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TMI Blog1986 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... nment and hence in the computation of the net wealth of the firm, a deduction was required to be given for this amount as debt owed. 2. The assessees are partners in the firm of Industrial Housing Plots Co. The value of the interest of the partners in the partnership is to be determined in accordance with rule 2 of the Wealth-tax Rules, 1957. For this purpose, the net wealth of the firm on the relevant valuation date has got to be first computed. The dispute that has arisen is whether, in the computation of the net wealth of the firm, a deduction has to be given for a sum of Rs. 2,79,543 on account of their being a debt owed by the firm to the State Government. The State Government had acquired 22 acres of the firm's land. The Land Acquisition Officer awarded a compensation of Rs. 4,691 on 25-8-1971. The firm did not feel satisfied with the compensation awarded by the LAO. It filed an appeal against the order of the LAO before the Civil Judge. The Civil Judge, by his order dated 31-12-1973, enhanced the amount of compensation to Rs. 2,17,722. The State Government did not accept this order of the Civil Judge and it filed an appeal before the High Court. The payment of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm had received was to be regarded as being on account of a loan from the State Government. The departmental representative has contended that the receipt was not in the nature of a loan. On the other hand, the authorised representative of the assessee has stated that as the matter of compensation was sub judice and the receipt in the hands of the firm was only tentative and the firm might be required to return the amount in the event of the modification of the award by the High Court, the receipt had been aptly regarded by the AAC as being in the nature of a loan and the order of the AAC needs no modification. 4. We have considered the matter carefully. We are of the view that the AAC was not justified in coming to the conclusion that the receipt was in the nature of a loan. The word 'loan' has certain definite connotations. Loan means that the lender has not parted with the ownership of the money, but he has only temporarily given up the possession of the money in favour of the person to whom money has been tent. Is the relationship between the State Government and the firm that of a lender and a borrower ? It cannot be said that the ownership of the money rested with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a loan or not. The party in that case was a dealer in lands. It had maintained its accounts on mercantile basis. The West Bengal Government acquired certain lands of the party. The Land Acquisition Collector awarded compensation of Rs. 24.9 lakhs. On appeal to the Court of Arbitrator, the compensation was enhanced to Rs. 30 lakhs. The award of the Arbitrator was given on 29-7-1955. The assessee thus became entitled to a further compensation of Rs. 5.1 lakhs with interest thereon at 5 per cent per annum from the date of acquisition to the date of payment. The State Government did not accept the award of the Land Acquisition Collector and it preferred an appeal before the High Court. The appeal before the High Court was still pending. The department sought to tax the amount of additional compensation as income for the assessment year 1956-57 on the basis that the income had accrued in consequence of the award of the Land Acquisition Collector given on 29-7-1955. On these facts, the Calcutta High Court decided that the enhanced compensation was not income that accrued or arose, since it was sub judice and it had not yet become determinate. This decision will not be of any help in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding that in the computation of the net wealth of the firm a deduction for a sum of Rs. 2,79,543 was required to be given. We hence set aside the order of the AAC and restore the order of the WTO on this behalf. 7. The next dispute is with regard to the valuation of the agricultural land owned by the assessee-firm of Industrial Housing Plots Co. The firm had owned 18 acres of land in village Cunj Kheda, Tehsil Deoli. The cost of the land in the balance sheet of the firm was Rs. 12,400. For the purposes of working out the net wealth of the firm in order to find out the value of the interest of the assessee-partners, the net wealth of the firm was worked out by taking the value of the agricultural land at Rs. 55,000. The assessee estimated the value at the rate of Rs. 3,500 per acre. The WTO, however, considered this value to be low. The WTO valued land at the rate of Rs. 25,000 per acre. On this basis he adopted the value of the land at Rs. 4,50,000. The valuation of the WTO was challenged by the assessee in appeal before the AAC. The AAC accepted the value shown by the assessee. Being aggrieved with this decision of the AAC, the department has now come up in appeal before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been held by the Special Bench of the Tribunal in the case of L. Gulabchand Jhabakh v. WTO [1982] 1 SOT 613 (Mad.) that in respect of the value of immovable property held by a firm, the partners were entitled to claim exemption in their individual assessments. It was held that the claim for exemption has to be considered in the hands of the partner and not in the hands of the firm. The Bombay High Court has laid down in the case of CWT v. Vasudeva V. Dempo [1981] 131 ITR 291 that the stage at which the exemption under section 5(1) is to be considered and allowed is the stage after which the share of the individual is brought into his hands. We also refer to the decision of the Special Bench of the Tribunal in the case of N.R. Karia v. WTO [1985] 13 ITD 545 (Pune) in which the view has been taken that the exemption under section 5(1) is to be allowed in the hands of each assessee-partner. Respectfully, following these decisions it is held by us that the AAC was justified in coming to the conclusion that exemption in respect of the building and agricultural land was to be given in the individual assessments of the partners and not at the time of the computation of the net we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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