High Court Of Gujarat
Commissioner Of Wealth Tax vs. Dilip Ratilal (HUF)
Sections WT 5(1)(xxxii)
Asst. Year 1979-80
M.S. Shah & K.A. Puj, JJ.
WT Ref. No. 36 of 1989
18th July, 2002
Manish R. Bhatt & Mrs. Mauna M. Bhatt, for the Petitioner : None, for the Respondent
M.S. SHAH, J. :
At the instance of the Revenue, the following question of law is referred for our opinion in respect of asst. yr. 1979-80 :
“Whether the Tribunal is right in law and on facts in holding that the assessee is entitled to exemption under s. 5(1)(xxxii) of the WT Act in respect of her capital interest in the firm of M/s Raja Textile Mill ?”
We have heard Mrs. Mona Bhatt, learned standing counsel for the Revenue. Though served, nobody appears on behalf of the respondent-assessee.
The assessee is an HUF and during the year under consideration i.e., 1979-80, it was a partner in a partnership firm of M/s Raja Textile Mill. The assessee claimed exemption under s. 5(1)(xxxii) of the Act in respect of her capital interest in the said partnership firm. The WTO rejected this claim. But in appeal, the learned AAC relying upon the ratio of the decision in the case of CWT vs. Radhey Mohan Narain (1982) 29 CTR (All) 299 : (1982) 135 ITR 372 (All) and Boardâs Circular No. 347, dt. 7th July, 1982, accepted the assesseeâs claim and granted exemption to her under s. 5(1) (xxxii) in respect of her capital interest in the said partnership firm. The Tribunal confirmed the order of the learned AAC.
4. At the hearing of the reference, Mrs. Bhatt for the Revenue has pointed out that in the instant case the partnership firm was getting the goods prepared by an outside agency and therefore, was not entitled to exemption under s. 5(1)(xxxii) of the Act. Learned counsel heavily relied on the decision of the Division Bench of this Court in the case of CWT vs. Mohinibai Kanaiyalal (1999) 157 CTR (Guj) 298 : (1999) 240 ITR 636 (Guj), wherein this Court has laid down the following principle. “The Court was concerned with a case where the firm was getting grey cloth converted into cloth through outsider agencies. The Court made the following observations for rejecting the assesseeâs claim that the firm was engaged in manufacture : âthe finding was that the firm had got grey cloth converted into cloth through outsider agency. It was not the case that the outside agency which was processing the grey cloth was working directly under the supervision or control of the firm, in respect of whose assets the assessee claimed exemption, nor was it the case that the processing was done by the labour employed by the firm for a purpose of its own, though not at the factory premises of the firm. Nor was it the case that the processing of the cloth by that outside agency was in any-way connected with the carrying on of the business of the firm. No direct involvement of the firm with any processing act had been found to exist. In that view of the matter, the assessee could not be said to have interest in a firm which was engaged in the business of manufacturer of goods or processing of foods and, therefore, she was not entitled to claim the benefit of exemption under s. 5(1)(xxxii) in respect of her share in the value of its assets.”
Following the aforesaid decision, our answer to the question referred to us is in the negative i.e., in favour of the Revenue and against the assessee.
The reference is accordingly disposed of.
[Citation : 260 ITR 306]