Commissioner of Wealth Tax vs P. Babul Reddy

Syed Shah Mohammed Quadri, J.—Under s. 27(1) of the WT Act, 1957, the following question is referred for our opinion at the instance of the Revenue :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is entitled to exemption under s. 5(1)(iv) in respect of the amount included in the assessee''s net wealth representing the amounts paid to Nandam Construction Co. in respect of a flat given possession of to them ?"

To answer the question it would be necessary to note the relevant facts here. The assessee is an HUF. For the asst. yrs. 1977-78 and 1978-79, under the WT Act, the assessee included the value of the flat at Rs. 70,000 and Rs. 80,125 respectively. The assessee claimed exemption under s. 5(1)(iv) of the WT Act, on the ground that that was the only flat belonging to the joint family. Inasmuch as there was no registered document conveying the flat in favour of the assessee, the WTO did not allow the exemption under the said provision. The assessee unsuccessfully carried the matter in appeal. In second appeal before the Tribunal, it was held that the assessee was entitled to exemption under the said provision. On these facts, the abovesaid question arose.

The learned standing counsel for the Revenue vehemently argues that as the assessee did not have title to the flat in question and as the same was not conveyed under a registered document which is a must under s. 54 of the Transfer of Property Act, the Tribunal erred in allowing the exemption prayed for. Section 5(1)(iv) of the WT Act, as it stood in the relevant assessment year, was in the following terms :

"5. (1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee -..........

(iv) one house or part of a house belonging to the assessee;"

From a perusal of the provision extracted above it is clear that for purposes of having the benefit of the house excluded from the computation of the net wealth under the WT Act, it is not necessary that the title to the property should have been conveyed in favour of the assessee. It is enough if the assessee is the beneficial owner of the house in respect of which exemption is claimed. The expression "belonging to" fell for consideration of this Court in Syed Khaza vs. Raghavendra Rao (1974) 2 ITJ 287. The Division Bench held that it does not necessarily connote ownership of the property and that the right of possession falls within the ambit of that expression. Following that judgment, we hold that for purposes of s. 5(1)(iv) of the WT Act, a person who has come into possession of the property on payment of the full consideration is entitled to exemption even though in the relevant year the property was not conveyed to him under a registered document. In this view of the matter, the Tribunal was right in holding that the assessee was entitled to exemption under s. 5(1)(iv) of the WT Act.

For the above reasons, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. No costs.