1985 (12) TMI 20 - HC - Wealth-tax

Summary

Issues Involved:
1. Exemption of agricultural lands u/s 5(1)(iva) of the Wealth-tax Act, 1957.
2. Doctrine of merger concerning the order of the Wealth-tax Officer and the Appellate Assistant Commissioner.

Summary:

Issue 1: Exemption of Agricultural Lands u/s 5(1)(iva)
The Tribunal referred the question of whether agricultural lands owned by a firm could be directly allocated to partners for claiming exemption u/s 5(1)(iva) in their individual assessments. The Tribunal held that agricultural lands belonged to the firm and not to the individual partners. Therefore, the exemption u/s 5(1)(iva) should be given effect to in the hands of the firm, not the individual partners. The High Court upheld this view, stating that the partners cannot claim exemption for agricultural lands owned by the firm, as these lands do not belong to them individually. The Court referenced several cases, including CWT v. Padampat Singhania [1973] 90 ITR 418 (All) and CWT v. Purushotham Pai [1978] 114 ITR 270 (Kar), supporting this interpretation. The question was answered in the negative, against the assessee and in favor of the Revenue.

Issue 2: Doctrine of Merger
The Tribunal also addressed whether the order of the Wealth-tax Officer (WTO) merged into the order of the Appellate Assistant Commissioner (AAC) when the latter did not consider certain aspects of the case. The Tribunal held that the part of the WTO's order not appealed before the AAC did not merge into the AAC's order. Therefore, the Commissioner of Wealth-tax was justified in taking action u/s 25(2) of the Act regarding that part of the order. The High Court agreed, citing State of Madras v. Madurai Mills Co. Ltd. [1967] 19 STC 144 (SC) and Karsandas Bhagwandas Patel v. G. V. Shah [1975] 98 ITR 255 (Guj), which clarified that the doctrine of merger depends on the scope of the appeal and the specific issues considered. The question was answered in the affirmative, in favor of the Revenue and against the assessee.

Conclusion:
The High Court ruled in favor of the Revenue on both issues, denying the individual partners' claim for exemption u/s 5(1)(iva) and upholding the Commissioner's jurisdiction to revise the WTO's order on points not considered by the AAC.