1989 (2) TMI 26 - HC - Wealth-tax

High Court affirms deduction under Wealth-tax Act for spouse's property, aligning with precedent

The High Court upheld the Tribunal's decision, ruling in favor of the assessee regarding the deduction under section 5(1)(iv) of the Wealth-tax Act, 1957 ... Exemptions, House Property, Wealth Tax Issues:Interpretation of Wealth-tax Act, 1957 - Deduction under section 5(1)(iv) - Property belonging to wife - Correctness of Tribunal's decision.Analysis:The case involved a question referred by the Tribunal under section 27(1) of the Wealth-tax Act, 1957, regarding the entitlement of the assessee to deduction under section 5(1)(iv) of the Act in respect of a house property at Hindusthan Road, Calcutta, belonging to his wife. The assessments in question were for the years 1970-71 to 1974-75, where the Wealth-tax Officer included the value of the house property held by the assessee's wife in the net wealth of the assessee. The issue revolved around the deduction of Rs. 1 lakh allowed under section 5(1)(iv) for a house belonging to the assessee, which was withdrawn by the Commissioner on the grounds that the property actually belonged to the wife of the assessee and not to the assessee himself.The Commissioner's decision to withdraw the deduction was based on the premise that where an asset belonged to the wife of the assessee under section 4(1)(a), the deduction under section 5(1)(iv) could not be allowed as it did not actually belong to the assessee. However, the Tribunal disagreed with this interpretation and held that the deduction should not have been withdrawn. The Tribunal relied on a decision of the Madras High Court, which held that the benefit of section 5(1)(iv) would be available even if the property is transferred to the wife under section 4(1)(a).The High Court, concurring with the Tribunal's view, emphasized that the charge of tax under the Wealth-tax Act is on the net wealth of the individual, and all assets belonging to the assessee must be included in the net wealth. While the house property assets did not strictly belong to the assessee, they were required to be included in the net wealth under section 4. Therefore, the exemptions provided under section 5 in respect of these assets could not be denied. The Court cited decisions from various High Courts supporting this interpretation, including Rajasthan, Bombay, Karnataka, and Madras High Courts.In conclusion, the High Court answered the question in the affirmative and in favor of the assessee, upholding the Tribunal's decision. The Court also highlighted that there would be no order as to costs, and both judges on the bench agreed with the judgment.