1992 (4) TMI 24 - HC - Wealth-tax

Summary

Issues Involved:
1. Entitlement to exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957.
2. Interpretation of "exclusive use" for residential purposes.
3. Applicability of Board's circulars on judicial interpretation.

Detailed Analysis:

1. Entitlement to exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957:

The primary issue was whether the assessees, three brothers who co-owned a house property, were entitled to the exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957, for the assessment years 1966-67 to 1970-71 and 1971-72. Initially, the exemption was granted, but it was later withdrawn by the Revenue. The Appellate Assistant Commissioner reinstated the exemption, which was upheld by the Tribunal based on a precedent set by a Special Bench. The Tribunal reasoned that the assessees, as co-owners, had a right to reside in the property, thereby qualifying for the exemption.

2. Interpretation of "exclusive use" for residential purposes:

The court examined whether the assessees had fulfilled the requirements of Section 5(1)(iv) which states that exemption applies to "one house or part of a house belonging to the assessee and exclusively used by him for residential purposes." The court emphasized that both ownership and exclusive residential use must be satisfied cumulatively. The court clarified that "exclusive use" does not mean the assessee must live alone, but the property must be used personally for residence and not for commercial purposes. The Tribunal's interpretation that mere ownership equated to exclusive use was rejected. The court found no evidence that the assessees used any specific part of the house exclusively for residential purposes.

3. Applicability of Board's circulars on judicial interpretation:

The assessees also relied on a circular issued by the Board which suggested that co-owners residing jointly should be individually granted exemption. The court noted that such circulars, issued under Section 13 of the Act, are administrative instructions and not binding on judicial authorities like the Tribunal or the High Court. The court referenced several decisions, including A. L. A. Firm v. CIT and Keshavji Ravji and Co. v. CIT, to support the view that circulars cannot override judicial interpretation of statutory provisions. The court concluded that the circular could not preempt the judicial interpretation of Section 5(1)(iv).

Conclusion:

The court held that the assessees did not satisfy the twin requirements of ownership and exclusive residential use under Section 5(1)(iv). The Tribunal's reliance on the right to reside rather than actual use was incorrect. Furthermore, the Board's circular could not influence the judicial interpretation of the statutory provision. Thus, the common question was answered in the negative, favoring the Revenue. The Revenue was also awarded costs.