1994 (4) TMI 8 - HC - Wealth-tax

High Court: Individual partners entitled to deductions based on their share in firm's properties.

The High Court held that deductions under section 5(1)(iv) of the Wealth-tax Act should be allowed to individual partners based on their respective shares ... House Property Issues:Interpretation of section 5(1)(iv) of the Wealth-tax Act, 1957 in relation to the computation of net wealth for a partner in a firm.Detailed Analysis:The case involved a reference under section 27(1) of the Wealth-tax Act, 1957, concerning the computation of net wealth for a partner in a firm. The Wealth-tax Officer had included the interest of the respondent-assessee as a partner in the firm, but the Appellate Assistant Commissioner found the computation to be incorrect. The Appellate Assistant Commissioner directed that the exemption under section 5(1)(iv) of the Act should be allowed to the firm before the balance was distributed among the partners. The respondent-assessee challenged this decision, leading to the matter being referred to the High Court by the Appellate Tribunal.The High Court analyzed previous decisions, including CWT v. Tarachand Agarwal and Wealth-tax Reference No. 4 of 1988, which clarified that deductions under section 5(1)(iv) should be allowed to the assessee-partner and not the firm. The court also referred to Wealth-tax Reference No. 19 of 1989, emphasizing that properties owned by a firm belong to the partners, and deductions under section 5(1)(iv) should be allowed to each partner. The court noted that the orders of the lower authorities were not in accordance with these legal principles and lacked necessary facts and materials on the claim for exemption.Based on the above analysis and considering the decision of the Special Bench in the case of L. Gulabchand Jabak, where a similar claim was allowed, the High Court held that the Tribunal was justified in restoring the matter to the Wealth-tax Officer for a fresh decision. The court reframed the question of law and answered it in favor of the assessee, emphasizing that deductions under section 5(1)(iv) should be allowed to individual partners based on their respective shares in the firm's properties. The judgment concluded by ruling in favor of the assessee, with no order as to costs.