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TMI Blog1987 (1) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of the assessee's interest in the firm on the lines mentioned in her order and allow exemption under section 5(1) (xxxii) as claimed by the assessee instead of confirming the WTO's computation of the assessee's interest in the firm as well as the exemption under section 5(1) (xxxii) allowed by the WTO." The dispute in this appeal relates to the quantum of exemption. As per the balance sheet of the assessee as on 31-3-1984 a sum of Rs. 15,000 has been shown as investment in Nylo Plastic Industries and a sum of Rs. 14,899 in Ashok Trading Co. Besides, a sum of Rs. 15,955 is receivable by the assessee in the current account with Nylo Plastic Industries. In the return the assessee took the value of the assets as per his balance sheet and added his share in the reserve in the firm Nylo Plastic Industries at a sum of Rs. 8,052. This represented his share of investment allowance reserve of the firm. On the other hand, he claimed exemption under section 5(1)(xxxii) of Rs. 46,574 in respect of Nylo Plastic Industries and of Rs. 24,196 in respect of Ashok Trading Co. The WTO observed that since the assessee had taken the assets for computation purposes as per the book value of Rs. 15,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (iii) From this remainder deduct the value of debts which are secured on or incurred in relation to such assets. If the residue is less than the value of the capital of partners then the value of interest is in proportion to the capital contribution. If the residue is in excess of the capital of partners then excess apportioned amongst the partners in proportion to the profit-sharing proportion." The AAC, therefore, came to the conclusion that the WTO was wrong in restricting the interest of the partner in the industrial undertaking to the extent of the credit balance of each of the partners in the said undertakings. Aggrieved by the said order of the AAC, the revenue is in appeal before us. 5. We have heard the parties and considered the rival submissions very carefully. Section 4(1) (b) of the Act directs the inclusion of the interest of a partner in a firm in the net wealth of the assessee determined in the prescribed manner. Rule 2 of the Rules in prescribed for the valuation of interest of a partner in the firm. As per this rule, the net wealth of the firm on the valuation date is to be determined first. That portion of the net wealth of the firm as is equal to the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonging to the assessee; (b) the aggregate value of such assets as determined under clause (a) shall be reduced by the value of the debts owed by the firm or association which are secured on, or which have been incurred in relation to, such assets; (c) that portion of the net value of such assets so arrived at as does not exceed the amount of the capital of the firm or association shall be allocated among the partners or members in the proportion in which capital has been contributed by them; (d) the residue, if any, of the net value of such assets shall then be allocated among the partners or members in accordance with the agreement of partnership or association for the distribution of assets in the event of dissolution of the firm or association and, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits; (e) the sum total of the amounts allocated to the partner or member under clause (c) and clause (d) shall be the value of the interest of that partner or member in such assets of the firm of association." "2H. (1) For the purposes of clause (xxxi) of sub-section (1) of section 5, the value of assets (not bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lities of the firm, whereas for the purpose of section 5(1)(xxxii) it is the value of assets in respect of which the exemption has been granted and the provisions of the Act as well as the Rules are silent about the liability except as provided under clause (b) of rule 2-I as aforesaid. To this extent, we may agree with the learned counsel for the assessee. However, keeping in view the opining sentence of section 5(1), we have to reject the claim of the assessee that tantamounts to exemption under section 5(1) (xxxii) of larger sum than one has been included in his assessment as value of his interest in the firms. Section 5(1) directs that on wealth-tax shall be payable by an assessee in respect of assets covered by section 5(1) (xxxii). It further directs that such assets shall not be included in the net wealth of the assessee. In this background what section 5(1) (xxxii) provides for is that such assets shall not be included in the net wealth of the assessee. It does not say that a deduction thereof shall be allowed while computing the net wealth of the assessee. Keeping the scheme of assessment of partners' interest and the exemption as contemplated in section 5 in mind we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firms in the hands of the partner. The argument of the assessee that since the liability of the firm is nothing but a liability of partners in communion and the same are allowable as the assessee's own liability has also no force. Deduction of such liability is prohibited by the provisions of section 2(m) (ii) providing that no debt owed by an assessee is allowable if it was incurred in relation to an asset in respect of which no wealth-tax is chargeable under the Act. The liability of the firm is in respect of the business of the firm and if the assessee's share in the firm's asset is not includible by virtue of section 5(1) (xxxii), deduction of the liability could not be allowed to the assessee. We, therefore, reject this contention of the assessee. 10. It is further noticed that the assessee has also included a sum of Rs. 15,955 in working out his above interest of Rs. 46,674 in the firm Nylo Plastic Industries. This sum of Rs. 15,955 was lying in the assessee's current account with the firm. The current account, in our opinion, does not represent the value of the assessee's interest in the firm. It is a liability of the firm and an asset of the assessee unconnected with h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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