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TMI Blog2001 (1) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... der the wealth-tax provision? was the owner of certain properties situate in the urban area. Royal Lodge was a business establishment controlled and managed by a partnership firm. The assessee had let out the premises owned by him to the aforesaid partnership firm, in which he was also a partner. The assessee claimed exemption from levy and payment of additional wealth-tax for the assessment years 1970-71 to 1976-77 under the wealth-tax provisions, on the ground that the premises in question are being used by the assessee, for his business purpose. The Wealth-tax Officer by his separate orders dated February 26, 1984, rejected the claim of the assessee and levied the additional wealth-tax for the relevant assessment years, on the sole ground that the premises situate in the urban area are not used by the assessee himself for his business or profession. As against the said order passed by the Wealth-tax Officer, the assessee had filed separate appeals before the Appellate Assistant Commissioner, who by his common order dated November 28, 1984, allowed the assessee's appeals, relying on the decision of the Income-tax Appellate Tribunal, Madras Bench, in the case of N. Soorian Pillai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in CWT v. R. Susheela [1989] 176 ITR 232 and other unreported in CWT v. Mahadevasa (T. R. C. No. 236 of 1985, dated February 18, 1991) have a direct bearing on the question involved in the present case. These decisions were not brought to the notice of this court while the present references were considered in T. R. C. Nos. 9 to 15 of 1989. The said tax referred cases were considered on June 20, 1991, by a Bench of which one of us was a member. The Bench relied on the decision in T. R. C. No. 20 of 1983 (M. S. Vasudeva v. CWT. However, while deciding M. S. Vasudeva's case also the other two decisions were not considered. In these circumstances, the main case will have to be considered afresh instead of compelling the assessee to go in appeal to the Supreme Court. An authoritative decision by this court on the question is necessary even otherwise. The review petitions are accordingly allowed. The TRCs are restored. In view of this, S. C. L. A. P. Nos. 102 to 108 of 1991, need not be considered, they are accordingly dismissed." When the reference came up for hearing before the learned judges of this court on October 9, 1991, it was pointed out by the assessee's learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes the value of any asset, being building or land (other than business premises) or any right in such building or land, situated in an urban area (such asset being hereafter in this Part referred to as urban asset). Rule 1 : In this Part,--- (i) 'business premises' means any building or land or part of such building or land, or any right in building or land or part thereof, owned by the assessee and used throughout the previous year for the purposes of his business or profession, and includes any building used for the purpose of residence of persons employed in the business or any building used for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, but does not include any premises in the nature of a guest house ; (ii) 'previous year', in relation to a business or profession, means the period which would be the previous year if an assessment of the profits and gains of such business or profession were to be made under the Income-tax Act for the assessment year ; (iii) 'urban area' means,--- (a) any area which is comprised within the jurisdiction of a municipality (whether known as a mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net wealth of the assessee includes the value of his interest as a partner in a firm or as a member of an association of persons and the assets of such firm or association includes any urban assets, then, notwithstanding the provisions of the Indian Partnership Act, the interest of the assessee in such firm or association to the extent specified in the Explanation, shall be deemed to be an urban asset for the purpose of levy of additional wealth-tax and the provisions of item (2) of Paragraph A shall apply accordingly. The expression "used for business purpose" is explained by the apex court in the case of Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265, wherein, the court was pleased to observe that it means used for the purpose of enabling the owner to carry on the business and earn profits in the business. In other words, the machinery or plant must be used for the purpose of that business which is actually carried on. Para. A of the Schedule envisages that in determining additional wealth-tax under Part I of the Schedule, while computing the net wealth of an individual or a Hindu undivided family owning the urban asset, business premises shall be excluded. Under rule 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve : "That under the general law of partnership, 'firm' is a compendious expression for all the partners put together and, therefore, the business expression on by the firm is the business carried on by the partners." Therefore, in view of this well settled position in law, it can safely be said that the business carried on by a firm is business carried on by the partners. Profits of the firm are profits earned by all the partners in carrying on the business. Learned counsel for the Revenue, Sri Indra Kumar, relying on the literal meaning of the word "business premises" submits that in order to claim exemption from levy of additional wealth-tax, the assessee must not only be the owner of the building or land situate in the urban area and must have used it for his business purpose throughout the previous year. The emphasis by learned counsel is more on the expression "his business" and according to him, "his business" will only mean the assessee's own business and not that of the firm or association of persons. Learned counsel further contends that the conditions prescribed by the Legislature for the purposes of granting exemption should be strictly construed and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of the expression "partnership" in the Indian Partnership Act, and in view of the authoritative pronouncement of the apex court in Ramniklal's case [1969] 74 ITR 57, it can safely be said that the business carried on by the firm is a business carried on by all the partners of the firm. Profits of the firm are profits earned by all the partners in carrying on the business. In view of this settled legal position, the business carried on by the firm in the premises owned by the assessee in an urban area, in which he is a partner is the business of the assessee. Therefore, while computing the net wealth of the assessee owning the urban asset, the business premises in which the business carried on by the firm, of which he is a partner, shall have to be excluded since there is nothing to show in the definition of the word "business premises" in rule 1 of para. B of the Schedule that the benefit of the provisions would not be available, if the business premises owned by the assessee are utilised by the firm of which the assessee is a partner for its business purposes. Therefore, it can safely be said that the expression "his business" in rule 1 of Part I of the Schedule would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in such premises. The view expressed by the Division Bench in R. Susheela's case [1989] 176 ITR 2 32 (Kar) is in consonance with our thinking and conclusion on the construction of the expression "his business" in rule 1 of Part I of the Schedule. We also find support for our view, from the observations made by a Bench of the Allahabad High Court in the case of CWT v. Ramashanker Gupta [1988] 174 ITR 134, the observations made by the Madras High Court in the case of CIT v. K. M. Jagannathan [1989] 180 ITR 191, and in the case of CWT v. C. G. Radhakrishnan [1994] 210 ITR 1016 (Mad). Therefore, in our considered opinion, the view expressed by another Division Bench of this court in the case of M. Vasudev v. CWT (T. R. C. No. 20 c/w 21 of 1983, disposed of on June 18, 1990), wherein it is observed that in the context of the provisions of the Wealth-tax Act. unless the assessee is carrying on his own business in a building belonging to him situate in an urban area, he would be liable to pay additional wealth-tax on such building, does not lay down the correct legal position. On behalf of the Revenue, it was contended that for the purpose of the Wealth-tax Act, the status of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on business." In our opinion, on an anxious consideration of the decisions, on which reliance was placed by learned counsel for the Revenue, there cannot be any disagreement with the above position of law governing the partnership business and its capital and even in these decisions, the view of the court seems to be that the partnership firm is not an entity or person in law, but merely an association of individuals and a firm's name is only a collective name for those individuals, who constitute the firm. Therefore, the view expressed or principles laid down in those cases on which strong reliance was placed by learned counsel for the Revenue has no conflict with the views expressed by this court in R. Susheela's case [1989] 176 ITR 232 and they are well justified in view of the different factual situations arising in those cases. On the other hand, the fact that the firm is not an assessable entity under the Wealth-tax Act unlike the Income-tax Act lends support to the plea of the assessee that the firm's business shall be deemed to be the business carried on by the partners as well. In view of the above discussion, we answer the question referred to this court in the affir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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