1981 (9) TMI 207 - AT - Income Tax

Summary

Issues:
Whether additional wealth-tax can be imposed on the share of the assessee in business premises held by a firm in which he is a partner.

Analysis:
The appeal was filed by the revenue against the order of the AAC, which held that additional wealth-tax cannot be imposed on the share of the assessee in business premises held by a firm in which he is a partner. The assessee was a partner in two firms, Anand Theatres and Uma Printing and Packaging Industries, which owned a theatre building and land with a building, respectively. The revenue argued that the assessee, as a partner, cannot specify any share in the buildings held by the firms, and therefore, his proportionate share should be subject to additional tax as deemed urban assets. However, the Tribunal disagreed with this contention, stating that the definition of "urban asset" under the Wealth-tax Act excludes business premises. The Tribunal highlighted that even if the business premises were deemed urban assets due to the partnership, they would still be considered business premises and exempt from additional tax.

The Tribunal further explained that under rule 3 of the Schedule, the proportionate interest of the assessee in the firm's assets is deemed to be an urban asset. However, since business premises are excluded from the definition of urban assets, the business premises held by the firm cannot be subjected to additional tax. The Tribunal emphasized that the business carried on by a firm is considered to be carried on by the partners collectively, and the interest of the partner in the business premises is deemed to be the partner's asset. Therefore, even if the business premises were treated as urban assets, they would fall under the category of business premises and be exempt from additional wealth-tax.

In conclusion, the Tribunal upheld the order of the AAC and dismissed the appeal by the revenue. The Tribunal found that the business premises held by the firm, in which the assessee was a partner, were not liable for additional wealth-tax as they were considered business premises and fell outside the scope of urban assets. The Tribunal emphasized that the interest of the partner in the business premises, even if deemed an urban asset, would still be exempt from additional tax as it was used for the business purposes of the partner.