Partitioned ancestral land ceases to form part of net wealth when decree, mutation and possession transfer before valuation date.

Ancestral agricultural lands partitioned under a civil court decree and mutated in favour of the assessee's son and grandsons before the valuation date were treated as outside the assessee's net wealth, because legal and practical ownership had passed with possession. A claim that the assessee remained absolute owner under customary law was rejected for want of proof of a custom overriding Hindu law, and contrary succession rules were displaced by the Hindu Succession Act. Section 4(1)(a)(iii) of the Wealth-tax Act was also found inapplicable because the transferees were majors and the statutory conditions were not satisfied. The disputed wealth-tax addition was directed to be deleted.

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Issues: (i) Whether the value of agricultural lands, which had been partitioned under a civil court decree and mutated in favour of the assessee's son and grandsons before the valuation date, remained includible in the assessee's net wealth. (ii) Whether the assessee could be assessed on the basis of customary law or under section 4(1)(a)(iii) of the Wealth-tax Act in respect of the transferred lands.

Issue (i): Whether the value of agricultural lands, which had been partitioned under a civil court decree and mutated in favour of the assessee's son and grandsons before the valuation date, remained includible in the assessee's net wealth.

Analysis: The lands were found to be ancestral in character. The court decree was acted upon by mutation and possession having been taken by the transferees before the valuation date, the assessee had ceased to have legal and practical ownership over the lands in question. The prior individual assessments did not prevent recognition of the later partition and transfer effected by decree.

Conclusion: The lands covered by the decree were not includible in the assessee's net wealth.

Issue (ii): Whether the assessee could be assessed on the basis of customary law or under section 4(1)(a)(iii) of the Wealth-tax Act in respect of the transferred lands.

Analysis: The plea that the assessee, being a Jat Sikh, was governed by customary law and remained absolute owner was rejected. Hindu law governed succession in the absence of proof of a custom inconsistent with it, and section 4 of the Hindu Succession Act abrogated contrary rules of succession. The transfer provision in section 4(1)(a)(iii) was also held inapplicable because the transferees were majors and the necessary statutory conditions were not established.

Conclusion: The assessee could not be assessed on the footing of customary absolute ownership, and section 4(1)(a)(iii) did not sustain inclusion of the lands in his wealth.

Final Conclusion: The assessments were directed to be modified by excluding the value of the lands decreed in favour of the assessee's son and grandsons, thereby deleting the disputed wealth-tax addition.

Ratio Decidendi: Once ancestral land is effectively partitioned and transferred pursuant to a binding court decree, with mutation and possession following before the valuation date, it ceases to form part of the assessee's assessable wealth unless a contrary custom displacing Hindu law is proved.

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