ORDER
V. DONGZATHANG, VICE-PRESIDENT :
Sri Shaileshchandra D. Shah is a partner in a firm which owns an immovable property in the firm of Milan Talkies, Ahmedabad. Similarly, Shaileshchandra Family Trust and Girishchandra Dahyabhai Family Trust are partners in a firm which owns a Relief Cinema, Ahmedabad. Each of these partners claimed relief under s. 5(1)(iv) of the WT Act in respect of their share in the value of the immovable property for the asst. yr. 1975-76. The Assessing Officer passed identical orders in each of the case and rejected the claim for identical reasons observing as follows :
“It is seen that the assessee has claimed the exemption of Rs. 1,00,000 under s. 5(1)(iv) of the WT Act in respect of its share in the value of immovable property owned by M/s. Milan Talkies, Ahmedabad in which he is a partner. Since the exemption under s. 5(1)(iv) of the WT Act is available only to the assessee in respect of the house or part of the house belonging to him while in this case the property belongs to the firm in which he is simply a partner, hence, the claim of the assessee for the said exemption under s. 5(1)(iv) of the WT Act is not accepted.”
2. Aggrieved by the said order, the assessee took up the matter in appeal before the AAC, who allowed the claim on the basis of the decision of the Special Bench of the Tribunal, Madras Bench, in the case of L. Gulabchand Jhabakh vs. WTO (1982) 14 TTJ (Mad)(SB) 465 : (1982) 1 SOT 613 (Mad)(SB), which in turn followed the decision of the Hon’ble Madras High Court in the case of CWT vs. K. Saraswathi Ammal & Ors. (1981) 127 ITR 404 (Mad).
3. The Revenue came upon appeal before the Tribunal challenging the order contending that the AAC erred in allowing exemption of Rs. 1,00,000 in terms of s. 5(1)(iv) of the WT Act. The case came up before the Division Bench of the Tribunal, Ahmedabad Bench. The Bench considered it fit to refer the following question to the Special Bench.
“Whether immovable property owned by the firm answers the description of a house or part of a house belonging to the assessee for the purpose of s. 5(1)(iv) of the WT Act ?”
4. It is in this manner that the case has come up before us. At the outset, it will be worthwhile to note that this issue is no more res integra in so far as the Tribunal is concerned. This controversy arose for the first time before the Tribunal, Madras Bench in the case of L. Gulabchand Jhabakh vs. WTO (supra). The Special Bench there considered the conflicting decision of the Hon’ble Madras High Court in the case of Purushothamdas Gocooldas vs. CWT 1976 CTR (Mad) 361 : (1976) 104 ITR 608 (Mad) and subsequent decision in CWT vs. K. Saraswathi Ammal (supra). After considerable deliberation on the issue, the Special Bench preferred to follow the later decision in CWT vs. Saraswathi Amal (supra) observing as follow :
“We are inclined to accept this submission of the assessee. After all, the real controversy in these cases is about the meaning and effect of the Supreme Court judgment in the case of Addanki Narayanappa vs. Bhaskara Krishnappa (supra). When the Madras High Court has in a subsequent case interpreted that in a way different from that contained in the case of Purushothamdas Gocooldas vs. CWT (supra) (though without expressly referring to it), we can follow that interpretation in the latest judgment, particularly when three other High Courts have also understood the Supreme Court judgment in the same manner as was done in the subsequent unreported decision of the Madras High Court.”
In doing so, the Special Bench took considerable support from the following decisions in favour of the view taken by it :
CWT vs. Mrs. Christine Cardoza (1978) 114 ITR 532 (Kar); CWT vs. I. Butchi Krishna 1977 CTR (Ori) 299 : (1979) 119 ITR 8 (Ori); CWT vs. Nandlal Jalan (1980) 14 CTR (Pat) 181 : (1980) 122 ITR 781 (Pat).
It was further noted by the Special Bench that the interpretation given by the Hon’ble High Court of Madras in Ammal’s case (supra) is in conformity with the subsequent decisions of the Hon’ble Supreme Court in the case of CIT vs. R. M. Chidambaram 1977 CTR (SC) 71 : (1977) 106 ITR 292 (SC) and in the case of Malabar Fisheries Co. vs. CIT (1979) 12 CTR (SC) 415 : (1979) 120 ITR 49 (SC).
5. The Hon’ble High Court of Gujarat at Ahmedabad had an occasion to consider that in an unreported judgment dt. 2nd September, 1994 in the case of CWT vs. Maheshkumar R. Patel in WT Ref. No. 9 of 1981, but the field of consideration in that case was circumscribed by the abandonment of the claim by the assessee for separate exemption in respect of two assets. It, however, claimed that while determining the value of its interest in the firm, the value of exempted assets under s. 5(1) of the WT Act had to be excluded. Their Lordships accepted the claim and observed as follow :
“10. If net wealth of the firm is to be assessed in terms of the r. 2 in accordance with the provisions of the Act, obviously the assets which are not to be included for the purpose of computing net wealth under s. 5 has to be excluded and same cannot be made a part of the interest of a person in the partnership firm referable to net wealth.
11. It is further to be noticed that neither under general law, nor under the provisions of WT Act a firm is separate entity from its partner. Firm as such is not a juristic person capable of holding property. Property owned in the firm name is in fact owned by the partners of the firm jointly. The WT Act does not provide that because an asset is jointly owned, it will be subjected to wealth-tax notwithstanding the fact that no tax is otherwise payable on it or is to be excluded from the computation of net wealth under s. 5 merely because of jointness of ownership. Merely because under the provisions of IT Act, a firm is treated as separate assessee, it does not become a separate entity for the purposes of WT Act also, when there is no such provision. Therefore, there is no warrant for treating the property under ownership of individual and under the joint ownership as partnership firm for the purpose of computing net wealth under the WT Act differently.
12. In this connection, it may also be noticed that s. 5 speaks of assets not to be included in net wealth of a “person” as distinct from assessee. If for the purpose of ownership of assets a firm is held to be a person distinct from its partners it applies to computation of net wealth of firm also. If a firm is not held to be a person than necessary corollary is that partners are the joint owners of the asset and they being the owner of the asset, are entitled to exclude its value from the computation of their net wealth for the purpose of wealth-tax.”
Their Lordships also noticed the subsequent insertion of sub-s. (4) in s. 5 w.e.f. 1st April, 1989 which reads as follow :
“(4) Where the assessee is a partner of a firm or member of an AOP, and the firm or association owns any one or more of the assets which are exempt under sub-s. (1), then, for the purposes of his assessment under this Act, the value of the interest in the firm or association shall be deemed to include the value of a part of each such asset of the firm or association in the same proportion in which he is entitled to share the profits of the firm or association and the assessment shall be made after allowing the exemption under sub-s. (1) in respect of those assets on the basis of such proportionate value.”
Their Lordships held the said provision as clarificatory in nature rather than amending the law.
6. In view of the above, this issue, in our view, is concluded in so far as the State of Gujarat is concerned. We hold that the AAC is fully justified in directing that the exemption under s. 5(1)(iv) of the WT Act should be given to the assessee. We accordingly uphold the order.
7. Before parting, it would be worthwhile to deal with the points raised by the parties before us. Shri B. R. Meena, the learned Senior Departmental Representative, at the outset, submitted that the immovable property in the form of cinema house is owned by the firm. Such cinema houses/cinema theatres are not residential property as contemplated under the WT Act. The Tribunal, Ahmedabad Bench in the case of Patel Enterprises vs. ITO (1986) 26 TTJ (Ahd) 171 (TM) : (1986) 15 ITD 114 (Ahd)(TM) considered the question whether theatre building being something by means of which business of film exhibition is carried on is to be treated as plant for purpose of depreciation allowance and it was held that such theatre building is a plant. Once the said cinema theatre is held by the Tribunal as a plant, it cannot at the same time be treated as house for the purpose of relief under s. 5(1)(iv) of the WT Act. According to him, the word “house” as used under s. 5(1)(iv) of the WT Act means building for human habitation especially a dwelling place. According to him, all houses are buildings but all buildings are not houses as contemplated under s. 5(1)(iv) of the Act. The learned Senior Departmental Representative further submitted that the interest of the partner in the firm is a movable property and that the partner cannot claim exemption under s. 5(1)(iv) of the Act. For this proposition, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Addanki Narayanappa vs. Bhaskara Krishnappa 1966 AIR SC 1300. It is further submitted that even if relief under s. 5(1)(iv) of the Act is to be given, then the same could be given only in the hands of the firm and not in determining the net wealth of its partners individually in their respective assessment as held by the Hon’ble Madras High Court in the case of Purushothamdas Gocooldas vs. CWT 1976 CTR (Mad) 361 : (1976) 104 ITR 608 (Mad). It is, therefore, submitted that the learned AAC erred in directing the Assessing Officer to allow deduction under s. 5(1)(iv) of the Act in the respective hands of the partners of the firm.
8. On the other hand, Shri K. C. Patel, the learned counsel of the assessee, raised a preliminary objection stating that the subject-matter of assessment or the matter in appeal before the first appellate authority is not a question of determination of the cinema theatre as a plant. The limited issue before the Assessing Officer was whether the assessee can claim the benefit of deduction under s. 5(1)(iv) of the WT Act in respect of its share in the immovable property held by the firm. On this very issue, the learned AAC decided the claim in favour of the assessee by following the decision of the Special Bench of the Tribunal which in turn followed the decision of the Hon’ble Madras High Court referred to in the order. In such a case, this issue is beyond the jurisdiction of the Special Bench as this issue has never been raised at any time before the Assessing Officer and the first appellate authority. For this reliance was placed on the decision of Hon’ble Gujarat High Court in the case of CIT vs. Steel Cast Corporation (1977) 107 ITR 683 (Guj). In particular, our attention was drawn to the observation given at pages 689 and 695. It is, therefore submitted that there must be a decision of the AAC by which the assessee or the Revenue is aggrieved, before he can prefer an appeal against that part of the order of the AAC consisting of such decision. A fortiori if a particular matter is not considered and decided by the AAC and the decision on it does not form part of the AAC, there can be no appeal against it. It is, therefore, submitted that this issue does not arise out of the order of the AAC and, therefore, it is not competent on the part of the Special Bench to consider this aspect of the matter.
9. Even assuming without admitting that this issue does arise, it is submitted that the scheme of the Acts, i.e., IT Act and WT Act are totally different. Sec. 43(3) of the Act which defines “plant” is applicable for the purpose of ss. 28 to 41 of the IT Act dealing with profits and gains of business or profession. Therefore, the decision rendered under the IT Act on this issue will have no application for determining the claim of deduction under s. 5(1)(iv) of the WT Act. Shri K. C. Patel, the learned counsel for the assessee, submitted that “plant” under the IT Act includes various items as defined in s. 43(3) of the Act. The Hon’ble Supreme Court in the case of CIT vs. Elecon Engg. Co. Ltd. (1987) 166 ITR 66 (SC) considered the term “plant” for the purpose of depreciation and it was held that drawings and patterns acquired from foreign collaborators are plant for the purpose of s. 43(3) of the Act and, therefore, is entitled to depreciation. In doing so, it upheld the decision of the Hon’ble Gujarat High Court in the same case reported in CIT vs. Elecon Engg. Co. Ltd. (1974) 96 ITR 672 (Guj). Their Lordships of the Supreme Court also referred to their earlier decision in the case of Scientific Engg. House P. Ltd. vs. CIT (1985) 49 CTR (SC) 386 : (1986) 157 ITR 86 (SC) and followed the ratio laid down therein. The question whether a particular asset is a plant or not depends also on the user of the said asset. The Tribunal in the case of WTO vs. Mootha Gopalkrishna (1987) 20 ITD 199 (Hyd) considered the question whether a godown would come within the description of ‘house’ for purpose of claiming exemption under s. 5(1)(iv). It was held in that case that the word “house” extends to a building which is used for business and should not be restricted to a mere dwelling house as held by the Supreme Court in the case of Tata Engg. & Locomotive Co. Ltd. vs. Gram Panchayat AIR 1976 SC 2463. The term “house” is not defined under the WT Act and it is held to be synonymous and interchangeable with building, dwelling or dwelling house and sometime with premises. It includes factory building and also building let out for office use, storage, for warehousing as also godowns. The learned counsel of the assessee further fortified his submission by citing the definition contained in the 20th Century Dictionary, Chambers 20th Century Dictionary and the Law Lexicon wherein the word “house” has been defined so as to include cinema theatre and other business houses including commercial establishments. The learned counsel of the assessee also cited the decision of the Hon’ble Madhya Pradesh High Court in the case of Ravi Mohan vs. CWT (1989) 180 ITR 667 (MP) which according to him is directly on this issue. He also cited the decision of the Hon’ble Punjab & Haryana High Court reported in CWT vs. Vipin Kumar (1993) 111 CTR (P&H) 52 : (1993) 69 Taxman 536 (P&H). It is, therefore, submitted that the issue is fully concluded by the decisions referred to above.
10. The learned counsel of the assessee further submitted that the Revenue authorities cannot raise objection in this regard. According to him, this issue is squarely covered by Board’s letter F. No. 317/23/73-WT dt. 24th July, 1973 wherein it was clarified that exemption under s. 5(1)(iv) is available even for houses used for commercial purposes.
11. In so far as the question whether relief is to be given in the hands of the firm or the partners, it is submitted that this issue is now squarely covered by the unreported decision of the Hon’ble High Court of Gujarat at Ahmedabad in WT Ref. No. 9 of 1981 of 2nd September, 1994 (supra) wherein it was held that neither under general law nor under the provisions of the WT Act, a firm is a separate entity from its partners. Firm as such is not a juristic person capable of holding property. Property owned in the firm name is, in fact, owned by the partners of the firm jointly. The WT Act does not provide that because an asset is jointly owned, it will be subjected to wealth-tax notwithstanding the fact that no tax is otherwise payable on it or is to be excluded from the computation of net wealth under s. 5 merely because of jointness of ownership. The Hon’ble High Court further held that sub-s. (4) in s. 5 inserted w.e.f. 1989 is clarificatory in nature and, therefore, procedural. In such a case, relief is to be given only in the hands of the partners. This view, according to the assessee, has now been consistently held by the Tribunal, Ahmedabad Benches in the recent decision like Asstt. CIT vs. Minor Kartikeya S. Shah in WTA No. 1799/Ahd/89 of 7th August, 1992. It is also submitted that this issue is clarified by the CBDT under the ED Act in the Circular dt. 6th March, 1982 [see Circular No. 330 dt. 6th March, 1992 printed at (1982) 29 CTR (TLT) 45.-ED.] wherein the Board clarified as follows :
“The Board are advised that a firm has no legal existence. The partnership property vests in all the partners and every partner has an interest in the property of the partnership. Since under s. 33(1)(n) property belonging to the deceased will qualify for exemption and since the expression “belong” would include cases where an interest less than full ownership exists exemption under s. 33(1)(n) would be admissible in respect of a house belonging to the firm.”
The learned counsel further took us to the corresponding provisions of s. 5 of the WT Act, 1957 and s. 33 of the ED Act, 1953 at page 11.1 of the paper book to show that the circular is equally applicable to the WT Act as follows :
Sec. 5 of WT Act, 1957
Sec. 33 of the ED Act, 1953
5. Exemption in respect of certain assets.- (1) Subject to the provisions of sub-s. (1A) wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee …….
33. Exemption.- (1) To the extent specified against each of the clause in this sub-section, estate duty payable in respect of property of any of the following kinds belonging to the deceased which passes on his death .
(iv) One house or part of a house belonging to the assessee.
(n) One house or part there of exclusively used by the deceased for his residence to the extent the principal value thereof does not exceed rupees one lakh if such house is situated in a place with a population exceeding ten thousand, and the full principal value thereof, in any other case :”
11. It is also submitted that the Hon’ble High Court of Gujarat at Ahmedabad in ED Ref. No. 1 of 1976 of 4th August, 1981 considered Instruction No. 939 of the CBDT dt. 22nd March, 1976 and following that instruction upheld the order of the Tribunal holding that the value of house property in which the deceased was residing at the time of her death was entitled to exemption under s. 33(1)(n) of the ED Act. Keeping in view the above provision and also in particular the provisions of the WT Act wherein a registered firm is not treated as a person assessable under the WT Act, it is but natural that relief is to be given in the hands of the partners as rightly held in the above cases. The learned counsel of the assessee also cited the decisions of the Hon’ble Supreme Court in the case of Malabar Fisheries Co. vs. CIT (supra) and Addanki Narayanappa vs. Bhaskara Krishnappa (supra) to support the view that the firm as such does not have a separate entity apart from the partners and, therefore, relief is to be allowed only in the hands of the partner. The decision of the Hon’ble Supreme Court in the case of Juggilal Kamlapat Bankers & Anr. vs. WTO (1984) 39 CTR (SC) 47 : (1984) 145 ITR 485 (SC) also was cited wherein it was observed at page 491 as follows :
“It cannot be said that the interest of a partner in a firm does not belong to him, it, in fact, belongs to him and no legal fiction is required for treating it as belonging to him.”
It is, therefore, submitted that there is no infirmity in the order of the AAC and the same is to be upheld.
12. In reply, the learned Senior Departmental Representative, Shri B. R. Meena reiterated the claim that cinema theatre is a plant and even if it is treated as a building, it is not a house as contemplated under s. 5(1)(iv) of the WT Act. It is also submitted that in the case of hotel building, the Hon’ble Calcutta High Court in the case of S.P. Jaiswal Estates Pvt. Ltd. vs. CIT (1994) 121 CTR (Cal) 482 : (1994) 209 ITR 307 (Cal) held that hotel building is not a plant. Keeping in view the above decisions, it is submitted that the expression used in a particular statutory provision cannot be different for different objects as held in the case of Petron Engineering Construction P. Ltd. vs. CBDT (1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC). Liberal construction will be made wherever it is possible to be made without impairing the legislative requirement and the spirit of the provision.
13. We have carefully considered the rival submissions. With regard to the preliminary objection raised by the learned counsel of the assessee, we are of the view that the objection raised cannot be sustained though the issue does not arise directly from the order of the Assessing Officer and the AAC. This is because the reference to us is a question whether immovable property owned by the firm answers the description “house or part of house belonging to the assessee” for the purpose of s. 5(1)(iv) of the WT Act. Unless this immovable property is identified at the first instance, the answer to the question will be academic and the appeals cannot be disposed of.
14. Coming to the merit of the case, it is seen that the point raised by the learned Senior Departmental Representative, Shri B. R. Meena, is no more debatable in view of the following reasons. The term “house” is not defined in the WT Act. It is held to be synonymous and interchangeable with building or dwelling or dwelling house and sometime with premises. The dictionary meaning of the term ‘house’ clearly provided that it includes a theatre, a place of business or commercial establishment also. The Hon’ble Supreme Court in the case of Tata Engg. & Locomotive Co. Ltd. vs. Gram Panchayat (supra) held that it includes a factory building and, therefore, it would include not only building occupied or intended for residence but let out for office use, storage, for warehousing as also godowns, etc. This view is further fortified by the amendment to s. 5(1)(iv) w.e.f. 1972 where the words “and exclusively used by him for residential purposes” have been deleted. The CBDT in reply to the query dt. 28th June, 1973 clarified that exemption under s. 5(1)(iv) would be available even for houses used for commercial purposes. Therefore, it does not lie in the month of the Revenue to say that commercial houses like cinema building are not entitled to exemption under s. 5(1)(iv) of the Act. The Hon’ble Madhya Pradesh High Court in the case of Ravi Mohan vs. CWT (supra) considered this very issue and held that a cinema building is a house for the purposes of s. 5(1)(iv) of the Act and the partners are entitled to the said deduction. The Tribunal, Hyderabad Bench, in the case of WTO vs. Mootha Gopalkrishna (supra) also held that a partner is entitled to exemption under s. 5(1)(iv) in the share of the value of a godown as it comes within the description of house for the purpose of claiming exemption under that section. Respectfully following the above decisions and also keeping in view the instruction of the Board, referred to above, we hold that the cinema building in the present case also comes within the description of ‘house’ for the purpose of s. 5(1)(iv) of the Act.
15. As to the question whether such exemption would be available to the firm or the partner, we have already given our reasoning in the earlier part of the order. For the reasons given therein, we hold that the learned AAC was justified in directing the Assessing Officer to allow exemption under s. 5(1)(iv) of the Act in the hands of the partners. We hold accordingly.
16. In the result, the appeals fail and are dismissed.