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1987 DIGILAW 259 (KER)

COMMR. OF WEALTH TAX v. JOSE MATHEW

1987-06-24

PARIPOORNAN, SREEDHARAN

body1987
Judgment :- 1. The Income Tax Appellate Tribunal has referred the following questions of law, for the decision of this Court, at the instance of the Revenue, in ITR Nos. 20 to 23 of 1983: "(1) Whether, on the facts and in the circumstances of the case, the agricultural property contributed to the firm by the assessee as his share of capital is in 'agricultural land belonging to the assessee' under S.5(1)(iva) of the Wealth-tax Act 1957? (2) Whether, on the facts and in the circumstances of the case, the assessee is entitled to the exemption claimed under S.5(1)(iva) of the Wealth-tax Act" In ITR Nos. 212 to 214 of 1984, at the instance of the Revenue, the following question has been referred by the Income Tax Appellate Tribunal, for the decision of this Court: "Whether, on the facts and in the circumstances of the case, is the assessee entitled to exemption under S.5(1)(iva) of the Wealth-tax Act. 1957, in respect of a movable asset. viz., his share of interest in the firm called M/s. U. J. Thariath And Co.?" The assessment years in ITR No. 20 to 23 of 1983 are 1974-75,1975-76,1976-77 and 1977-78. The assessment years in ITR. No. 212 to 214 of 1984 are 1973-74,1974-75 and 1975-76. The respondents in all these cases are assessees under the Wealth-tax Act. They are partners of firms. They brought agricultural properties as their capital in the firms. During the course of assessment, under the Wealth-tax Act. the respondents/assessees claimed that their share in the value in the agricultural property of the firm, (contributed to the firm by them as their share capital), are agricultural lands belonging to them and so they are entitled to exemption provided by S.5(1)(iva) of the Wealth-tax Act. The assessing authority held that the respondents/assessees are not eligible for exemption under S.5(1)(iva) of the Wealth-tax Act since the interest of the assessee in the firm is not agricultural property in the hands of the assessee. The said plea was accepted by the Appellate Assistant Commissioner and also by the Appellate Tribunal. Thereafter, the Revenue moved the Appellate Tribunal for referring the above questions of law for the decision of this Court. The Appellate Tribunal referred the above questions, in the above cases, for the decision of this Court. 2. The said plea was accepted by the Appellate Assistant Commissioner and also by the Appellate Tribunal. Thereafter, the Revenue moved the Appellate Tribunal for referring the above questions of law for the decision of this Court. The Appellate Tribunal referred the above questions, in the above cases, for the decision of this Court. 2. Sole question that arises for consideration is whether for the actual share or quantum attributable to the respondents/assessees in the agricultural properties of the firm, the assessees can claim exemption under S5(1)(iva) of the Wealth-tax Act. Though the agricultural land belongs to the firm, really it is the partners who are the owners of the said land. After adverting to the decision of the Supreme Court in Narayanappa v. Bhaskara Krishnappa (AIR. 1966 SC 1300), and also the decision in CIT v. R. M. Chidambaram Pillai [(1917) 106 ITR 292] and other relevant decisions, a Bench of the Karnataka High Court in the decision reported in Commissioner of Wealth-tax v. Mrs. Christine Cardoza [(1978) 114 ITR 532] held that in computing the net wealth of an assessee, who was a partner in a firm which owned agricultural lands, the value of the share of the assessee in agricultural lands will have to be included in his net wealth and the full deduction under S.5(1)(iva) should be given in his hands. We perused through the said decision. We concur with the same. The Appellate Tribunal has referred to the said decision of the Karnataka High Court as also a few other decisions which have followed the said decision. We are of the view that the decision of the Appellate Tribunal holding that the respondents/assessees, who are partners in a firm which owned agricultural lands, are entitled to exemption pleaded under S.5(1)(iv-a) of the Wealth-tax Act in computing their net wealth. 3. In this view of the matter, we answer the questions, referred to us in ITR Nos. 20 to 23 of 1983, in the affirmative in favour of the assessee and against the Revenue. We answer the question, referred to us in ITR Nos. 212 to 214 of 1984, in the affirmative in favour of the assessee and against the Revenue. 4. The ITRs. are disposed of, as above. A copy of this judgment, under the seal of this Court and the signature or the Registrar, shall be forwarded to the Appellate Tribunal, as required by law.