1988 (4) TMI 130 - AT - Wealth-tax

Inheritance assets taxed individually, not as HUF property, in wealth-tax assessment.

The assets received by the two brothers from their deceased parents were deemed to be included in their individual assessments for wealth-tax purposes. ... Cash Payments, Closing Stock, Rejection Of Accounts Issues Involved:1. Whether the assets received by the assessees from their deceased parents should be included in their individual wealth or treated as HUF properties.2. Validity and interpretation of the wills made by the deceased parents.3. Status of the assessees for wealth-tax purposes in relation to the properties received from their parents.Detailed Analysis:Issue 1: Inclusion of Assets in Individual Wealth vs. HUF PropertiesThe primary issue in these appeals was whether the assets received by the assessees from their deceased parents should be included in their individual wealth or treated as HUF properties. The assessees argued that the assets received from their deceased parents constituted HUF properties, while the revenue contended that they were individual properties. The Tribunal had previously ruled in income-tax proceedings that the income from these properties should be included in the individual assessments of the assessees. This rationale was applied to the wealth-tax assessments, leading to the conclusion that the value of the assets received by the two brothers from their parents should be assessable in their hands in their individual capacity.Issue 2: Validity and Interpretation of the WillsThe wills of the late Keshavrao Buty and his wife, Lilabai, were central to the case. Keshavrao and Lilabai had made wills in 1970, bequeathing their respective shares of the property to their two sons, Vinayak and Gopal. The assessees argued that the properties were ancestral and that the parents were not competent to will away their shares. However, the Tribunal noted that the wills had not been challenged and had been probated, making them a fait accompli. The Tribunal found that the parents had clearly stated in their wills that they were the absolute owners of their respective shares received on partition and had the legal authority to dispose of them. Therefore, the properties were bequeathed to the sons in their individual capacities.Issue 3: Status of the Assessees for Wealth-Tax PurposesThe Tribunal examined whether the properties received by the assessees should be considered individual properties or HUF properties for wealth-tax purposes. The assessees' counsel argued that the properties were ancestral and should be treated as HUF properties, citing various legal precedents. However, the Tribunal found that the properties had been partitioned in 1958, and each party received their share as individual property. The Tribunal also noted that the properties had been enjoyed as individual properties, and the wills had been acted upon, with the properties distributed among the beneficiaries. Consequently, the Tribunal held that the assessees should be assessed as individuals in respect of the properties received from their parents.Conclusion:The Tribunal concluded that the value of the assets received by the two brothers from their parents in terms of the wills should be included in their individual assessments for wealth-tax purposes. The decision of the CWT (Appeals) was reversed, and the departmental appeals were allowed.