COMMISSIONER OF WEALTH TAX Vs. M KUMARAN

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following common question of law for the opinion of this Court relating to the asst. yrs. 1973-74 and 1974-75 under s. 27 (1) of the WT Act : "whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the CWT was not justified in holding that additional wealth-tax is leviable on the assessee-partner in a firm, in regard to the value of assets consisting of lands and buildings used by the firm for its business, to the extent to which the assessee has interest in them""

(2.) THE assessees were partners in certain firms viz. AVM studies and Saraswathy Publications. THEre were certain immovable properties owned by these firms which were used for its business purposes as business premises. THE CWT considered the omission of the WTO to levy additional wealth tax in respect of the assessee's share as a partner in the urban assets used by the firm to be not legally correct and therefore after issuing show cause notice and after considering the assessee's objection held that the omission to levy additional wealth tax was not correct in law. Accordingly CWT directed the wto to revise the assessment with a view to charge additional wealth tax on the value of the urban assets which were used for the business to the extent to which the assessees have interest in them. Aggrieved, the assessees filed appeals before the Tribunal. THE claim of the assessees was that the assets concerned were being used for the purpose of the firm and as such constituted business premises required to be excluded from the purview of the expression 'urban assets'on which additional tax is leviable. According to the department's stand, the business is carried on by the individual partners and since the assessee does not use the assets for any business carried on by him individually, it has to be considered as urban assets liable to be charged to wealth-tax. THE Tribunal upheld the assessee's contention in view of the decision of the Supreme Court in CIT vs. Ramanik Lal Kothari. THE Tribunal held that the direction of CWT to charge additional wealth-tax is not justified, and accordingly the order passed by the CWT was set aside.

(3.) RULE 3 in Paragraph B does not authorise levy of additional tax on the individual partner in regard to his share of interest in the assets of the firm. In CIT vs. K. M. Jaganathan 1, this Court while considering the provisions of s. 22 of the IT Act, 1961 and s. 4 of the Indian partnership Act, 1932 held "that for the purpose of s. 22 of the Act, a business carried on by the firm should be regarded as being carried on by all the partners and therefore no income from the property should be computed in respect of the portion of the property occupied by the firm, of which the assessee is a partner"