

u/s 5(1)(iv) of the Act, one house or part of a house belonging to the assessee is exempt from tax. The Act has not defined "house". At this stage, it will be helpful to refer to a decision of the Supreme Court reported as The Tata Engineering and Locomotive Company Ltd. Vs. Gram Panchayat, Pimpri Waghere, In that case, the Supreme Court was dealing with the meaning of the word "house". In paragraph 15, at page 2466, it was observed :

" The word ''house'' is not defined in the Act. This court in Ramavatar Budhaiprasad Etc. Vs. Assistant Sales Tax Officer, Akola, said that the correct approach is to construe the word in that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. Counsel for the respondent rightly contended that the word ''house'' would in its ordinary sense include any building irrespective of its user. To ascertain the meaning of the word ''house'' one must understand the subject-matter with respect to which it is used in order to arrive at the sense in which it is employed in a statute. Formerly, houses were built so that each house occupied a separate site. In modem times a practice, has grown of putting separate houses one above the other. They are built in separate flats or storeys. For legal and ordinary purposes they are separate houses. Each is separately let and separately occupied. One has no connection with those above or below, except in so far as it may derive support from those below instead of from the ground as in the case of ordinary houses. . . ."

In view of the above decision of the Supreme Court, it follows that the word "house" would include any building irrespective of its use, that is to say, it may be used for business purposes or as a residence or as a school, and it should not be restricted to a dwelling house ; and that a building may be divided into several legal houses, for example, separate flats of a building each of which is separately let and separately occupied by different persons or families.

Section 5(1)(iv) of the Act grants exemption in respect of one house or part of a house belonging to an assessee. The Legislature is speaking of one house or part of a house. It must, therefore, mean what is in law a house, although it is in fact a part of a house, viz., a legal house. Section 5(1)(iv) does not contemplate that every room or a single self-contained unit of a house occupied by one person, although not in itself a division, is a separate house in law, namely, a legal house. This being the position, merely because the assessee used the house partly for business purposes (godown) and partly as a residence it cannot be said that they are also separate legal houses or tenements, in the context of the fact-position. In that view of the matter, the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner that both the godown and the dwelling unit would be regarded as one house. Accordingly, the question is answered in the affirmative, that is, in favour of the assessee and against the Revenue.

A copy of this judgment under the signature of the Registrar and the seal of court be sent to the Appellate Tribunal.