Dayabhaga inheritance and wealth-tax assessment: inherited property was taxable in the hands of individual heirs, not as a Hindu undivided family.

Under Dayabhaga Hindu law, heirs taking inherited property in defined shares do not automatically form a Hindu undivided family; that status arises only if they actually choose to live and hold as a joint family. On the facts stated, there was no material showing any such intention, so assessment in the HUF status was not justified. Where the assets were held by an administrator, section 21 of the Wealth-tax Act permitted assessment in the hands of the persons on whose behalf the property was held, namely the individual heirs. The status shown in the return could not prevail over the true legal character of the holding.

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Issues: Whether, on the death of a Dayabhaga Hindu leaving heirs with defined and ascertained shares, the inherited property could be assessed to wealth-tax in the status of a Hindu undivided family, and whether the assessment could instead be made on the individual heirs through the administrator under section 21 of the Wealth-tax Act, 1957.

Analysis: Under Dayabhaga law, the heirs of a deceased father take the estate in defined shares and hold it in unity of possession, but that does not by itself create a Hindu undivided family. A joint family under that school arises only if the heirs choose to live jointly as a family in fact. In the present case, there was no material showing any such intention or formation of a joint family. The assets were held by an administrator, and section 21 of the Wealth-tax Act authorises assessment in the hands of the person on whose behalf the assets are held. The status adopted in the return could not override the true legal position.

Conclusion: The assessment as a Hindu undivided family was not justified, and the taxable wealth was required to be assessed in the hands of the individual heirs through the administrator. The answer to the reference was therefore in favour of the assessee.

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