COMMISSIONER OF WEALTH TAX Vs. RAMALINGAM V T

JUDGEMENT

(1.) IN these tax case reference under section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following common question of law has been referred to this court, for its opinion, in respect of the assessment years 1971-72, 1966-67 to 1970-71, 1966-67 to 1970-71 and 1966-67 to 1970-71, respectively, with reference to three assessees :

(2.) THE assessees are three brothers and they, along with their father, owned and enjoyed a house property. In the course of the proceedings for assessment to wealth-tax, in respect of the assessment years set out earlier, each one of the assessees claimed exemption under section 5(1)(iv) of the Act. This claim for exemption was allowed in the original assessment, but an objection was raised subsequently by the Revenue audit, which led to the reopening of the assessments and the withdrawal of the exemption granted earlier to the assessees. On appeal by the assessees, the Appellate Assistant Commissioner held that each one of the assessees was entitled to the benefit of exemption under section 5(1)(iv) of the Act. On further appeal before the Tribunal by the Revenue, the Tribunal, purporting to follow the decision of a Special Bench of the Tribunal in W. T. A. Nos. 447 to 449/MDS/1974-75 in the case of one Sri V. N. Nichani, held that the test of exclusiveness of the user of the house must be determined with reference to the question whether the assessees user of the house was as of right and since the assessees, as co-owners, had a right to reside in the property, under section 5(1)(iv) of the Act the benefit of exemption was available to the assessees. That is how the common question of law set out earlier has arisen, though the assessees as well as the assessment years, in respect of those assessees, are also different.

(3.) THAT leaves for consideration the argument regarding the availability of the benefit of the circular, referred to earlier, to the assessees. There was a lot of debate about the effect of the circular issued under section 13 of the Act. We find that, before the Tribunal, there was no attempt made by the assessees to rely upon the circular. Even so, the common question referred to us could be regarded as comprehensive enough even to take in that aspect relating to the claim for exemption based on the circular. The circular issued under section 13 of the Act could at best be regarded as an administrative instruction issued by the Board of the Wealth-tax Officers and our attention has not been drawn to any provision either in the Act or else where to show that the issue of such administrative instructions would be binding upon the Tribunal or even us. We may, in this connection, refer to the decision to which our attention has been drawn by counsel on both sides. <PARA> L. A. Firm v. CIT , relied on by learned counsel for the Revenue, points out that judicial powers cannot be controlled by circulars issued under section 119 of the Income-tax Act, 1961, and those circulars could be regarded as pertaining to administrative aspects and not judicial aspects of the administration of the Act and that the circulars of the Central Board had no binding force with reference to the assessment in question. In A. L. A. Firm v. CIT , on appeal from A. L. A. Firm v. CIT , the Supreme Court, while confirming the decision of this court in A. L. A. Firm v. CIT [1976] 102 ITR 622, took the view that the terms of the circular cannot be of any assistance to the assessee in answering the issues and in that view, the Supreme Court refrained from answering the third question posed by the Tribunal. It is thus seen that the Supreme Court had not pronounced about the binding nature of the circular in the decision referred to by learned counsel for the Revenue. In Shri Shubhlaxmi Mills Ltd. v. CIT , relied on by learned counsel for the Revenue, it was laid down by the Supreme Court that a condition to be satisfied for securing the benefit of development rebate must be satisfied and, if that had not been so specified, relief by way of development rebate cannot at all be claimed. It had also been pointed out that the circulars issued by the Central Board of direct Taxes do not affect the true position of law. From this decision, it would appear that, if the availability of a benefit is conditional upon the fulfilment of certain requirements and those requirements had not been satisfied, then, the benefit cannot be had by resorting to a circular. Earlier, we had pointed out that the latter part of the requirement of section 5(1)(iv) of the Act had not been fulfilled by the assessees in these references and merely by placing reliance upon a circular that cannot be regarded as having been fulfilled in order to enable the assessees to claim the benefit of exemption. In yet another decision of the Supreme Court in Keshavji Ravji and Co. v. CIT [1990] 183 ITR 1 (SC), it had been pointed out that the Board, by its circulars, cannot pre-empt a judicial interpretation of the provisions of the Act and the Tribunal, much less the High Court, is not bound by the circulars and that though such circulars might have departed from the tenor of the statutory provision and give benefit to assessees, that is not the same as saying that such circulars either have a binding effect on the interpretation of the provisions of the Act or that the Tribunal and the High Court are supposed to interpret the law in the light of the circulars. Ultimately, the Supreme Court pointed out that the circular broadly accorded with the view taken by the court on the interpretation of the true scope of the provision which fell for consideration and in that view, the Supreme Court felt it unnecessary to examine whether or not such circulars could be recognised as legitimate aids to statutory construction. In Rajan Ramkrishna v. CWT [1981] 127 ITR 1 (Guj), the Gujarat High Court laid down that, in the matter of valuing the unquoted equity shares of investment companies, the benevolent circulars issued by the Board were binding on the Wealth-tax Officer and the Commissioner and it was not open to them to disregard the circular and proceed to exercise revisional jurisdiction under section 25(2) of the Act on the basis that a different principle should be adopted in the valuation of the shares. This decision also does not lay down that circulars would be binding either on the Tribunal or even this court. In K. P. Varghese v. ITO , with reference to the scope of the circulars issued by the Central Board in regard to the administration or implementation of section 52(2) of the Income-tax Act, 1961, the Supreme Court pointed our that the circulars would be binding on the Department in the administration or implementation of section 52(2) of the Income-tax Act, 1961. Though this decision had proceeded on the footing that circulars would be binding on the Department in so far as the administration and implementation of section 52(2) of the Income-tax Act, 1961, are concerned, it could not be understood as laying down that such a circular would be binding on the Tribunal or the High Court and at best, it could be treated as containing merely administrative direction, not in any manner affecting the judicial interpretation of the relevant provisions of the Act on the facts and the circumstances of a particular case. On a due consideration of the several decision referred to by counsel on both sides, we are of the opinion that the reliance placed by the assessee on the circular cannot pre-empt a judicial interpretation of section 5(1)(iv) of the Act with reference to its constituent requisite and, in any event, such circulars, being purely administrative in nature, cannot bind either the Tribunal or this court in the matter of interpretation of the provision of section 5(1)(iv) of the Act. We, therefore, answer the common question referred to us in the negative and in favour of the Revenue. The Revenue will be entitled to its costs in these references. Counsel's fee Rs. 1,000. (one set).