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TMI Blog1994 (3) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Wealth-tax Officer to allow exemption under section 5(1)(iv) of the Wealth-tax Act in the hands of the assessee in determining the share of interest in the property standing in the name of the firm in which the assessee was a partner while making fresh order as per the Tribunal's direction ?" The brief facts of the case as stated in the statement of the case drawn up by the Appellate Tribunal are that in the course of assessment for the assessment year 1980-81, the respondent-assessee claimed exemption under section 5(1)(iv) of the Wealth-tax Act, 1957 (for short, "the Act"), in respect of the house properties owned by a partnership firm of which the respondent-assessee was a partner. The Wealth-tax Officer rejected the said claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department, cited before us the decision of the Madras High Court in the case of Purushothamdas Gocooldas v. CWT [1976] 104 ITR 608 to persuade us to take a view in favour of the Revenue. But we find that a Division Bench court in the case of CWT v. Tarachand Agarwalla [1989] 180 ITR 234 ; [1989] 2 GLR 129 has not agreed with the said decision of the Madras High Court. In the said decision of this court, the Division Bench of this court has held : " For these reasons, the net wealth of the firm should be determined including the value of the building and then it should be allocated amongst the partners indicating the nature of assets and liabilities allotted to the share of the partner and net wealth of the partner is to be determined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein are not to be included in the net wealth of the "assessee", in our opinion, the exemption under sub-section (1) of section 5 in respect of the assets mentioned therein has to be worked out in the hands of the partners of the firm who are assessees under the Act and not while determining the net wealth of the firm, which is not an assessee under the Act. This view is further reinforced and fortified by the provisions in the Act and the Wealth-tax Rules, 1957 (for short, "the Rules"), for determination of the interest of the individual assessee in a firm. According to section 4(1)(b) of the Act, where an individual is a partner of a firm the value of his interest in the firm is to be determined in the manner prescribed in rule 2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assets of a firm is to be first included in the net wealth of the firm for the purpose of determining the interest of the partners under section 4(1)(b) of the Act read with rule 2 and when after such determination the interest or shares of the partners of the firm are allocated to the respective partners, exemption is to be granted to each such partner of the firm under sub-section (1) of section 5 of the Act in respect of the said house or part of the house up to the extent admissible under the proviso to clause (iv) of the said sub-section. In the decision of the Madras High Court in Purushothamdas Gocooldas v. CWT [1976] 104 ITR 608, relied upon by Mr. Talukdar, the aforesaid provisions of the Act and the Rules as analysed by us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it ; any change amongst them destroys the identity of the firm ; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. In point of law, a partner may be the debtor or the creditor of his co-partners, but he cannot be either debtor or creditor of the firm of which he is himself a member, nor can he be employed by his firm, for a man cannot be his own employer." (emphasis supplied). In the said decision, the Supreme Court has also extracted the observation of the apex court in Dulichand Laxminarayan v. CIT [1956] 29 ITR 535 to the effect that our partnership law is based on the English law and has observed that in Addanki Narayanappa v. Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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