1997 (11) TMI 42 - HC - Wealth-tax

Summary

Issues:
1. Validity of exemption claim under section 5(1)(iv) of the Wealth-tax Act, 1957 based on ownership of assets by individual partners of a firm.
2. Interpretation of the term "house" in section 5(1)(iv) of the Wealth-tax Act, 1957.

Analysis:
Issue 1:
The judgment pertains to a case where the assessee, a partner in a firm, claimed exemption under section 5(1)(iv) of the Wealth-tax Act, 1957 for his share in a workshop building. The Wealth-tax Officer initially disallowed the claim, stating that the workshop building was owned by the firm and not by the partner, and that there was no registered document effecting the transfer of the property to the partner. The Appellate Assistant Commissioner, however, accepted the assessee's contentions and allowed the exemption claim. The Revenue then appealed to the Income-tax Appellate Tribunal, which ruled in favor of the assessee, holding that the partner could claim exemption under the provision. The High Court analyzed previous decisions and concluded that partners alone are entitled to claim exemption under section 5(1)(iv) of the Act, as the firm is not considered an assessee under the Wealth-tax Act. The court relied on the principle that the firm has no legal existence and partners are the real owners of the assets, thus upholding the Tribunal's decision in favor of the assessee.

Issue 2:
Regarding the interpretation of the term "house" in section 5(1)(iv) of the Act, the Revenue contended that the workshop building could not be considered a house as it lacked habitability. However, the court referred to a previous decision and a circular issued by the Central Board of Direct Taxes, which clarified that the term "house" is not limited to structures designed for human habitation but includes any building or shed used as habitation or shelter. The court further cited a Supreme Court decision to support this interpretation. Consequently, the court held that the workshop building could be regarded as a house within the meaning of section 5(1)(iv) of the Wealth-tax Act. The court affirmed the Tribunal's decision on this issue, rejecting the Revenue's arguments and ruling in favor of the assessee on both questions of law referred to them.

In conclusion, the High Court upheld the assessee's claim for exemption under section 5(1)(iv) of the Wealth-tax Act, 1957, based on the individual ownership of assets by partners of the firm and the broad interpretation of the term "house" to include various types of buildings.