1969 (3) TMI 3 - SC - Wealth-tax

Supreme Court confirms Hindu Undivided Family tax status for ancestral property received through family partition

The SC upheld the appellant's claim to be assessed as a Hindu Undivided Family (HUF) for tax purposes. The appellant argued that the wealth consisted of ... Appellant claimed to be assessed in the status of a HUF inasmuch as the wealth returned consisted of ancestral property received or deemed to have been received by him on partition with his father and brothers - held that the status of the appellant was rightly determined as that of a Hindu undivided family by the Income-tax Appellate Tribunal and the question of law referred to the High Court must be answered in the affirmative - Assessee's appeal is allowed Issues Involved:1. Determination of the appellant's status as a Hindu Undivided Family (HUF) for wealth tax purposes.2. Characterization of assets received on partition as joint family property or individual property.Issue-wise Detailed Analysis:1. Determination of the Appellant's Status as a Hindu Undivided Family (HUF):The primary issue was whether the appellant's status should be assessed as a Hindu Undivided Family (HUF) or as an individual. The appellant claimed the wealth returned consisted of ancestral property received or deemed to have been received by him on partition with his father and brothers. The Wealth-tax Officer and the Appellate Assistant Commissioner of Wealth-tax assessed him as an individual, while the Income-tax Appellate Tribunal held he should be assessed as an HUF. The High Court disagreed with the Tribunal, holding that without another male coparcener, the assets belonged to the appellant as an individual.The Supreme Court clarified that under the Wealth-tax Act, the term 'Hindu undivided family' is used in the sense understood in Hindu personal law. A Hindu joint family may consist of a single male member, his wife, and daughters. There is no requirement for at least two male members to form an HUF as a taxable unit. Therefore, the appellant's family, consisting of himself, his wife, and his daughters, qualified as an HUF.2. Characterization of Assets Received on Partition:The next issue was whether the assets received by the appellant on partition retained their character as joint family properties or became his individual property. The Court distinguished between two scenarios:1. Property not originally joint but received by the assessee.2. Property already impressed with the character of joint family property coming into the hands of a single coparcener.The Court referred to several precedents, including Kalyanji Vithaldas v. Commissioner of Income-tax and Commissioner of Income-tax v. Gomedalli Lakshminarayan, to emphasize that property originally belonging to an HUF does not cease to be joint family property merely because it comes into the hands of a single coparcener. The property retains its character as joint family property unless alienated. The Court also cited the Judicial Committee's decision in Attorney-General of Ceylon v. A. R. Arunachalam Chettiar, which held that property in the hands of a single coparcener remains joint family property.Applying these principles, the Supreme Court concluded that the properties received by the appellant on partition did not lose their character as joint family properties. The appellant's ownership was such that it would assume a different quality upon the birth or adoption of a son, and female members of the family had rights to maintenance out of it. Therefore, the properties remained joint family properties in the hands of the appellant.Conclusion:The Supreme Court held that the appellant's status was rightly determined as that of a Hindu Undivided Family by the Income-tax Appellate Tribunal. The assets received on partition retained their character as joint family properties. The question of law referred to the High Court was answered in the affirmative and against the Commissioner of Wealth-tax. The appeals were allowed with costs.