1987 (6) TMI 36 - HC - Wealth-tax

Summary

Issues:
1. Whether agricultural property contributed to the firm by the assessee qualifies as agricultural land under section 5(1)(iva) of the Wealth-tax Act, 1957?
2. Whether the assessee is entitled to exemption under section 5(1)(iva) of the Wealth-tax Act, 1957 for the movable asset, his share of interest in the firm?

Analysis:

The judgment pertains to two sets of cases involving the interpretation of section 5(1)(iva) of the Wealth-tax Act, 1957. The respondents in these cases are assessees under the Act who are partners in firms and have contributed agricultural properties as their capital in the firms. The primary contention revolves around whether the agricultural properties contributed by the assessees to the firms qualify as agricultural land under section 5(1)(iva) and whether the assessees are entitled to exemption under this provision.

In the first set of cases (ITR Nos. 20 to 23 of 1983), the Income-tax Appellate Tribunal referred questions of law to the High Court at the instance of the Revenue. The Tribunal questioned whether the agricultural property contributed by the assessees as their share of capital is considered agricultural land under section 5(1)(iva) and whether the assessees are entitled to the claimed exemption. The Appellate Tribunal had ruled in favor of the assessees, prompting the Revenue to seek clarification from the High Court.

The High Court analyzed relevant precedents, including the decision of the Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa and other judgments. Referring to the decision of the Karnataka High Court in CWT v. Mrs. Christine Cardoza, the High Court concurred that the value of the share of the assessees in the agricultural lands should be included in their net wealth, and the full deduction under section 5(1)(iva) should be granted to them. The Court upheld the Appellate Tribunal's decision, ruling in favor of the assessees.

In the second set of cases (ITR Nos. 212 to 214 of 1984), the Tribunal questioned whether the assessees were entitled to exemption under section 5(1)(iva) for their movable asset, specifically their share of interest in the firm. The High Court, following the same reasoning as in the previous cases, answered in the affirmative, in favor of the assessees and against the Revenue.

Ultimately, the High Court concluded that the assessees, as partners in firms that owned agricultural lands, were indeed entitled to the exemption claimed under section 5(1)(iva) of the Wealth-tax Act. The judgments in both sets of cases were disposed of accordingly, with the High Court directing the forwarding of the judgment to the Appellate Tribunal as required by law.