Commissioner of Wealth Tax Vs. N. Balakrishna - Court Judgment

Excerpt:
direct taxation - apportionment of share - section 28 of income tax act, 1961 and sections 4 (1), 5, 5 (1) and 27 (1) of wealth tax act, 1957 - assessee was minor - admitted to benefits of partnership firm - whether deduction under section 5 (1) to be made in computing net wealth of firm before apportionment of share of partners or whether deduction to be taken into account after ascertaining share of partner and allowed as deduction only in hands of partner - assessee being minor was not having any share in assets of firm - held, value not includible as assessee had no share in assets of firm. head note: income tax wealth tax exemption under s. 5(1)(iv)--residential property--assessee a minor. ratio: question as to whether assessee was entitled to deduction under section 5(1)(iv) in respect of an asset not includible in the net wealth was academic, as the assessee was a minor. held: on the facts of this case, the question is academic. it is not in dispute that the assessee was a minor on the relevant valuation dates and he was only admitted to the benefits of the partnership. therefore, the assessee did not have any share in the assets of the firm. that was the reason why the tribunal upheld the order of the appellate commissioner excluding the value of the building from the net wealth of the assessee. though the commissioner excluded it on the ground that it was exempt under section 5(1)(iv), the value itself was not including as the assessee had no share in the assets of the firm. that being the accepted position, the question whether he is entitled to deduction under section 5(1)(iv) in respect of an asset not includible in the net wealth is clearly academic. application: also to current assessment years though under section 5(1)(vi) a. y.: 1976-77 and 1977-78 wealth tax act 1957 s.5(1)(iv) - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter. scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. it would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. section 2(x) and 2(iv) of the act used the plural products of livestock. the legislative intention is very clear that not only a product of livestock like milk (when notified by government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the act. thus the term ghee is to be interpreted on the basis of expression products of livestock as defined in section 2(xv) of the act. whatever products are declared as such by the government by notification, they become products of livestock for purpose of the act. consequently it was held that ghee is the product of livestock and by reason of power conferred under section 3(1) read with section 3(3) of the act on them it is competent for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of the definitions aforesaid. sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] declaration of notified area held, it is only under section 3 that government are required to publish draft notification inviting objections and section 3(3) mandates to consider objections and suggestions before issuing declaration order. it is very conspicuous that section 4 does not contemplate any draft notification inviting objections and suggestions before either constituting market committee, establishing notified market area or declaring notified market area for the purpose of levy of market fees. thus, except ordaining government to issue preliminary/draft notification inviting objections at the time of issuing declaration order under section 3(3) of the act nowhere much less under section 4 contemplates issuing a notification inviting objections. when the legislature has chosen to exclude principles of natural justice, the court cannot introduce rule of audi alteram partem and render statutory provisions unworkable. in such a case, maxim, expressum facit cessare tacitum (when there is express mention of certain things, then anything not mentioned is excluded) would apply. section 7: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] levy of market fee element of quid pro quo - held, levying fees and tax are two forms of exercise of sttaes taxing power. there is no quid pro quo between tax payer and public authority as tax is a part of common burden. it is also well settled that fee is charge for special service or a benefit given to a class of individual fee payers and fee collected need not have correlation with actual service in exactitude but if it is shown that substantial portion of the fee is expended or the purpose for which it is levied, it would be justified. expressum facit cessare tacitum sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] meaning when there is express mention of certain things, then anything not mentioned is excluded. - 5(1)(iv) in respect of an asset not includible in the net wealth is clearly academic.t.n.c. rangarajan, j.1. at the instance of the revenue, the following two questions have been referred under s. 27(1) of the wt act : '(1) whether, on the facts and in the circumstances of the case, the tribunal is right in holding that the provisions of s. 4(1)(b) of the wt act r/w r. 2 of the wt rules and the principle decided by the ap high court in cwt vs . narendra ranjalker : [1981]129itr203(ap) are not applicable in the case of the assessee, who is a minor (2) whether, on the facts and in the circumstances of the case, the tribunal is right in directing the wto to grant exemption under s. 5(1)(iv) separately for a minor ?' 2. the undisputed facts are that the assessee was a minor admitted to the benefits of a partnership and that partnership had a residential property. for the valuation dates being 31st december, 1975 and 31st december, 1976 respectively corresponding to the asst. yrs. 1976-77 and 1977-78, the 1/8th share of the assessee in the net wealth of the firm was added in determining the net wealth of the assessee. but the exemption under s. 5(1)(iv) in respect of the residential property owned by the firm was not allowed. on appeal, the cit(a) noted that on a revaluation, the property was valued at rs. 5,76,000 and the share of the assessee-partner came to rs. 72,000. this amount being less than rs. 1 lakh, which is the maximum amount exempted under s. 5(1)(iv) of the act, he held that this amount is not includible in the wealth-tax assessments of the assessee. the revenue appealed and contended that the deduction under s. 5(1) should be made in computing the net wealth of the firm before apportionment of the share of the partners and consequently no such deduction should be given in the assessment of the assessee as a partner and relied upon the decision of this court in cwt vs. nagendra ranjalker (supra). however, the tribunal noted that the assessee being a minor admitted to the benefits of the partnership, he could not be regarded as a partner and, therefore, his share was not assessable to wealth-tax. the tribunal, therefore, followed its own decision in the case of b. sadasiva rao vs. wto and confirmed the exclusion of the share of the value of the residential property from the net wealth of the assessee. the learned counsel for the revenue pointed out that the decision of the tribunal in sadasiva rao vs. wto (supra) has been reversed by this court in cwt vs . b. chandrasekhara rao : [1989]175itr66(ap) , and therefore, the decision of the tribunal was not correct and the questions raised must be answered in favour of the revenue. on the other hand, the learned counsel for the assessee submitted that, on the question whether the deduction under s. 5 should be taken into account in computing the net wealth of the firm before ascertaining the share of the partner or whether it should be taken into account after ascertaining the share of the partner and allowed as a deduction only in the hands of the partner, who alone is the assessee, there were several decisions, the most recent being that of the delhi high court in cwt vs . a. k. tandon : [1992]198itr26(delhi) in favour of the assessee and, therefore, the judgment of this court in cwt vs. b. chandrasekhara rao (supra) requires reconsideration. 3. even though we find that the question raised does admit of further consideration as suggested by the learned counsel for the assessee, we are of the opinion that on the facts of this case, the question is academic. it is not in dispute that the assessee was a minor on the relevant valuation dates and he was only admitted to the benefits of the partnership. therefore, the assessee did not have any share in the assets of the firm. that was the reason why the tribunal upheld the order of the appellate commissioner excluding the value of the building from the net wealth of the assessee. though the appellate commissioner excluded it on the ground that it was exempt under s. 5(1)(iv), the value itself was not includible as the assessee had no share in the assets of the firm. that being the accepted position, the question whether he is entitled to deduction under s. 5(1)(iv) in respect of an asset not includible in the net wealth is clearly academic. 4. in the circumstances, we decline to answer the questions. no costs.