Rectification power cannot withdraw a deduction on a debatable legal issue; estate duty treatment under HUF wealth taxation was upheld.

Estate duty attributable to a deceased coparcener's share was treated as linked to that share and not as a deductible debt of the continuing HUF beyond the statutory scheme governing succession and recovery. On rectification, a debatable question of law and a mere change of opinion were held not to amount to a mistake apparent from the record, so section 35 could not be used to withdraw the original deduction on that basis. By majority, the rectification orders were sustained and the appeals failed.

---

---

Issues: (i) Whether the estate duty liability attributable to the deceased coparcener's 1/3rd share in the Hindu undivided family property could be deducted in computing the net wealth of the Hindu undivided family. (ii) Whether the Wealth-tax Officer could invoke section 35 of the Wealth-tax Act, 1957 to withdraw the deduction on the ground of a mistake apparent from the record.

Issue (i): Whether the estate duty liability attributable to the deceased coparcener's 1/3rd share in the Hindu undivided family property could be deducted in computing the net wealth of the Hindu undivided family.

Analysis: On the death of a coparcener, the proviso to section 6 of the Hindu Succession Act, 1956 creates only a notional partition for the limited purpose of determining succession; it does not bring about an actual partition by metes and bounds. The liability to estate duty attaches to the property passing on death and is a personal liability of the accountable person, subject to the statutory scheme of valuation and recovery under the Estate Duty Act. The estate duty payable on the deceased coparcener's share was therefore attributable to that share and not to the continuing wealth of the Hindu undivided family as such.

Conclusion: The estate duty liability was not deductible from the Hindu undivided family's net wealth except to the extent permitted by the statutory scheme applicable to the share passing on death, and the assessee did not succeed on this issue.

Issue (ii): Whether the Wealth-tax Officer could invoke section 35 of the Wealth-tax Act, 1957 to withdraw the deduction on the ground of a mistake apparent from the record.

Analysis: The question whether estate duty liability could be treated as a deductible debt in the hands of the Hindu undivided family had been the subject of divergent views and required legal reasoning beyond an obvious or patent error. A debatable point of law, or a change of opinion on a disputed legal position, does not constitute a mistake apparent from the record for the purpose of rectification. Since the original allowance of the deduction involved such a debatable issue, rectification under section 35 was not justified.

Conclusion: The rectificatory orders were not sustainable under section 35, and this issue was decided in favour of the assessee at the level of the reference, but the majority ultimately upheld the rectification.

Final Conclusion: By majority, the rectification orders were sustained and the appeals failed.

Ratio Decidendi: A deduction cannot be withdrawn under the rectification power unless the alleged error is obvious and patent on the record; a debatable legal issue or mere change of opinion falls outside section 35.

---