LexJUGGL LAL KAMLAPAT BANKERS & ANR. versus WEALTH TAX OFFICER SPECIAL CIRCLE C-WARD KANPUR & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
•·
•
--
·'
35
A
JUGGl LAL KAMLAPAT BANKERS & ANR .
v.
WEALTH TAX OFFICER. SPECIAL CIRCLE C-WARD.
KANPUR & ORS.
December 15. 1983
[V.D. TULZAP~RKAR,'V. BALAKRISHNA ERADI & D.P. MADON, JJ.J
Wealth Tax Act 1957.
Sections 2 (e), 2(111), 3, 4(1), 7(2) (a~,/6A and 38A(l)
(h).
Wealth Tax R11fes 1957-Rule 2A & Rule 2B
JYealth Tax-Assess111e11t nf-lnterest of Karla of H.U.F. in a partnei·ship
.
.
firn1-'-Whether to be i11c(11ded in the net wealth of H.V.F.
Wealth Tax Officer-Reference to Valilation Officers- Wh~n justifierl
U7ords & Phrases-Meaning of
'Havin!! regard to the halanc~-s!ieet (}(such hllfiiness'-s. 7(2)'ca), Wealth
Act 1957.
The asses'sec (Appellant No. 2) who was Karta of a Hindu Undivided
·Fa1nily was a partner of the fan1ily finn (Appellant -No. 1). and w:as bCing assessed
to wealth tax as a HUF. For the p·urposc. of evaluating the interest of the
fan1i!y's _interest in the finn. the asscsscc ad0Ptcd the book value of buildings
owned by the firn1.
On the view that the n1arkct value of the buildings was n1uch n1ore than
their book value. the Wealth Tax Officer (Respondent No. 1) Tefcrred, under
section \-GA on the We.alth Tax Act,_ 1957, to the Valuation Ofi'i~rs (KesPondent
Nos. 2 & 3) the question of valuatipn of those buildings. The Valuation
Off'lcers issued notices under section 38A(I) (b) for inspection of buildings and
records relating to the1n, and the . asSessees objections to such procedure were
overruled.
The High Court dis1nisscd the asscssee's writ petition holding~
(I) having regard to 5ection 29 of the PartnCrship Act ·which enables a
f'\artne; to -transfer his interest in the partnership finn a~d Section 2(e) and
Section 4(1) (b) of the Act the interest of a partner in the par nershiP fir1n will
have to be regarded as a part of his nqt wealth under the Act. (2) Section 3 the
charging pfovision expressly levied wealth tax on the net wealth of every Hindu
undivided· fan1ily, and consequCntlY the interest of a H.U.F. in a Partnership
firm, which is Properly, could be regarded as a part of its assets liahlc to be
charged unde.r this Section. (3) R.ule 2, section 7 and section l6A (l) (i)_(li) had
B
C·
D
E
F
G
H
A
c
D
E
F
G
.ff
36
SUPREME corntr REPORTS
(1984] 2 S.C.R.
tp be. read hanhoniously and Rule 2 did ,;ot exclude the application of sections
7 and 16A for valuing an asset of a partner· in a partnership firm. (4) Section
7(2) was an enabling pr6vision giving a discretion to the Wealth-tax Officer
either to value the assets of a business as a whole or valuing each 3ssct thereof
separately and.in that' behalf he had the power to refer such ·valuation to ihe
Valuation Officer under Section l6A. (5) A.ppellant N~. 2 as a .Partner could be
regarded as a·n agent of appellant no. J firn1 and the Valuation Officers could
issue notices requiring affording of' facilities for inspection of buildings and
Production of boOks, docuni.ents and reCords ..
In the Appeal to this Court it was contended that : (l) there was n.o provi-
sion for inclusion of a 'Kafta~s interest in a Partnership firn1 in the H.U.F.'s
net-wealth f0r \vealth tax purPo.ses under th6 Act, and (2) even· assuming" that
api)e!lant No.2's interest (asn Karta of his H.U.F.) in the app~llant No.J's
. firm is eligible to tax tinder the Act, the valuation of such interest would bC
governed by section 7(2) (a) of the Act rC;;id \Vith rule 2A of the \Vealth Tax
Rules 1957 alld it wos hot open to the Wealth Tax OfficCr to refer the valuation
to the valuation Officer under section 16A.
Dis;:111issing 1h~ Appeal,
HELD: l(i) Section 3 01 ·the Act read with the definitions of i'net-weal-
th" as given in Section 2(1n) and "assets" given in section 2(e} clearly brings
out the cxigibility of a partner's interest in a firm either .jn his individual capa'-
. chy or his capacity as Karta of a II.. U.F. to wealth tax under the Act. [44 B-CJ.
(ii} There _is no. lacuna.in the Act as regards the making bf a Karb··s
interest {feprcsenting his H.U.F.) jn the· partnership 1irn1 exigiblc to wealth-
tax. J45 CJ"
(iii) Secti6n 4 (J) deals \vith the con1putation of the net-wealth of an
~individual. It enacts a deeming provision. Certc.in .assCts which do noJ in fact
or ih re1litY be1ong to the individual (the assessee) but sonie one else are to be
treated as belonging to that irtdividu~l and are to be indud('.d in his net
wealth. Analysis of Clauses (a) and (b) of•section 4(1) nlake iExcerpt shown. Read the full judgment & AI analysis in Lexace.