1966 (8) TMI 16 - HC - Wealth-tax

Court rules assets received on partition as individual's separate property for wealth tax purposes.

Hanumanmal Periwal. Versus Commissioner of Wealth-Tax, Bihar And Orissa.

The court determined that the assessment to wealth-tax for the assessment year 1960-61 was correctly made on the assessee as an individual, not as a Hindu ... Whether the assessment to wealth-tax for the asst. yr. 1960-61 had been rightly made on the assessee in the status of an individual - as there was no other coparcener with the assessee on the valuation date, the assessment to wealth-tax was rightly made on the basis that the assessee was an individual Issues Involved:1. Status determination for wealth-tax assessment (individual vs. Hindu undivided family).2. Character of assets received on partition.3. Applicability of exemptions under the Wealth-tax Act.4. Comparison with sole surviving coparcener cases.5. Binding precedents and conflicting judgments.Issue-wise Detailed Analysis:1. Status Determination for Wealth-tax Assessment:The primary issue was whether the assessment to wealth-tax for the assessment year 1960-61 was rightly made on the assessee in the status of an individual. The assessee's family consisted of himself, his wife, and an unmarried daughter. He received the assets upon partition from a Hindu joint family, and the Wealth-tax Officer determined his status as an individual, not as a Hindu undivided family (HUF).2. Character of Assets Received on Partition:The court examined whether the assets received by the assessee on partition belonged to him absolutely or retained their character as coparcenary property. The court noted that the assets received on partition no longer retain the character of coparcenary property unless the assessee had a male issue. Since the assessee had no son either born or adopted by the valuation date, the property became his separate property. The court referenced Mulla's Principles of Hindu Law, stating that the share obtained on partition is ancestral property concerning male issue but separate property concerning other relations.3. Applicability of Exemptions under the Wealth-tax Act:Section 5(1)(ii) of the Wealth-tax Act exempts the interest of the assessee in the coparcenary property of any HUF of which he is a member. The court had to determine if the assets belonged to the assessee or to the HUF. Since the assessee had no male issue at the valuation date, the property was considered his separate property, making the exemption inapplicable.4. Comparison with Sole Surviving Coparcener Cases:The court distinguished between a coparcener obtaining ancestral property on partition and a sole surviving coparcener in possession of ancestral property. In the latter case, the property retains its character as coparcenary property, whereas in the former, it becomes separate property until another coparcener is born or adopted. The court cited the case of Attorney-General of Ceylon v. Ar. Arunachalam Chettiar, where the property remained joint family property despite being held by a sole surviving coparcener due to the potential for adoption by the widow.5. Binding Precedents and Conflicting Judgments:The court referred to the Supreme Court decision in T. S. Srinivasan v. Commissioner of Income-tax, which held that the status of the assessee should be determined based on the existence of any other coparcener on the relevant date. The court also noted a conflicting judgment in Panna Lal Rastogi v. Commissioner of Income-tax, which supported the assessee's contention but was not followed due to the binding nature of the Supreme Court's decision.Conclusion:The court concluded that the assessment to wealth-tax for the assessment year 1960-61 was rightly made on the assessee in the status of an individual. The assets received on partition were considered the separate property of the assessee as he had no male issue at the valuation date. The decision of the Supreme Court in T. S. Srinivasan v. Commissioner of Income-tax was followed, and the question was answered in the affirmative and against the assessee. No order for costs was made due to the complexity of the question and differing views by various courts.