1986 (5) TMI 42 - AT - Wealth-tax

Summary

Issues:
1. Whether exemption under section 5(1)(iv) of the Wealth Tax Act should be granted in respect of land gifted by the assessee to his wife.
2. Whether the land gifted to the spouse can be considered as part of a house for the purpose of claiming exemption under section 5(1)(iv).
3. Interpretation of the provisions of section 4(1)(a) and section 5(1)(iv) in relation to the asset transferred to the spouse.
4. Application of deeming provision under section 4(3) and its impact on claiming exemption under section 5(1)(iv).

Detailed Analysis:
1. The appeals by the revenue were against the order of the AAC granting exemption under section 5(1)(iv) of the Wealth Tax Act in relation to the land gifted by the assessee to his wife, which was added back to his net wealth under section 4(1) of the Act. The assessee claimed that exemption should be given under section 5(1)(iv) for the asset gifted to his spouse, while the revenue contended that exemption could not be granted as section 5(1)(iv) applied only to a house. The AAC held that the property had become part of a house on the valuation date, entitling the assessee to the exemption.

2. The revenue argued that only the value of the land, not the house, was added back to the net wealth, hence exemption under section 5(1)(iv) could not apply. The assessee, however, relied on legal precedents to support the contention that the land should be considered part of a house for the purpose of claiming exemption. The Tribunal considered the provisions of section 4(1)(a) which include the value of the asset transferred to the spouse in the net wealth of the individual and the deeming provision of section 4(3) which applies section 5 to such assets as if they belong to the assessee.

3. The Tribunal analyzed the arguments presented and concluded that the revenue was entitled to succeed. It emphasized that section 5(1)(iv) exempts one house or part of a house belonging to the assessee. The Tribunal noted that in the present case, the land gifted to the wife had not been converted into an exempted asset like agricultural land but had become part of a house constructed on it. The Tribunal highlighted the distinction between the land added back to the net wealth and the house constructed by the wife, stating that treating the land as part of the house for exemption purposes would require the house itself to be added back under section 4.

4. The Tribunal further explained that the deeming provision of section 4(3) only applies to the asset being added to the net wealth, which in this case was the value of the land. It reasoned that considering the land as part of a house without adding the house itself back to the net wealth would be an excessive interpretation of the law. The Tribunal emphasized that legal provisions in India allow buildings to be constructed on land belonging to others, and there is no legal presumption that the superstructure belongs to the landowner. Therefore, the Tribunal reversed the order of the AAC and restored the assessments made by the WTO, allowing the revenue's appeals.