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TMI Blog1985 (10) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... f the City of Bangalore, from the Maharajah of Mysore, who was its owner. Ever since he purchased the land, the assessee has been exclusively using the same for agricultural purposes. Some time in 1968-69, the assessee built a residential building on the said land at a cost of about Rs. 2,50,000. For the assessment years 1971-72 to 1974-75, relevant to the corresponding valuation dates, the assessee filed his returns under the Wealth-tax Act, 1957 (" the Act "), before the Wealth-tax Officer, Assessment-2, Circle-II, Bangalore, inter alia, claiming exemption of the value of the said residential building under section 5(1)(ivb) of the Act. On April 22, 1975, the Wealth-tax Officer by separate but identical orders completed the assessments for the said years and rejected the assessee's said claim for exemption. Aggrieved by the said orders of the Wealth-tax Officer, the assessee filed appeals before the Appellate Assistant Commissioner, Bangalore Range-11, who by his common order dated June 24, 1976, dismissed them. Aggrieved by the said orders of the Appellate Assistant Commissioner and the Wealth-tax Officer, the assessee filed second appeals before the Tribunal which by its com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, all the authorities including the Tribunal have rejected the claim of the assessee solely or principally on the basis of their rejection for the year 1969-70 and in doing so they were clearly in error. Even otherwise, the claim of the assessee is founded on section 5(1)(ivb) of the Act placed on the statute book from April 1, 1970, by section 26 of the Finance Act, 1970, which was in operation for the assessment years in question. In this view also, the claim of the assessee requires to be examined on merits without reference to the assessment completed for the year 1969-70. Another reason given by the authorities including the Tribunal was that the building was a palatial building and it had been constructed in 1969. We do not see as to how these can be reasons for rejecting or sustaining the claim of the assessee. We are of the view that the Tribunal was in error in relying on these irrelevant reasons. We now pass on to examine the claim of the assessee without reference to the said irrelevant reasons. The Act has been enacted to levy a tax on the net wealth of those who fall within the provisions of the Act. The Act came into force from April 1, 1957. Section 2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building was situated on the land itself where the assessee also lives and cultivates his land or at any rate receives rents from the agricultural lands. When that is so, the claim of the assessee that the value of that dwelling house should be exempted in computing his net wealth and the consequent levy of wealth-tax thereto is well founded and cannot be denied at all. In Maharajadhiraj of Darbhanga v. CIT, AIR 1928 Pat 468, a Division Bench of the Patna High Court had occasion to construe the true scope and ambit of the proviso to section 2(1)(a) of the Indian Income-tax Act, 1922 (old I.T. Act), vis-a-vis the claim of the Zamindar of Dharbhanga who had built a palace on the vast Zamindary of Dharbhanga, for exemption of the entire value of that building as referable to agricultural income exempted from income-tax under that Act. In upholding that claim, the Division Bench, speaking through Dawson-Miller C.J., expressed thus (p. 470): " Once it is shown that by reason of the assessee's connection with the land he requires a dwelling-house in that vicinity, then we are not concerned to enquire whether the dwelling-house is more commodious than other persons in the same posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income of a building : 'which the receiver of the rent or revenue or the cultivator or the receiver of the rent in kind by reason of his connection with the land, requires as a dwelling house or as a store-house, or other out-building.' The department contends that the words: 'by reason of his connection with the land requires as a dwelling house mean that the proviso is only to apply to such portion, if any, of the building as should be needed as a dwelling house, store-house or outbuilding for the purpose of receiving of rents or cultivation or receiving of rent in kind, as the case may be. The argument more shortly put is that the word 'requires' is used in the sense of 'needs' and that the words 'by reason of his connection with the land' mean as applied to this case: 'for the purpose of ... collecting the rent or revenue.' This interpretation, if correct, would leave the taxable proportion of the notional income from the building to be assessed by the Income-tax Officer as a matter of fact and without appeal. Now, I can see no indication in the Act of any circumstances which are to guide the officer in assessing the taxable proportion. There is for instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the building as a dwelling house, store-house or out-building and the assessee is not at liberty to claim arbitrarily the exception of any building which he may at his own choice describe as a dwelling house, store-house or out-building without regard to the actual facts. For these reasons, I am in agreement with the decision arrived at in the case of Maharajadhiraj of Dharbhanga v. Commissioner of Income-tax, AIR 1928 Pat 468." Macpherson J. dissented. We have carefully read the proviso to section 2(1)(c) of the old Income-tax Act, which is somewhat analogous to section 5(1)(ivb) of the Act, the dicta in Maharajadhiraj Dharbhanga's case, AIR 1928 Pat 468, and the opinion of the majority in Rajendra's case, AIR 1929 Pat 449. We are of the view that the principles stated in these cases with respect are correct and we are in respectful agreement with those views. For these reasons, with respect, we regret our inability to subscribe to the views expressed by Macpherson J. In Kanan Devan Hills Produce Co. Ltd. v. CWT [1968] 67 ITR 823, the High Court of Calcutta did not dissent from the views expressed by the Patna High Court and only distinguished and held that they had no a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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