1985 (4) TMI 156 - AT - Wealth-tax

Summary

Issues:
- Interpretation of exemption under s. 5(1)(iv) of the WT Act, 1957 - whether to be allowed in computing net wealth of the firm or in the hands of the partner.
- Conflict of decisions regarding the allowance of deduction under s. 5(1)(iv) in different cases.
- Consideration of High Court decisions and Special Bench rulings in determining the appropriate stage for allowing exemptions.

Analysis:
1. The judgment addresses the common issue of whether the exemption under s. 5(1)(iv) of the Wealth Tax Act, 1957 should be allowed at the stage of computing the net wealth of the firm or in the hands of the partner. The conflicting decisions from the Pune Bench of the Tribunal are highlighted, with different views taken in various cases.

2. The conflicting decisions from different cases led to a referral to the President, ITAT, for the constitution of a Special Bench. The judgment discusses the various cases and the differing conclusions reached regarding the allowance of deductions under s. 5(1)(iv) in the computation of net wealth of the firm or the individual partner.

3. The appeals involved cases where the assessee claimed deduction under s. 5(1)(iv) of the WT Act, which was disallowed by the WTO and upheld by the AAC. The judgment mentions specific cases and the preference given to certain High Court decisions in determining the allowance of deductions.

4. The legal counsel for the assessee relied on decisions from Karnataka and Orissa High Courts, as well as the Bombay High Court ruling in CWT vs. Vasudeva V. Dempo. The Departmental Representative, on the other hand, cited decisions from Madras and Patna High Courts to support their argument against allowing the deductions.

5. The judgment extensively discusses the interpretation of the statutory provisions and the applicability of High Court decisions in determining the stage at which exemptions should be considered and allowed. The Bombay High Court's ruling in CWT vs. Vasudeva V. Dempo is emphasized as binding on the Pune Bench, leading to the conclusion that exemptions should be considered in the hands of the partners.

6. The Special Bench decision in L. Gulabchand Jhabakh vs. WTO is referenced to support the entitlement of partners to deductions in their hands. The judgment concludes that there is no further bar to allowing the deduction under s. 5(1)(iv) in the hands of each assessee partner based on the binding Bombay High Court decision.

7. The final decision in the appeals results in allowing the appeals preferred by the assessees and dismissing the Revenue's appeal, upholding the AAC's order regarding the allowance of deductions under s. 5(1)(iv) of the Wealth Tax Act, 1975.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the reasoning behind the decision reached by the Appellate Tribunal ITAT Pune.