Hindu undivided family status cannot be created by assessment; section 20(2) applies only to an existing joint family.

Wealth-tax could not be assessed in the status of a Hindu undivided family where the family had already been divided and the sons held the inherited properties separately. The court held that HUF status depends on the factual and legal existence of a joint family under personal law, and cannot be created by assessment alone. Section 20(2) of the Wealth-tax Act, 1957 also did not apply, because it presupposes an existing HUF whose partition may be recognised or deemed to continue; it cannot bring a non-existent joint family into existence. The assessment was therefore held unsustainable.

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Issues: (i) Whether the assessee could be assessed to wealth-tax in the status of a Hindu undivided family in respect of the properties inherited from the deceased father. (ii) Whether section 20(2) of the Wealth-tax Act, 1957 could be invoked to sustain the assessment.

Issue (i): Whether the assessee could be assessed to wealth-tax in the status of a Hindu undivided family in respect of the properties inherited from the deceased father.

Analysis: The family had already become divided in 1932, and the sons thereafter held the properties as separate units. On the father's death in 1949, the properties devolved on the divided sons separately and not as one continuing family holding. A Hindu undivided family cannot be created by assessment; its existence depends upon personal law and the factual constitution of the family. Where no joint family existed in the relevant year, assessment in that status was not legally sustainable.

Conclusion: The assessee was not liable to be assessed in the status of a Hindu undivided family.

Issue (ii): Whether section 20(2) of the Wealth-tax Act, 1957 could be invoked to sustain the assessment.

Analysis: Section 20 proceeds on the premise that there is an existing Hindu undivided family whose partition has to be recognised or, failing satisfaction about partition, deemed to continue. The provision does not authorise creation of a Hindu undivided family where none existed in law. Since the family had ceased to exist as a joint family long before the relevant valuation date, section 20 had no application.

Conclusion: Section 20(2) of the Wealth-tax Act, 1957 could not be applied to sustain the assessment.

Final Conclusion: The reference was answered against the Revenue and the wealth-tax assessment in the status of a Hindu undivided family was held unsustainable.

Ratio Decidendi: Deeming provisions for continued assessment of a Hindu undivided family apply only where a Hindu undivided family existed in law; they cannot bring a non-existent joint family into existence for tax purposes.

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