Calcutta H.C : The deduction of Rs. 1lakh allowed by the ITO should not have been withdrawn by the Commissioner.

High Court Of Calcutta

Commissioner Of Wealth Tax vs. Saroj Kumar Banerjee

Sections WT 4(1)(a), WT 5(1)(iv)

Asst. Year 1970-71, 1971-72, 1972-73, 1973-74, 1974-75

Suhas Chandra Sen & Baboo Lall Jain, JJ.

WT Appeal. No. 1141 of 1977

14th February, 1989

Counsel Appeared

H.M. Dhar, for the Revenue : Manas Banerjee & S.N. Das, for the Assessee

S.C. SEN,J.:

It has been stated by the advocate appearing on behalf of the assessee that the asessee, Shri Saroj Kumar Banerjee, has died leaving his son, Manoj Kumar Banerjee, as his legal heir and representative. The name of the son be recorded

The question that has been referred to us by the Tribunal under s. 27(1) of the WT Act, 1957(“the Act”), is as under : “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was entitled to deduction under s. 5(1)(iv) of the WT Act, 1957, in respect of the house at Hindusthan Road, Calcutta, belonging to his wife?”

The assessments relate to the asst. yrs. 1970-71 to 1974-75. For the asst. yr. 1970-71, the WTO had included the sum of Rs. 1,67,750 as the value of the house property at Hindusthan Road, Calcutta, standing in the name of the Assessee’s wife. For the asst. yr. 1974-75 Rs. 1,70,000 was added as the value of the house property. This addition was done by applying the provisions of s. 4 (1)(a) of the Act which lays down as hereunder: “4 Net wealth to include certain assets.—(1) In computing the net wealth of an individual, there shall be included, as belonging to that individual— (a) the value of assets which on the valuation date are held— (i) By the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or”

The WTO allowed in each of those assessments deduction of Rs. 1 lakh in respect of a house or a part of a house belonging to the assessee in terms of s. 5(1)(iv) of the Act. On 16th Aug., 1975, the Commissioner, by his consolidated order passed under s. 25(2) of the Act, withdrew the deduction of Rs. 1 lakh allowed under s. 5(1)(iv) on the ground that the said provision had no application in the present case as the house property in question actually belonged to the wife of the assessee and not to the assessee himself. The Commissioner proceeded on the basis that where an asset belonged to the wife or a minor child of an assessee under s. 4(1) (a), the deduction contemplated under s. 5(1)(iv) could not be allowed in respect of the asset so included as it did not actually belong to the assessee.

The Tribunal, on appeal, held that the deduction of Rs. 1lakh allowed by the ITO should not have been withdrawn by the Commissioner. The Tribunal followed the decision of the Madras High Court in the case of S. Naganathan vs. CWT (1975) 101 ITR 287, where it was held that the benefit of s. 5(1)(iv) would be available also where the property is transferred to the wife by reason of s. 4(1) (a).

The view taken by the Tribunal appears to be correct. The charge of tax under the WT Act is on the net wealth of every individual or the HUF at the rate specified in Sch. I of the Act.

In computing the net wealth of an individual, the entire assets belonging to an assessee have to be included in his net wealth. Strictly speaking, the house property assets did not belong to him. By the extended definition of s. 4, these assets have to be included in the net wealth of the assessee. Now, having included the assets in the net wealth of the assessee, the exemptions in respect of these assets which were provided under s. 5 cannot be denied

Our view on the question is in consonance with the view taken by the Rajasthan High Court in the case of CWT vs. B.T. Agrawal (1987) 163 ITR 72, the Bombay High Court in the case of CWT vs. Rai (C.) (1979) 119 ITR 553 and also the Karnataka High Court in the case of CWT vs. Eapen (K.M.) (1978) 114 ITR 415. The Madras high Court has also taken the same view in the case of S. Naganathan 91975) 101 ITR 287.

In view of the aforesaid, the question referred to this Court is answered in the affirmative and in favour of the assessee.

There will be no order as to costs.


I agree

[Citation :181 ITR 168]

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