Income Tax Appellate Tribunal - Madras
Third Wealth-Tax Officer vs G. Umapathy on 15 April, 1996
Equivalent citations: [1982]1ITD141(MAD)
ORDER
Shri T. N. C. Rangarajan, Judicial Member
1. This appeal by the revenue is directed against the order of the AAC holding that additional wealth tax cannot be imposed on the share of the assessee in business premises held by a firm in which he is a partner.
2. The assessee is an individual and a partner of two firms, Anand Theatres and Uma Printing and Packaging Industries. Anand Theatres owns a theatre building and Uma printing and Packaging Industries owns a and and building. It is not in dispute that both the theatre and the land and building in question are used for the purpose of the business of the two firms. The Schedule to the Wealth tax Act, 1957, giving the rate of wealth tax enact that an additional tax shall be imposed on urban assets including a share of any partner in the urban assets held by a firm. Treating these theatre building as urban asset the WTO imposed additional tax. On appeal, the AAC found that these urban assets were business premises and, therefore, cannot be subjected to additional tax.
3. In this appeal it was pointed out on behalf of the revenue that these buildings were actually held by the firms and under the general law the assessee partner cannot specify any share in those buildings as his share will be only an interest in all the properties of the firm and not in any particular asset held by the firm. It was submitted that though in general law a partner cannot be said to have a specific interest in any urban asset held by a firm, rule 3 in Paragraph B in the Schedule specifically deems his proportionate share to be an urban asset. According to the revenue this deeming provision could not extend to mean that the assessee partner was the owner of the urban asset or that such an urban asset was used for the purpose of his business. It was argued that since the definition of "business premises" required that the buildings should owned by the assessee induced in his business, the assessee will not be entitled to the exemption in respect of the asset which was owned by the firm and used in the business of the firm through his proportionate share may be liable to additional tax as it was deemed to be an urban asset.
4. We are unable to agree with this contention of the revenue which goes against the basic provision of item (3) in Paragraph A in the Schedule as well as the general principles of law. In item (3) under the rates of wealth tax, it is stated that where the net wealth of an individual or a HUF includes the value of any asset being building or land other than business includes the value of any asset being building or land other that business premises situate in urban area (such asset being referred to as an urban asset), there shall be levied an additional tax. This item is by itself a definition of "urban asset" which by that very definition excludes business premises from its scope. Therefore, primarily additional tax cannot be imposed on business premises even if it happens to be an urban area. If an individual has held a business premises it would not be an urban asset and it will not suffer additional tax. But the revenue seeks to deny this exemption merely because the individual holds it along with other as a partnership. Normally the interest of a partner not being an interest in a particular asset held by a firm would not be liable to additional tax, but for the deeming provision in rule 3 under Paragraph B of the Schedule. Rule 3 itself states that where the net wealth of the assessee includes any urban asset a proportionate interest of the assessee as explained therein will be deemed to be an urban asset. When an urban asset does not include a business premises, the urben asset referred to by rule 3 as included in the assets of a firm must also exclude the business premises. In other words, when the concept of "urban asset" by itself does not include business premise, it matters not whether it is held by the firm or by the individual as in either case it cannot be taken into consideration. But, the attempt of the revenue is to include business premises in the urban assets held by the firm on the ground that though it is deemed the assets of the partner, it cannot be considered to be the businrss premises of the partner because he does not own it and he does not use it in the business. Even this argument must fail because assuming that the business premises is part of the urben assets a share in that asset under the rule 3 is deemed to be the assets of t he partner assessee. Since the wealth tax is imposed only on the owner of the asset we cannot escape the inference that the business premises treated as an urban asset must be deemed to be owned by a partner assessee.
It is also well settled that where the business is carried on by a firm it is carried on by a partner because a partnership is after all an agreement to carry on business by any one or all of the partners on behalf of all. Therefore, even if we apply the two conditions, defining "business premises" in rule 1(i) of Paragraph B, to the share of the assessee-partner in a business premises treating it as an urban asset, we find that both the conditions are satisfied. Therefore, primarily the business premises in question are outside the scope of urban asset and, secondly, even if assumed to be within the scope of an urban asset held by a firm the interest of the partner which is deemed to be an urban asset will also fall within the scope of business premises and will again be exempt from the additional wealth tax. Therefore, looking at it from any point of view, we are satisfied that the AAC was right in cancelling the additional wealth tax imposed on the assessee. We have, therefore, no hesitation in confirming the order of the AAC.
5. In the result, the appeal is dismissed.