COMMISSIONER OF WEALTH TAX vs. KULBIR SINGH

This order will dispose of W.T.As. No.4, 5 of 2007, 27, 28, 29 and 30 of 2009 as it has been stated by learned counsel for the parties that all the six appeals involve common questions.

W.T.A.No.4 of 2007 has been preferred by the revenue under Section 27A of the Wealth Tax Act, 1957 (hereinafter referred to as “the Act”) against order dated 4.12.2006 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh raising following substantial questions of law:- “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the A.O. to accept the claim of the assessee on filing of -2- **** comparable cases ignoring rates prescribed by the Registering Authorities?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in concurring with the findings of the Ist Appellate Authority authorised to collect House Tax that the property does not constitute two independent houses inspite of the fact that as per local authority there are two independent houses and two separate numbers have been allotted to these two separate houses?”

During the wealth tax assessment of the assessee, claim of the assessee for exemption for one residential house was not accepted on the ground that what was described as one residential house was infact two houses. Plea of the assessee as to valuation was also not accepted and wealth was assessed at higher value. On appeal, CWT(A) accepted the valuation of assessee and also accepted the plea that the residential house was one and not two as held by assessing officer. On appeal of the revenue, the issue of valuation was remanded to the assessing officer and the finding of the CWT(A) that the property in question was only one house and not two was upheld. Aggrieved thereby this appeal was preferred raising the above two questions. It is now pointed out that during the pendency of appeal remand order was complied with and though the assessing officer reiterated the valuation earlier determined, on appeal CWT(A) decided the issue in favour of the assessee vide order 24.7.2008 which has attained finality. In view of this -3- **** development, question no.1 has become infructuous.

As regards question No.2 it will be appropriate to refer to the finding recorded by the Tribunal, which reads as under:- “Next ground raised by the revenue pertains to holding that the assessee had one house and not two houses whereas the municipal record speaks otherwise. The ld. DR defended the assessment order whereas the assessee defended the orders of the first appellate authority. On perusal of record and after hearing the rival submissions, it is seen that the impugned addition was made by the ld. Assessing Officer on the ground that the assessee owns two independent houses consequently, the value of one house was added to the total wealth of the assessee. The ld. Assessing Officer has merely considered the allotment of different house numbers allotted by the Municipal; Committee to the extended part of the house ignoring the factual aspect/report of the Executive Officer. There is a special note by municipal authorities that the impugned certificate is only for house tax purposes and not for ownership. As per the assessee, there is only one electric/sewerage connection with the impugned property and is used by the same family. The investment on the construction was also made from the HUF account and the property is surrounded by a common boundary. Keeping in view the totality of circumstances and the finding of the ld. CIT(A), -4- **** we concur with the finding that these are not two independent houses. Therefore, the stand of the ld. CIT (A) is upheld, specially when the land belongs to HUF having common compound. The decision of the Hon'ble a “house” within the meaning of Section 7(4) of the W.T.Act, 1957, therefore, entitled to exemption, clearly comes to the rescue of the assessee. Therefore, this ground of the revenue is dismissed. This covers ground no.3 in the appeal of the revenue for assessment year 2003-04 also.”

We have heard learned counsel for the parties.

Learned counsel for the revenue submits that since different house numbers have been allotted by the Municipal Committee, the property could not be treated as one house as rightly held by the assessing officer. On the other hand, learned counsel for the assessee submits that mere allotment of two numbers to the same property could not be conclusive on the question whether the property was one house or two houses. While allotting two numbers, a note was given by the municipal authorities that the numbers were allotted only for house tax purposes and not for ownership. There was only one electric/sewerage connection. Construction was made from the HUF funds. The property was -5- **** [2006] 283 ITR 0045 holding that since the buildings were in the same compound, the same constitute one house. Reliance has also been placed on judgments of Allahabad High Court in Shiv Narain Chaudhari Vs. Commissioner of Wealth-Tax [1977] 108 ITR 0104 and Bombay High Court in WTA No.268 to 273/Mum/2004 (Dy. Wealth Tax, which reads as under:- “5. Exemptions in respect of certain assets (1) ..... 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) xxx xxx (ii) xxx xxx (iii) xxx xxx (iv) xxx xxx (v) xxx xxx (vi) one house or part of a house or a plot of land belonging to an individual or a Hindu undivided family; Provided that wealth-tax shall not be payable by an -6- **** assessee in respect of an asset being a plot of land comprising an area of five hundred square metres or less.

To determine as to whether building constitutes one house or more than one houses, the Allahabad High Court in Shiv Narain Chaudhari observed as under:- “The word “house” has not been defined in the Act. Of the several meanings of the word “house” contained in Shorter Oxford Dictionary, the one appropriate to the context, in our opinion, is building for human habitation, especially a dwelling place. In ascertaining the meaning of the word “house” for Housing and Local Government [1965] 3 All ER 850, 853, 854 ; [1966] 2 WLR 1204, 1211 are apposite: “The precise meaning of the word 'houses' has frequently arisen for judicial consideration, but mostly in connection with other statutes or in other contexts. Decisions in relation to such other matters appear to me to afford very little, if any, assistance, to the determination of its meaning in this case. What seems to be clear is that the word has a distinct fluidity of meaning, and that it is best construed in relation to the context in which it is found and in relation to the objects and purposes of the Act or of the section of the Act in which it is used.” To attract the exemption under clause (iv) of -7- **** section 5(1) of the Act the house owned by the assessee should be used by the assessee exclusively for residential purpose. In the present case the assessee is a Hindu undivided family consisting of four adult male members. Each of them is occupying one residential unit in the building bearing door Nos. 92 and 92A. It is well- settled that though a Hindu undivided family is ordinarily joint not only in estate but also in food and worship, the members of such family need not have a common residence. In other words, the family may continue to remain undivided even though different members of the family are residing separately. If a building otherwise comes within the meaning of the word 'house” the mere fact that different members of the Hindu undivided family who own that building are living separately in different self-contained portions thereof, will not, in our opinion, constitute that building into many houses. It is undisputed that both portions of the building bearing door Nos.92 and 92-A, Darbhanga Castle, are contiguous to each other and are within a common boundary and a common compound. Though there are four residential units within that building, they are connected by a common passage and the building has unity of structure. That the portion of the building bearing door No.92 was building in 1960 while the other portion bearing door -8- **** No.92-A was built in the year 1963, would not have any relevance to determine whether both those portions together constitute a house. A house may be built in stages; a portion of it may be built in one year and another portion of it may be built after an interval of several years. That one portion of the building bears one door number, while the other portion bears another door number and that these two portions are assessed separately by the municipality, are no doubt relevant circumstances in considering whether these two portions constitute one house or two different houses, but these circumstances are not decisive. The Tribunal has, in our opinion, attached excessive importance to these two circumstances. As these two portions of the building are contiguous and situate in the same compound and within common boundaries and have unity of structure there is no reason why they should not together be regarded as constituting one house. Bearing in mind the caution uttered by Lawrence J. in Annicola Investments Ltd.'s case [1965] 3 All ER 850; [1966] 2 WLR 1204 that the same word occurring in different enactments has to be given a meaning in relation to the context, the object and the purpose of that enactment, we shall advert to a few decisions in which the question whether a building in which there are several dwelling units, can be regarded -9- **** as one house, was considered. In Kimber V. Admans [1900] 1 Ch D 412 (CA) the facts were these: The plaintiffs were owners of two plots of lands forming part of a building estate, and had built a house on each of these plots. The defendant had purchased the two remaining plots in that building estate. He proposed to erect on those plots four blocks of residential flats. Each block was to contain two flats on the ground floor and two flats on the first floor. The plaintiffs pleaded that the defendant was bound by a covenant that not more than ten houses shall be erected on the said four plots. Cozen-Hardy J. had held that there was no breach of the covenant by the defendant and that the building of the nature which he intended to build was a dwelling house though each building was to contain a number of separate mess usage. In appeal, while upholding that decision, Lindley M.R. Observed: “What does that (covenant) mean? Does it refer to the mode in which the building to be erected is to be sub-divided or let, or does it refer to the aggregate of the rooms or whatever the contents of the building may consist of ? I think that the latter is the meaning. The house is the whole amalgamation .....It applies, not to the interior portions of the building, but to the whole building. In Banabo V. Mayor, Aldermen and Burgesses of -10- **** the Borough of Wood Green [ 1945] 2 All ER 162 (KB), the facts were these :The local authority in whose area a house was situated, served a notice upon its landlord to carry out certain specified repairs to various parts of the building. At the date of the notice the house was let to two separate tenants, one of whom occupied the ground floor and the other the upper floor. The house was not structurally divided, both tenants using the same entrance door, hall and internal corridor. The local authority had, however, rated the two parts of the house as separate dwellings. The landlord failed to carry out the work required by that notice and the local authority carried out the work and called upon the landlord to pay the cost of such work under the Housing Act, 1936. The landlord pleaded that the notice and the demand which followed it were not valid since separate notices and separate demands in respect of each tenement was required and that the landlord was entitled to know the cost of effecting the repairs for each of the tenements. It was held in that case that for the purpose of the Housing Act, 1936, the fact that the house consisted of two separate dwellings, did not entitle the landlord to separate notices in respect of each dwelling and that as the Act was concerned with -11- **** “houses” and not “dwellings” only one notice was necessary in respect of the entire house and separate notices were not necessary in respect of each dwelling. Humphreys J. observed thus at page 164:- “In fact, this was a house which was used by two separate families. The landlord, the person having control, had let certain rooms in the house to one person and certain other rooms to another person. Does that make house two houses? In my opinion, emphatically not. It remained one house. I think that is the answer, and a complete answer, to this point.” In Okereke V. Borough of Brent [1966]1 All ER 150; [1966] 2 WLR 169 (CA) the facts were these. A building containing three floors and a basement had been occupied at one time as a single house. Subsequently, it was divided into three separate self-contained dwellings which were rated separately. Two of these were each occupied by a different family and a third was occupied by members of more than one family. The respondent, Borough, had issued a notice to the owner of that building under section 15 of the Housing Act requiring him to effect certain improvements. The owner challenged that notice on the ground that the property did not fall within section 15 of that Act as the building was a mere -12- **** collection of houses. The Court of appeal by a majority decision held that the building came within the meaning of the word “house” under section 15 of the Housing Act. Salmon L.J. Observed thus at page 158 (see also [1966] 2 WLR 169, 181 (CA): “Indeed, in my view, it was wrong to hold, if words have any meaning, that each tenement in a tenement block is a house. It may be, as counsel for the respondent suggests, that the occupier of a tenement sometimes refers to it loosely as his house, just as it is said figuratively that an Englishman's home is his castle. This, however, is beside the point, for it seems to me as impossible to hold that a single tenement is a house, as it would be to hold that a sub urban villa is a castle.” The aforesaid decisions also support the view we have taken, namely, that a house may consist of more than one self-contained dwelling unit and that if there is unit of structure, the mere fact that such self-contained dwelling units are occupied by different persons, will not make that house into several houses.”

Following the above view, the Gujarat High Court in S.D.Jadeja observed as under:- “In a slightly different situation the Allahabad High Court was called upon to decide in the case of Shiv Narain Chaudhari V. CWT [1977] 108 ITR 104 as to what would -13- **** constitute one house used for residential purposes. It was held that several self-contained dwelling units which are contiguous and situate in the same compound and within common boundaries and having unity of structure could be regarded as one house.”

Bombay High Court in WTA No.268 to 273/Mum/2004 observed as under:- “12. Under Section 5(vi) of the Wealth Tax Act, exemption is provided in respect of one house or part of house. The question for determination is whether a house can be said to include only a single dwelling unit. Per Halsbury, C. Grant V. Langston (1900) AC 390, it was held “A hundred years ago there was not much difficulty in saying what was a 'house' but builders and architects have so altered the construction of houses, and the habits of people have so altered in relation to them, that 'house' has acquired an artificial meaning and the word is no longer the expression of a simple idea. To ascertain its meaning one must understand the subject-matter with respect to which it is used in order to arrive at the sense in which it is employed in a statute”. In Lewin V.End (1906) App. Cas 299, it has been held that “House imputes a place of residence, but is a wider term than dwelling house.”.

Their Lordships of Allahabad High Court in Shiv -14- **** Narain Chaudhari's case (supra) considered the case of a Hindu Undivided Family consisting of 4 adult members, each occupying one residential unit in the building bearing door Nos.92-92A. The residential units were connected by common passages and had unity of structure. After the considering the facts of that case, their Lordships have held as under:- “Several self-contained dwelling units which are contiguous and situate in the same compound and within common boundaries and having unity of structure could be regarded as one house.” Reliance was placed by their Lordships of Allahabad High Court on the decision of Okereke V. Borough of Brent [1966]1 All ER 150; wherein it was observed at page 158 that “Indeed, in my view, it is wrong to hold, if words have any meaning, that each tenement in a tenement block is a house. It may be, as counsel for the respondent suggests, that the occupier of a tenement sometimes refers to it loosely as his house, just as it is said figuratively that an Englishman's home is his castle. This, however, is beside the point, for it seems to me as impossible to hold that a single tenement is a house, as it would be to hold that a sub urban villa is a castle.”

Their Lordships of Allahabad High Court after -15- **** considering the aforesaid decision is held as under:- “The aforesaid decisions also support the view we have taken, namely, that a house may consist of more than one self-contained dwelling unit and that if there is unit of structure, the mere fact that such self-contained dwelling units are occupied by different persons, will not make that house into several houses.”

In the facts of the present case, the assessee is owning two flats being Flat Nos.101 and 102, Jogeshwari (W), Mumbai and had claimed exemption under Section 5(vi) of the Wealth Tax Act. It is an admitted fact before the Commissioner (Appeals) that the two flats occupied by the assessee are being used by the joint family of the assessee and the Commissioner(Appeals) has observed “it is not under dispute that the assessee is staying with the joint family in the two adjacent flats which as per the assessee are connected.” During the course of appellate proceedings, the Commissioner (Appeals) was also considered the stand of assessing officer that the two independent flats which are adjacent and connected and occupied by the joint family as two independent houses. But, the Commissioner (Appeals) based on the reliance of the assessee on the decision of Shiv Narain Chaudhari's case (supra) it was held that the one house may consist of multiple dwelling units would be considered as one -16- **** unit for the purpose of Wealth Tax Act as a House provided there is a unity of structure.

In the facts and circumstances of the case wherein the flats being adjacent to each other are being used by the assessee as a common residence for himself and his joint family members, there is no merit in considering each flat as a separate unit and denying exemption under Section 5(vi) of the Wealth Tax Act. The exemption under Section 5(vi) of the Act is allowable to a house, which is a unity of structure and may consist of more than one dwelling units. We find support from CWT V. S.D. Jadeja, wherein their Lordships of Gujarat High Court have held as under:- “Held, that once the Tribunal had found on the facts, and there was no challenge to the finding, that the two buildings were contiguous, existed in one compound and within common boundaries, in the absence of any finding that either of the buildings was used for non-residential purposes i.e. commercial purposes, no infirmity could be found in the order of the Tribunal, when it held that both the buildings constituted a house belonging to the assessee exclusively used by him for residential purposes within the meaning of Section 7(4). The assessee was entitled to exemption in respect of both the buildings.

In our considered view, both the flats being adjacent to each other and being used as a common unit of residence by the assessee and his family members is to be considered a a house within in the meaning of section 5(vi) of the Act and is eligible for the aforesaid exemption provided under the Act. The value of the both the flats are not to be included as part of the assessed wealth of the assessee; for the purpose of levy of wealth-tax. This ground of appeal raised by the revenue is dismissed.”

In the present case, the assessing officer rejected the claim of the assessee for exemption. The assessing officer found that the assessee was HUF and though claimed exemption under section 5(1)(vi) in respect of one residential house, on enquiry from the municipal committee it was found that there were two houses in the same premises one in the name of Kulbir Singh and the other in the name of his son Gagandeep Singh who was also member of HUF. In a writ petition filed in this Court, Raghubir Singh had alleged that Kulbir Singh had constructed an independent house which allegation was not disputed. Accordingly, the house is to be treated as an independent house.

On appeal, CWT(A) considered the objections of the assessee that what was held to be two houses was infact two portions in the same house belonging to the same HUF. CWT(A) upheld the said plea holding that the assessing officer wrongly treated two separate portions of same house as two independent houses. The said finding has been upheld by the Tribunal for the -18- **** reasons quoted earlier. Factors taken into account for holding the same to be one house include there being only one electric/sewerage connection, usage by the same family, investment on construction from the same HUF account, ownership of the land by the same HUF and common compound.

For the purpose of Section 5(1)(vi) question whether the property was one house or more has to be gone into from case to case. Some of the parameters for determining whether the property in dispute was one house or more are:- a) Common ownership; b) Unity of structure and common compound; and c) Nature of usage. The above parameters are not exhaustive. Mere fact that two numbers are allotted for the same house having separate self-contained dwelling units may not necessarily give rise to an inference that the property was not one house as observed by the Bombay High Court in Mustaq Abdullah Khatri. There may be separate units in the same house which may sometime be treated as one residential house depending upon the facts and circumstances of a case.

As already noted above, in the present case the house is in the same compound and originally the house was constructed in the name of Karta of the HUF. There was expansion of construction in the name of son of Karta who was also member of HUF, from the funds of HUF. Both the units were being occupied by the HUF. In the circumstances, mere fact that two separate numbers were -19- **** allotted by the municipal committee for house tax purposes was not conclusive to hold that the assessee could not treat the same as one house under Section 5(1)(vi) of the Act to claim exemption. The view taken by the CWT(A) and the Tribunal cannot be held to be erroneous. Thus, we answer question raised against the revenue and in favour of the assessee.

Accordingly, the appeals are dismissed.

A copy of this order be placed in the file of each connected case.