Aran Kumar, J.:— This judgment will dispose of bunch of references under Section 27 of the wealth Tax Act 1989, pending in this Court.

The assessees are partners in a firm known s M/s Wengers and Co. which owns -15 and A-16, Connaught Place, New Delhi, known as Wengers Building. The Wealth Tax Officer while making the assessment accepted, the assessees' claim that in respect of the assessees' share in the said immoveable property owned by the firm, he was entitled to exemption under Section 5(1)(iv) of the Wealth Tax Act 1957 (hereinafter referred to as the Act). However, the Commissioner of Wealth Tax was of the opinion that the order of the Wealth Tax Officer allowing the exemption under Section 5(1)(iv) to the extent of rupees one lac was erroneous and, therefore, he served a notice on the assessee to show cause why the same should not be cancelled and assessment be not made afresh by withdrawing the benefit of the exemption under Section 5(1)(iv) of the Act. The Commissioner of Wealth Tax relying on the judgment of the Madras High Court reported in Purushothamdas Gocooldas & Others v. CWT, 104 ITR 608, held that deduction under Section 5(1)(iv) was not allowable to a partner in the firm regarding property owned by the firm. The assessees who are partners in the said firm M/s Wengers and Co. filed appeals before the Tribunal. The Tribunal relying on the judgments of the Karnatka High Court reported in 114 ITR 532, Orissa High Court reported in 119 ITR 8 and M.P High Court reported in 127 ITR 633, held that the order of the Wealth-tax Officer was correct inasmuch as it allowed the benefit of exemption under Section 5(1)(iv) of the Act to the partners of the firm. Thus the order of the Commissioner of Wealth-tax was set aside by the Tribunal. With this background the Revenue has sought the opinion of this court on the following questions:—

“Whether, on the facts and in the circumstances of the case, the Tribunal was rihgt in holding that the assessee is entitled to an exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957 in respect of the property belonging to the firm?

“If the answer to question No. 1 is in the negative, was the order of the Wealth-tax Officer erroneous and prejudicial to the interests of the revenue and the Commissioner of Wealth-tax was justified in setting it aside?”

We may mention here that the Wealth-tax Officer had valued the building in question at Rs. 32,80,000/- and the question of valuation is not at all relevant so far as the answer to the aforesaid questions is concerned.

In order to appreciate the controversy involved, it may be appropriate to reproduce certain provisions of the Wealth Tax Act as in force at the relevant time:—

“Section 2(c)—“assessee” means a person by whom wealth-tax or any other sum of money is payable under this Act, and includes-

(i) every person in respect of whom any proceeding under this Act has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person,

(ii) every person who is deemed to be an assessee under this Act,

(iii) every person who is deemed to be an assessee in default under this Act.”

Section 2(m)—“net wealth” means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owned by the assessee on the valuation date other than-

(i) debts which under section 6 are not to be taken into account;

(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and

(iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953;xxxxx”

Section 3—“Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April 1957, a tax hereinafter referred to as wealth-tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I.”

Section 4(1)—In computing the net wealth-

(a) x x x where the assessee is a partner in a firm or a member of an association of persons (not being a co-operativee housing society), the value of his interest in the firm or association determined in the prescribed manner.”

Section 5(1)(iv) -

(1) Subject to the provisions of sub-section (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 -

(i) x x x

(ii) x x x

(iii) x x x

(iv) one house or part of a house belonging to the assessee.”

Rule 2 of the Wealth Tax Rules 1957 as it stood at the relevant time also needs reproduction.

“(1) The value of the interest of a person in a firm of which he is a pertner or in an association of persons of which he is a member, shall be determined in the manner provided herein. The net wealth of the firm or the association on the valuation date shall first be determined. That portion of the net wealth of the firm or association as is equal to the amount of its capital has been contributed by them. The residue of the net wealth of the firm or association shall be allocated among the parterners or members in accordance with the agreement of partnership or association for the distribution of assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the parterns or members are entitled to share profits. The sum total of the amounts so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association.

(2) Where the net wealth of a firm or association computed in accordance with sub-rule (1) includes the value of any assets located outside India, the value of the interest of any partner or member in the assets located in India, shall be determined having regard to the proportion which the value of the assets located in India diminshed by the debts relating to those assets bears to the net wealth of the firm or association.

(3) Where the net wealth of a firm or association computed in accordance with sub-rule (1) includes the value of any assets referred to in section 5(2) of the Act, the value of the interest of a partner or member shall be deemed to include the value of his proportionate share in the said assets and the provisions of section 5(2) of the Act shall be applied to him accordingly.”

As it has been already noticed the authorities below have placed reliance on certain High Court decisions while reaching their respective conclusions which shows that the point in issue has already been the subject matter of judicial pronouncement. However, since there is divergence of opinion between various High Courts, the matter has come up for consideration before us also. On behalf of the Revenue reliance has been placed on 104 ITR 608 which is a judgment of a Division Bench of the Madras High Court. In the said case the partnership in which the assessees were partners, owned a house property as one of its assets and the partners were residing in the said premises. In their return for Wealth Tax each of the assessees valued their share in the house property separately and claimed exemption under Section 5(1)(iv) of the Act. This claim was negatived by the officer on the ground that the house property was the asset of the firm and not that of the individual partner. This view was upheld by the Tribunal. On a reference to the High Court at the instance of the assessees it was held:—

That in the case of a partnership, no partner could claim to have any specific interest in its assets exclusively apart from his interest as a partner in the firm as such;

The partner's interest in the house property could not also be considered as immoveable property as his right is only to a share on the division of the partnership assets on dissolution;

As the property was an asset of the firm, the assessees in the instant case could not claim to be entitled to any portion of the house property as exclusively belonging to them and hence were not entitled to claim exemption under Section 5(1)(iv) of the Act.,

In deciding this case the Court mainly relied on a judgment of the Supreme Court in Addanki Narayanappa v. Bhaskera Krishnappa, 1966 SC 1300. In the said case the question for consideration before the Supreme Court was whether the interst of a partner in partnership assets comprising of moveable as well as immoveable property should be treated as moveable or immoveable property for the purposes of Section 17(1) of the Registration Act 1908. After discussing certain relevant provisions of the parnership act and the registrtion act it was held that the interest of the partners in the partnership assets was moveable property and the document evidencing the relinquishment of that interest was not compulsorily registrable under Section 17(1) of the Registration Act. It was also observed in this context that the provisions of Sections 14, 15, 29, 32, 37, 38 and 48 of the Partnership Act make it clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits if any accruing to the partnership from the realisation of this property and upon dssolution of the partnership to a share in the money representing the value of the property. It was further observed “no doubt, since a firm has no legal existence the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone”.

Relying on the aforesaid judgment, the Madras High Court held that the assessees in this case cannot claim to be entitled to any portion of this house property as exclusively belonging to them.

The counsel for the Revenue also referred to 87 ITR 17 which is again a decision of the Madras High Court. Reliance on the same in the present context we fail to appreciate. The said decision deals with the question as to whether a particular asset should be included in the assets of the firm for purposes of determining its net wealth under Rule 2 of the Wealth Tax Rules 1957. The question was whether agricultural land owned by a partnership firm was liable to be excluded from the assets in view of its expression ‘exclusion’ from the definition of assets in Section 2(e) of the Act.

Next, reliance has been placed by the counsel for the Revenue on 129 ITR 203 which is a judgment of the Andhra Pradesh High Court, In this case it was held that the net wealth of the firm ought to be arrived at in accordance with the provisions of the Wealth Tax Act as if the firm were an assessee. Therefore, it was held that while computing the interest of a partner in the firm in terms of Section 4(1)(b) of the Act, only the interest of the firm arrived at in accordance with the provisions of the Act, as if the firm were an assessee shall be taken into consideration. Therefore, according to this judgment it is the firm which is entitled to deduction on account of the exemptions granted under Section 5 of the Act. The case related to exemption under Section 5(1)(xxvi) read with Section 5(1A) of the Act. The firm was held entitled to deduction on account of deposits in a scheduled bank to an extent of Rs. 1,50,000 and it was held that the partner will not be entitled to exemption in regard to his share of the bank deposits held by the firm. At the bottom of page 212 of the report of the said judgment it has been noted that a firm is not an assessee under the Act, still it has been held that while computing the net wealth, the firm should be deemed to be an assessee, and the provisions of the Act dealing with computation of net assets of the assessee should be applied to the firm as if it was an assessee, though in fact it is not an assessee under the Act.

Reliance has also been placed on a latter decision of the same High Court reported as 175 ITR 66. This decision merely follows the earlier decision of the same Court referred to by us hereinbefore. The counsel for the Revenue also relied on two decisions of the Patna High Court reported in 122 ITR 781 and 145 ITR 217. Since the later decision merely follows the earlier one it may be worthwhile to make reference to only the earlier decision. The reasoning given in this decision is more or less on the same lines as contained in the decisions of the Andhra Pradesh High Court referred to hereinbefore, though a slight deviation is made so far as the question of a firm being treated as an assessee is concerned. It is also significant to mention here that this judgment dissents from the judgment of the Madras High Court in 104 ITR 602 to which a reference has been made by us earlier. The reasoning adopted by the Madras High Court has been countered with the following observations:—

“A firm is not a legal entity even though it has some attributes of personality. ‘Firm’ is a compendious expression to designate an entity, not a person. What is called property of the firm is the property of the partners and what are called debts and liabilities of the firm are their debts and liabilites. During the subsistence of the partnership, assets thrown into the partnership by the partners get merged together and lose their identity. All the same, the assets as a whole belong to the partners.”

Thus in the process the Patna High Court also distingushed the Supreme Court judgment in Addanki Narayanappa's case (1966 SC 1300) on which strong reliance was placed by the Madras High Court in Purshottamdass Gocooldass (supra). However, after making the aforesaid observations, the Patna High Court has proceeded to hold that in computing the net wealth of the firm by reference to Rule 2 of the Wealth Tax Rules 1957, if an asset qualifies for any exemption provided under the Act, such exemption must be taken into consideration in determining the net wealth of the firm. It follows from this judgment that it has been accepted that a firm is not an assessee under the Act and, therefore, it need not be treated as such which is contrary to w at was held in the decisions of the Andhra Pradesh High Court noted hereinbefore. It also holds that the property of the firm is really the property of the partners which is contrary to what was held by the Madras High Court in Purshottam Gocooldass, However, instead of granting benefit of exemption under Section 5(1)(iv) to a partner who is really an assessee under the Sales Tax Act, this judgment holds that the exemption should be taken for consideration in determining net wealth of the firm.

On the other hand Mr. Agnihotri, learned counsel for the assessees has laid great stress on the relevant provisions of the Act itself before proceeding to cite various decisions in support of his contention. According to him the following words in Section 5(1) hold the key to the entire cntroversy:—

“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”.

The emphasis is on ‘assessee’ for the purposes of availing the exemption Contained in the said provision, a firm not being an assessee is, therfore, not entitled to any exemption. According to the definition of the word ‘assessee’ in clause (c) of Section 2, a firm is not an assessee. It is further submitted that though under the Income Tax Act, a firm has been made an assessee, the same is not so in case of the Wealth Tax Act.

Section 3 which is the charging section under the Wealth Tax Act, excludes a partnership firm. It levies Wealth Tax on the net wealth on the corresponding valuation date of every “individual, Hindu Undivided family and company at the rate or rates specified in Schedule I”. This being the position emerging from the statutory provisions it is urged that there is no question of exemption being allowed to a firm or a firm being treated as an assessee for the purposes of computation of its net wealth.

Section 4 (1) which deals with the computation of the net wealth of an assessee postulates the case of an assessee being a partner in a firm in Sub-section (b). According to sub-section (b), the value of the interest of such partner in the firm has to be determined in the prescribed manner and the prescribed manner is contained in Rule 2 of the Wealth Tax Rules 1957. Rule 2, sub-rule (1) provides the net wealth of the firm as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them. The residue of the net wealth of the firm shall be allocated among the partners and members in accordance with the agreement of partnership for the distribution of assets in the event of dissolution of the firm or in the absence of such agreement, in the proportion in which the partners are entitled to share profit. The sum total of the amounts so allocated to a partner, shall be treated as the value of the interest of that partner in the firm. Thus sub-rule (1) of Rule 2 provides the manner in which the interest of a partner in the net wealth of an assessee being a partner in a firm is to be calculated so far as his interest in the firm is concerned. In the face of these clear provisions we need not go to the extent to which the Patna High Court or the Andhra Pradesh High Court has gone. If what has been laid down in the said judgments was the intention of the statute, the same could have been achieved by providing for it in the rules. The rules being silent on this aspect, one need not stretch them to take the view taken by the Andhra Pradesh High Court or the Patna High Court.

Further it is urged that the procedure as per Rule 2 is to be followed, Section 5 will not come into picture till the stage of computation of net assets and wealth of the assessee who is a partner in a firm comes. The exemption under Section 5 will not come into play while the net asset of the partnership firm is computed in order to ultimately find out the share of a partner in such asset. Rule 2 appears to be quite exhaustive in this behalf and whatever procedure is to be followed and benefit has to be allowed has been provided for therein. For instance in sub-rule (3) the benefit of Section 5(2) has been extended to a partner. If benefit of Section 5(1) was also to be extended, the same could have been so stated in Rule 2 itself. In view of this it is submitted by counsel for the assessees that the benefit of the exemption under Section 5(1)(iv) of the Wealth Tax Act has to be allowed to a partner at the time of his individual assessment and for his share in the house property owned by the partnership firm he will be entitled to such benefit.

Counsel for the assessee has relied on cetain rulings in support of his contentions. Reliance has been placed on 145 ITR 485 which is a judgment of the Supreme Court. It has been held in the said decision that the interest of a partner in a firm cannot be said to be not belonging to him; it in fact belongs to him and no legal fiction is required for treating it as beonging to him. The deeming provision in Section 4(1)(b) of the Wealth-tax Act is referable only to the “quantification of his interest in the firm”. Section 4(1)(b) only relats to the quantum of his interest as determined in the prescribed manner which is includible in the net wealth. In this case the assessee was the karta of an HUF who was assessed in the status of an HUF while he was also a partner in a firm as representing his HUF. It was held that the assessee's interest in the firm was chargeable to Wealth-tax in his hands in the status of HUF. After making a detailed reference to provisions of Section 4(1)(a) and 4(1)(b) of the Wealth-tax Act, their Lordships observed:—

“In other words, cl.(b) is not a deeming provision in the sense in which a deeming provision is made in cl.(a). It cannot be said that the interest of a partner in a firm does not helong to him; it, in fact, belongs to him and no legal fiction is required for treating it as belonging to him; and the proper way to interpret cl.(b) would be that the deeming part of it relates to the quantum of his interest in the firm determined in the prescribed manner which is to be treated as belonging to him and includible in his net wealth it is impossible to accept the contention that but for cl.(b) of s.4(1) the interest of a partner (where he happens to be an individual assessee) in a firm would not have been exigible to wealth-tax under the Act. As we shall presently point out a partner's interest in a firm either in his individual capacity or in his capacity as the karta of an HUF is otherwise exigible to wealth-tax under the other provisions of the Act and the deeming provision contained in s.4(1)(b), properly understood, must be held to be referable to the quantification of his interest in the firm determined in the presccribed manner that is made includible in his net wealth.

Section 3 of the Act read with the definitions of “net wealth” as given in s.2(m) and “assets” given in s.2(e) clearly brings out the exigibility of a pertner's interest in a firm either in his individual capacity or in his capacity as the karta of an HUF to wealth-tax under the Act.”

Again after referring to provisions of Section 3, Section 2(m) and Section 2(e), it was observed—

“On reading the aforesaid provisions together, it will appear clear that wealth-tax has been levied on the net wealth of an individual or an HUF, meaning thereby the aggregate value of all the assets belonging to such assessee minus all the debts owed by him. Under the definitions of “assets” property of every description, moveable or immoveable, is included, and since it cannot be disputed, and was not disputed before us that a partner's interest in a firm either in his individual capacity or in his capacity as the karta of an HUF is property, the same would be includible in the expression “assets” which will have to be taken into account while computing the net wealth of such individual or HUF and on such net wealth, the charge of wealth-tax has been imposed under s.3 It is thus clear that there is no lacuna in the Act as regards the making of a karta's interest (representing his HUF) in the partnership firm exigible to wealth-tax.”

The next judgment cited by the learned councel for the assessees is reported in C.I.T v. K. Saraswathi Ammal, 127 ITR 404. This judgment of the Madras Hogh Court does not refer to Purushothmdas Gocooldas v. C.W.T, 104 ITR 608 which is also a Madras High Court judgment. In this case the firm in which the assessees were partners held certain shares in a compaany. It was an industrial undertaking falling under Section 84 of the Income Tax Act 1961. By virtue of section 85 the dividends received by the firm from the company were excluded in computing the total income of the firm. The claim of the partners for exemption of the share of the dividend received by them from the company on the basis that their share of income from the firm contained the income received by the firm by way of dividend from the company was negatived by the departmental authorities on the ground that the benefit available to the firm, would not be available to the partners of the firm. The Tribunal, however, held that the income received by the distribution of the income of the firm by division of the profits and gains of the firm in accordance with the terms of the partnership deed gave to each of the partners the same type of income which the firm had received, and to the extent to which the income of the firm consisted of dividends from the shares held by the firm in the company the partners were also entitled to the same exemption. On a reference the High Court held that the firm had no separate legal entity and hence could not hold any property. It could not be treated as the owner of the shares in question. Consequently, the partners were the real owners of the shares and hence they would be entitled to the benefit under Section 85 in respect of their share of income to the extent that it included the dividends received by the firm from the company. While discussing the concept of the property of the firm, reference was made to Addanki Narayanappa's case (1966 SC 1300) which in fact had been relied upon by the same High Court in 104 ITR 608 to take a somewhat contrary view. Referring to Section 14 of the Partnership Act which defines property of the firm, it was observed “when one talks of the property, of the firm, it has to be remembered that a firm as such is not a legal entity; nor can a firm as such, according to the English concept also, hold property. This is the reason why the Supreme Court in the two decisions held that when the firm is dissolved and the partnership assets are distributed among the partners, there will be no transfer of the property of the firm in favour of the partners so as to attract the provisions of the Income Tax Act for capital gains”. The decisions of the Supreme Court referred to in this behalf are CIT v. Bankelal Vaidya, 79 ITR 594; CIT v. Devas Cine Corporation, 68 ITR 240. It was further observed “as far as the individuals who make up the partners of the firm are concerned, we have no doubt that the properties, which are called the assets of the firm, really vest in the partners of the firm. This has also been said by the Supreme Court in the decision Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300. Each of the partners may not hold any specific shares; nor can it be said that each partner holds all the shares in Kalinga Tubes Ltd. But this does not matter. The partners are the owners of the shares and the general principle of law cannot be abrogated and we cannot conceive of a hypothetical ownership of these shares and deny the partners, who, in law, own the property and in whom the property is vested, the benefit of Section 85”.

The counsel for the assessees has also cited C.W.T v. Mrs. Christine Cardoza, 114 ITR 532. This case related to the question of exemption under Section 5(1)(iv) being available to a firm or a partner of the firm at the time of his individual assessment—a situation similar to the one in hand. The partnership held agricultural land. It was held that in computing the net wealth of the partnership, the method of deducting the sum of Rs. 1,50,000/- in the computation of the net wealth of the firm under Rule 2 of the Wealth-tax Rules 1957, is not warranted by the terms of Section 5(1)(iv-a) of the Wealth-tax Act. The deduction contemplated by that provision is in the computation of the net wealth of an assessee-partner and not the firm, which is not an assessee. Hence, it was held that in computing the net wealth of an assessee who was a partner in a firm which owned agricultural lands, the value of the share of the assessee in agricultural lands will have to be included in his net wealth and the full deduction under Section 5(1)(iv-a) has to be given in his hands.

The following observations are worth noting, particularly in view of the fact that Addanki Narayanappa's case has been referred to and also relied upon:—

“Considerable emphasis has been laid by the learned counsel for the assessee on this sentence and it is contended that in the light of the clear enunciation by the Supreme Court in this case explaining the scope and effect of the decision in Addanki Narayanappa's case, AIR 1966 SC 1300, the assessee owned and had interest in the agricultural land and was entitled to the deduction under Section 5(1)(iv-a) of the Act. This submission for the assessee has considerbale force. In the light of this pronouncement of the Supreme Court in regard to the concept of a firm and the interests that the partners have in what is called property of the firm, on the facts and in the circumstances of the case, it is difficult to hold that the assessee was not the owner of agricultural lands so as to deny the deduction under Section 5(1)(iv-a). Accordingly, the view taken by the Tribunal must be upheld.”

The Court further observed:—

“But it seems to us that the method of deducting a sum of Rs. 1,50,000 in the computtion of the net wealth of the firm under rule 2 is not warranted by the terms of Section 5(1)(iv-a). The deduction contemplated is in the computation of the net wealth of an assessee and not a firm which is not the assessee. On the principle enunciated by the Supreme Court, the assessee is a person, who owns the agricultural land and, therefore, deduction has to be given in his/her hands. This is what has been directed by the Tribunal.”

The next judgment in line is reported in C.W.T v. L. Butchi Krishna, 119 ITR 8. This judgment of the Orissa High Court fully supports the contention of the learned counsel for the assessees. In this case the Tribunal had taken the view that on a reading of Rule 2(3) of the Wealth-tax Rules, it was not necessary to comply with the provisions of section 5(1a) and exemption should be available in respect of the value of the assets of the exempted variety in the hands of the assessee. Irrespective of whether the assessee held the deposits in his own name or as his share in a firm, the limit prescribed under section 5(1 A) of the Act was to be applied at that stage and not at the stage of computing the assets in the hands of the firm. The dispute was really as to the stage at which the exemption had to be given effect to. It was held that the deduction on account of the exempted asset held by the firm was to be allowed at the time of computation of the net wealth of the assessee partner.

To the same effect is the M.P High Court decision reported in Narsibhai Patel v. Commissioner Of Wealth Tax, 127 ITR 633. Regarding the concept of partnership property it was observed that though a partnership or a firm is not a legal person and cannot hold property, yet the property brought in by the partners for the partnership business cannot be without any owner. Such a property really vests in the partners collectively in proportion to their shares in the firm although the right of onwership of each partner in respect of that property is restricted by the contract of partnership and the very nature and character of the collective business called the partnership business for which the property is to be utilised. Therefore, the deposits made by the partnership in a bank are in law held by the partners in proportion to their shares in the partnership and each partner is entitled to the benefit of the exemption contained in section 5(1)(xxvi) of the W.T Act 1957, in his individual assessme t to the extent of the maximum prescribed by section 5(1A). For this view the Court found support from Rule 2 of the Wealth-tax Rules also.

Jagdish Chandra Grover v. Commissioner Of Wealth Tax, 156 ITR 560 is a latter decision of the Madhya Pradesh High Court which totally relies on the aforesaid earlier decision of the same Court. It was further noted that 104 ITR 608 (Purshottamdas Gocooldas) had already been distingushed in the judgments of Karnatka and Patna High Courts referred to hereinbefore including that of the Madhya Pradesh High Court reported in 127 ITR 633, and the court was specifically of the view that it was unable to pursuade itself to follow the view expressed in Purushothamdas Gocooldas's case. Counsel for the assessee has also cited 168 ITR 46 which is a judgment of the Kerala High Court and it is really based on the Karnatka High Court decision already referred to by us, reported in 114 ITR 533.

The judgment of the Calcutta High Court reported in C.W.T v. Naurangrai Agarwalla, 155 ITR 753 is an elaborate judgment on the point discussing all the earlier cases on the subject and the relevant provisions of the Act and the Rules. It was finally held that a partnership is not a distinct legal entity and the partnership property in law belongs to all the partners constituting the firm. The Wealth-tax Act 1957, unlike the Income-tax Act, has not made the partnership an assessee. The properties held under a firm name will have to be assessed in the hands of the partners of the firm. The Wealth-tax Act imposes a tax on the net wealth of every individual and HUE “Net wealth” has been defined to mean the agregate value of all the assets wherever located belonging to the assessee on the valuation date. Therefore, when the total of the assets of an individual is computed under the Wealth Tax Act, his share in the assets of the firm in which he is a partner has to be taken into account.

The assessment of the individual partners will have to be made in accordance with the provisions of the Wealth-tax Act, 1957, and the Rules framed for that purpose. Rule 2 of the Wealth Tax Rules, 1957, has laid down the mothod of ascertining the vlaue of the share of a partner in a partnership firm. That does not mean and there is no express requirement of law that the firm's wealth has to be assessed in accordance with the provisions of the Act. Section 4(i)(b) requires inclusion of the value of the interest of a partner in a firm determined in the prescribed manner. Prescribed manner means the manner set out in the Wealth-tax Rules. The Rules do not require that the wealth of a firm will be computed after taking into account various allowances and deductions provided in the Act. The Rules have not created any legal fiction treating the firm as an assessee at all. Various exemptions mentioned in Section 5 can only be claimed by an assessee and the terms and conditions of claiming those exemptions have been laid down in Section 5 itself. Therefore, it is only after the value of the assessee's interest in the partnership firm has been determined under Section 4(i)(b), the question of granting exemtpion in respect of the assets which have been included in the valuation will arise.

Regarding Addanki Narayanappa's case (1966 SC 1300) it was observed:—

“It was contended on the basis of the judgment of the Supreme Court in the case of Addanki Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300, that the interest of the partners individually did not have any interest in the partnership property. The Supreme Court in the case of Addanki Narayanappa was faced with the question whether in a case, where the partnership assets included immoveable property, a document recording relinguishment by some of the partners of their interest in the firm was compusorily registrable under Section 17(1)(c) of the Registration Act. It was observed by Mudholkar, J., in that case, at page 1304, as follows:—

“The whole concept of parnership is to embark upon a joint venture and for that purposee to bring in as capital money or even property including immoveable property. Once that is done, whateever is brought in would cease to be the exclusive property of a person who brought it in. It would be the trading asset of the partnership in whcih all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right or any property which has brought in, much less over any other partnership property.”

I fail to see how this judgment helps the partner the case before us. It is well settled that no partner can claim that any portion of the partnership assets belong to him exclusively. But can it be denied that the assets belong to the partner jointly and to nobody else? The firm is not a juristic person. The assets belong to the partners jointly. It was observed by Mudholkar J. (headnote);

“No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense, every partner has an interest in the propety of the partnership.”

“It has to be noted that in Addanki Narayanappa's case, AIR 1966 SC 1300, it was clearly stated by the Supreme Court that “since a firm has no legal existence, the partnership property will vest in all the partners and in that sense, every partner has an interest in the property of the partnership”. The property cannot reamin in vacuum. It must belong to somebody. If the partnership has no legal existence, the property must in law belong to the partners. It is true that during the subsistence of the firm, no partner can deal with any of the assets of the partnership as his own.

But none the less, in law, all the assets must belong to the parters jointly. The point has been placed beyond any doubt by the judgment of the Supreme Court in the case of Malabar Fisheiries Co. v. C.I.T (1979) 120 ITR 49, where it was observed at page 57:

“But, speaking generally, the firm as such has no legal recognition. The law, ignoring the firm, looks to the partners composing it; any change amongst them destroys the identity of the firm; what is called the property of the firm is their property, and what are called the debts and liabilites of the firm are their debts and liabilites.”

Another judgment (155 ITR 765) of the same High Court but by a different Bench is reported in the same volume which takes a similar view at page 765. Then there is a full bench decision of the Kerala High Court reported in 179 ITR 543 taking the same view.

This leads us to L.N Birla v. C.W.T, 168 ITR 87. In this judgment the Calcutta High Court has emphasised the fact that the Wealth-tax Act is a separate Act and contains its own scheme for assessment. The status of the partnership under the Income-tax Act is different from that under the Wealth-tax Act. The Income-tax Act contains special provisions under which a partnership firm is an assessable entity and further, provisions have been made in the Act for assesment of a partnership firm to Income-tax. So far as the Wealth-tax Act is concerned, a partnership firm is not an assessable entity. Therefore, the concept of a partnership in the context of the Income-tax Act cannot be imported into the Wealth-tax Act. A partnership having been excluded from assessment under the Wealth-tax Act and provisions having been made for assessment of the properties standing in the name of the firm in the hands of the partners, according to their respective shares, the general concept of the nature of a partnership has to be taken into account. Under the general principles of law, the name of the firm is a compendious name for all the partners and it is not an entity in law. It is on that basis that the shares of the partners in the assets of the firm have to be considered as assets or wealth in the hands of the partners liable to be assessed to Wealth-tax.

The assessee was a partner in a firm having one—fifth share therein. The firm owned agricultural lands. In his return of Wealth-tax, the assessee claimed exemption under Section 5(i)(iva) of the Wealth-tax Act, 1957, in respect of his share of the agricultural land of the firm. The Wealth-tax Officer disallowed the claim of the assessee. The Tribunal held that the assessee was not entitled to exemption under Seciton 5(1)(iva) in his personal assessment of wealth in respect of his share as a partner of the firm but the exemption would be taken into account while determining the net wealth of the firm. It was held that inasmuch as a firm was not an assessee within the meaning of the Wealth-tax Act and inasmuch as the properties of a firm were treated as wealth or assets in the hands of its partners to the extent of their respective shares aggregating to their respective interest therein, in computing the net wealth of the firm under Rule 2 of the Wealth-tax Rules 1957, there was no question of any exemption being allowed to the firm. The assessee was entitled to exemption under Section 5(1)(iva) to the extent of 1/5th of the value of the agricultural land held by the firm in determining his net wealth.”

The latest judgment in series is that of the Madhya Pradesh High Court reported in 180 ITR 667. A partner of a firm is entitled to exemption under Section 5(1)(iv) of the Wealth-tax Act 1957, in respect of the value of his interest in the house property owned by the firm. The exemption would be available even for a house used for commercial purposes. This is clear because the words “and exclusively used by him for residential purposes” have been deleted in Section 5(1)(iv) by the Finance (No. 2) Act, with effect from April 1, 1972. Instructions issued by the Cntral Board of Direct Taxs, vide letter F.No 317/23/73-WT dated July 24, 1973 are also to the same effect.

Accordingly it was held that the assessee was entitled to exemption under Section 5(1)(iv) of the Act in respect of his share in the cinema building owned by the firm in which he is a partner.

Having carefully considered the rival contentions of the parties and having gone through the various judgments cited before us to which we have made reference hereinbefore, we are of the opinion that the contentions raised on behalf of the assessees are well founded. A plain reading of the statutory provisions supports this view. Section 5 which grants the exemptions under the Act refers to assessees and a firm not being an assessee under the Act is not covered under Section 5. It is an assessee alone who can avail the exemption under Section 5. In the face of this clear Statutory provision we are unable to subscribe to the view taken by the Andhra Pradesh and the Patna High Courts in the case cited by the revenue and referred to by us earlier. Another reason which impels us not to subscribe to the said view is again statutory provision in Section 4(1)(b) and Rule 2 of the Wealth-tax Rules. Section 4(1) deals with computation of net wealth of an assessee. Sub-section (b) thereof relates to a firm. The said sub-section makes reference to prescribed manner. The only prescribed manner is the one contained in Rule 2. Rule 2 does not contain any procedure for granting exemption under Section 5(1)(iv) at the time of computation of the net wealth of a firm. Rule 2 appears to be quite exhaustive and whatever procedure is to be followed and wherever exemption has to be allowed, has been provided for. In sub-rule (3) the benefit of Section 5(2) has been extended to a partner. If benefit of section 5(1) was also to be extended, the same could have been so stated in Rule 2 itself. There is nothing in Section 4(1)(b) or Rule 2 to suggest that a firm be deemed an assessee so as to allow benefit of the exemption under Section 5(1)(iv) to it. We feel that taking a view as canvassed by the revenue will be doing violence to the statutory provisions.

The concept of a partnership firm and partnership property as contained in the Partnership Act also compels us to take this view. A firm has no legal existence and as such it cannot hold any property. It is the partners who own the partnership property or assets. Therefore, it is only fair that they alone should have the benefit of the exemption under Section 5(1)(iv) when their individual assessments are taken up which will include their respective shares in the net wealth of the partnership firm. We find preponderance of judicial opinion in favour of this view that we have taken. On behalf of the revenue reliance has been placed on the decisions of the Madras, Patna and Andhra Pradesh High Courts. We have already noted the said judgments and found that the Andhra and the Patna views treat the firm as an assessee. With utmost respect we feel that this view is not consistent with the plain statutory provisions or the Rules. So far as the Madras High Court's view expressed in Purshottamdas Gocooldas (supra) is concerned, the same is purportedly based wholly on Addanki Narayanappa, 1966 SC 1300. To us it appears that reliance placed on Addanki Narayanappa's case by the Madras High Court is not correct. In fact the Madras High Court has itself not subscribed to this view in a later judgment in 127 ITR 404. Besides this various other High Courts including those who have ultimately held in favour of the revenue on the question of exemption, have demonstrated that the reliance placed by the Madras High Court in Addanki Naraynappa is not correct. Actually we find that this Supreme Court decision dealing with the concept of partnership property supports the view that we have taken.

The Supreme Court was more concerned with the aspect of requirement of registration of documents at the time of distribution of assets on dissolution of a firm. Moreover the mere fact that a partner cannot claim to be entitled to any potion of a property owned by a firm as exclusively belonging to him, will not to our mind completely disentitle him from seeking benefit of exemption under Section 5(1)(iv) of the Act so long as he is onwer of the house property even though as a partner in a firm. This is particularly in view of the language of the relevant provisions of the statute granting the exemption. For purposes of the exemption provision it does not appear to be necessary that a partner should be able to say that the property or any specific part thereof exclusively belongs to him.

It has been brought to our notice that an S.L.P filed in the Hon'ble Supreme Court on behalf of the revenue against one of the decisions of the Madhya Pradesh High Court taking the same view as we have taken in this judgment, has already been dismissed recently. (See 178 ITR statute portion at pp 70-71).

We may note here yet another aspect of the matter urged before us by counsel for the assessees. Although as per the view we have taken already, it may not be necessary to divulge on this aspect, yet since the same was urged before us we feel it appropriate to notice the same.

It has been pointed out that Sub-section (4) has been added to Section 5 by virtue of an amendment with effect from 1.4.1989 Sub-section (4) runs as under:—

“Sub-section (4).

Where the assessee is a partner of a firm or member of an association of persons, and the firm or association owns any one or more of the assets which are exempt under sub-section (1), then, for the purposes of his assessment under this Act, the value of his 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-section (1) in respect of those assets on the basis of such proportionate value.”

The effect of this provision is that the view taken above has found statutory force. The case in hand relates to a period much prior to the said amendment coming into force. The submission on behalf of the assessees is that subsequent legislation may be looked into to see what ought to be the proper interpretation of the relevant provisions prior to the subsequent legislation. Counsel cites 183 ITR 299 which is a judgment of the Karnatka High Court and page 559 of the same volume which is a judgment of the Supreme Court in support of this submission. It was held in the Supreme Court judgment that though Explanation II was inserted in Section 64 of the Income-tax Act with effect from April 1, 1980 and it did not have retrospective effect, it serves as a legislative exposition of the import of Section 64 (1) and (i).

The Karnatka High Court has discussed this in greater detail. In the aforesaid judgments after making reference to two earlier decisions of the Supreme Court in support of this view, it has been held that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation.

The result of the above discussion is that question No. 1 is answered in the affirmative and in view of the said answer to question No. 1, question No. 2 does not arise and we further add that 5the Wealth-tax Officer was right in allowing the benefit of exemption to the assessees who are partners in the firm qua their respective shares in the immoveable property owned by the firm under Section 5(1)(iv) of the Wealth-tax Act.