1979 (3) TMI 8 - HC - Wealth-tax

Communion of property in marriage not an association of persons under tax laws

The Tribunal held that the communion of property formed as a result of marriage under the Portuguese Civil Code does not constitute an association of ... Exemptions, Net Wealth, Wealth Tax Issues Involved:1. Whether the communion between spouses married under the Portuguese Civil Code constitutes an association of persons.2. Whether each spouse is entitled to a separate deduction u/s 5 of the Wealth-tax Act, 1957.Summary:Issue 1: Whether the communion between spouses married under the Portuguese Civil Code constitutes an association of persons.The Tribunal observed that no association of persons could have come into existence as a result of the marriage of the assessee with his wife. The Tribunal's decision was based on the interpretation of the Portuguese Civil Code and relevant case law, including CIT v. Purushotam Gangadhar Bhende [1977] 106 ITR 932 (Bom) and CIT v. Indira Balkrishna [1960] 39 ITR 546 (SC). The court concluded that the communion of property formed as a result of marriage under the Portuguese Civil Code does not constitute an association of persons as understood under the I.T. Act or the W.T. Act. The marriage does not have the purpose or object of constituting joint holders of property, which is a necessary condition for an association of persons.Issue 2: Whether each spouse is entitled to a separate deduction u/s 5 of the Wealth-tax Act, 1957.The Tribunal upheld the contention that the exemption u/s 5 should be allowed in the assessee's assessment against his share in the assets of the communion, and not while computing the net wealth of the communion itself. The court found that the statutory provision is clear that the exemption is to be considered at the stage of the assessment of the individual. This interpretation is supported by the Karnataka High Court decisions in CWT v. Purushotham Pai [1978] 114 ITR 270 (Kar) and CWT v. Mrs. Christine Cardoza [1978] 114 ITR 532 (Kar), as well as the Orissa High Court decision in CWT v. I. Buchi Krishna [1979] 119 ITR 8 (Orissa). The court concluded that the exemption u/s 5 is to be considered at the stage of computing the net wealth of the individual assessee and not at the stage of determining the net wealth of the communion.Conclusion:The question referred to the court was answered in the affirmative and in favor of the assessee. The department was directed to pay the costs of the reference to the assessee.