COMMISSIONER OF WEALTH TAX Vs. RADHA KRISHNA JALAN

JUDGEMENT

(1.) A statement of case has been submitted by the Tribunal, Patna Bench, 'B', referring the following question of law for the opinion of this Court:

(2.) From the statement of the case in Shri Nand Lal Jalan aforementioned, it appears that the assessee is a partner in the firm Radha Krishna Sanwar Prasad. The second partner is Shri Nand Lal Jalan, the first partner being Radha Krishna Jalan, the assessee in this case. Both the partners reside in a house which belongs to the aforesaid firm. Before the WTO, the assessee claimed exemption under Sec. 5(1)(iv) of the Wealth -tax Act, 1957 ('the Act') in respect of the house. The WTO rejected the claim of the assessee on the ground that the house belonged to the firm and not to the assessee. On appeal, the AAC confirmed the order of the WTO. On further appeal to the Tribunal, the assessee contended that the partners should be treated as owners of the house standing in the name of the firm which was nothing but a group of its partners. Alternatively, the assessee pleaded that while computing the net wealth of the firm under rule 2 of the Wealth -tax Rules, 1957, for the purpose of determining the interest of the partner in the firm, exemption under Sec. 5(1)(iv) should be allowed to the firm. The Tribunal observed that the said exemption under Sec. 5(1)(iv) was in respect of the house belonging to the firm. As the assessee in this case did not own the house, which in fact stood in the name of the aforesaid firm, the assessee could not be entitled to the exemption under Sec. 5(1)(iv). However, on the alternative plea taken by the assessee, the Tribunal observed that as per rule 2 net wealth of the firm was first to be determined for calculating the interest of the partner of the firm and for that purpose the firm had to be treated as an assessee under the Act, and all the exemptions under the Act had to be considered before arriving at the net wealth of the firm. The Tribunal, therefore, directed that the exemption of Rs. 1,00,000 should be allowed to the firm while computing the net wealth of the firm.

(3.) It was argued that the order was not correct in law because nowhere in the Act was there any determining provision to the effect that a firm should be treated as an assessee. Therefore, the Tribunal's observation that the firm should be treated as an assessee did not fit in with the scheme of the Act. Furthermore, the term 'net wealth' appearing in rule 2 was to be construed as 'net wealth' to be ascertained according to the commercial notions, the term 'net wealth' had been defined in Sec. 2(m) of the Act, as follows: