1999 (12) TMI 42 - HC - Wealth-tax

Supreme Court rules minors entitled to tax exemption individually.

The court held that the decision in CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP) was overruled by the Supreme Court, implying that Section 4(1)(b) ... Wealth Tax, Exemption, House Property, Minor Issues Involved:1. Applicability of Section 4(1)(b) of the Wealth-tax Act, 1957, and Rule 2 of the Wealth-tax Rules, 1957, to a minor.2. Granting exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957, to a minor.Detailed Analysis:Issue 1: Applicability of Section 4(1)(b) and Rule 2 to a MinorThe court examined whether the provisions of Section 4(1)(b) of the Wealth-tax Act and Rule 2 of the Wealth-tax Rules apply to a minor admitted to the benefits of a partnership. The minor in question had a 1/8th share in the profits of the firm Taj Mahal Hotel, Secunderabad. The Wealth-tax Officer included the minor's interest in the firm in the net wealth computation, which was contested by the minor. The court noted that the primary issue before the Appellate Assistant Commissioner and the Appellate Tribunal was whether the minor could claim exemption under Section 5(1)(iv) for his share in the firm's house property.The court referenced the decision in CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP), which held that the net wealth of the firm should be computed excluding certain exempt assets, and the share of the assessee in the firm should be ascertained thereafter. This principle was applied in CWT v. B. Chandrasekhara Rao [1989] 175 ITR 66 (AP) without discussion. However, the court highlighted that the Supreme Court in CWT v. T. S. Sundaram [1999] 237 ITR 61 ruled that exempt assets should be included in the firm's net wealth and then apportioned among partners for individual exemptions.The court concluded that the decision in CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP) was impliedly overruled by the Supreme Court, and thus, the principle laid down therein no longer holds good. Therefore, the applicability of Section 4(1)(b) and Rule 2 to a minor is not relevant as the Supreme Court's decision mandates that exemptions should be granted in individual assessments.Issue 2: Granting Exemption under Section 5(1)(iv) to a MinorThe court examined whether the minor could claim exemption under Section 5(1)(iv) for his share in the firm's house property. The Appellate Tribunal had previously accepted the minor's claim, distinguishing the case from CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP) on the ground that different considerations apply to a minor admitted to the benefits of a partnership. The Tribunal's decision was supported by the Supreme Court's ruling in CWT v. T. S. Sundaram [1999] 237 ITR 61, which allowed exemptions to be granted in individual assessments.The court noted that the Appellate Assistant Commissioner had rejected the minor's claim based on the principle that both minor and major partners should be treated equally. However, the Supreme Court's decision clarified that exemptions should be granted in individual assessments, irrespective of whether the assessee is a minor or a major. The court emphasized that the Revenue's stand, which was based on the overruled decision in CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP), could not be upheld.The court concluded that the minor's interest in the firm's house property should be evaluated without deducting exempt assets under Section 5(1)(iv) and that the exemption should be granted in the minor's individual assessment. This conclusion aligns with the Supreme Court's decision and the Tribunal's reasoning in the earlier case of W.T.A. Nos. 237 and 238 of 1981.Conclusion:1. The court did not need to answer whether Section 4(1)(b) and Rule 2 apply to a minor, as the decision in CWT v. Narendra Ranjalker [1981] 129 ITR 203 (AP) was overruled by the Supreme Court.2. The court affirmed that the minor is entitled to exemption under Section 5(1)(iv) in his individual assessment, and this exemption cannot be granted while evaluating the firm's wealth. The exemption applies irrespective of the assessee being a minor.The reference was answered and disposed of accordingly.