TaxTMI 
TaxTMI 
2002 (8) TMI 32
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....in definite portion for purposes of wealth-tax? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding and had valid materials to hold that the property in Desabandhu Street, Coimbatore, was only the individual property of three brothers held as tenants-in-common and was not held as the property of the joint family of three brothers? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's conclusion that the value of the two houses in Coimbatore and Ooty could be estimated only by the capitalisation of the rent method is a reasonable view and valid on the facts?" The assessment years with which we are concerned are 1968-69 to 1975-76. The subject matter of the tax cases relates to the validity of assessment made on the Hindu undivided family under the provisions of the Wealth-tax Act, 1957, hereinafter referred to as "the Act". There was a Hindu undivided family constituted with its karta, one N.S. Ramaswamy Iyengar, and his three sons, namely, N.R. Srinivasan, N.R. Vijayaraghavan and N.R. Santhanam. The karta of the joint family, N.S. Ramaswamy Iyengar, died intestate in the year....
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....nsisted that all the three brothers should join in the execution of deed of conveyance and, hence, an agreement was also entered into among the brothers on July 9, 1972, stating that they effected partition in 1943 itself and from that date, they were co-owners of the properties and due to the difficulty in effecting division, the properties had not been partitioned by metes and bounds and in order to assure their earnestness to the purchaser, they decided to execute the deed of sale jointly and the sale proceeds would be divided by metes and bounds proportionately. The agreement also nominated the respondent herein to arrange for the sale of the property. The three brothers made necessary application to the Commissioner of Municipality, Coimbatore, requesting that they may be recorded as co-owners of the properties. The respondent also applied for tax clearance certificate under section 230A of the Act not only for himself but also on behalf of his two brothers. It was stated in the accompanying application for tax clearance certificate that the Hindu undivided family was not assessed to income-tax or wealth-tax. Though a provisional no objection certificate was issued, the Wealth....
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....e only by adopting the rental capitalisation method. In this view of the matter, the Appellate Tribunal dismissed the appeals preferred by the Revenue and allowed the cross appeals preferred by the assessee. The Revenue, aggrieved by the orders of the Appellate Tribunal, sought for a reference and the Appellate Tribunal has stated a case and referred the questions of law referred to earlier. Mr. T.C.A. Ramanujam, learned senior standing counsel appearing for the Department, submitted that the view of the Appellate Tribunal is erroneous in point of law as in 1943, partition had not taken place by metes and bounds and there was a division only in status. Learned counsel submitted that the mere division in status is not sufficient for the purpose of Wealth-tax Act and there must be a division by metes and bounds. He also submitted that there was no order by the Wealth-tax Officer recognising the partition. Learned counsel relied upon the decision of the Supreme Court in Tatavarthi Rajah v. CWT [1997] 225 ITR 561 and submitted that unless the properties are divided by metes and bounds, the joint family would continue for the purpose of assessment under the Wealth-tax Act. He also su....
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....ed their intention to be separated in status and the joint family ceased to exist from September 9, 1943. As far As the other property in Leslie Cottage, Ooty, is concerned, that property was also in occupation of a hostile tenant and the tenant claimed absolute right to the property and only in 1977, the matter was compromised in a suit instituted by the tenant. It is therefore clear that the properties were not in the physical possession of the three brothers, but they were in the physical possession and occupation by the tenants and the mode of enjoyment of the properties by the three brothers was the enjoyment of the income derived from the properties. In other words, it was not possible for the assessees in 1943 to enter into the properties and physically divide the properties and allot a definite and specific share to the three brothers in view of the occupation of the properties by the statutory tenant in one case and the hostile tenant in another case. The three brothers have divided the properties in a manner permissible or possible under the law as right to property is a bundle of rights and where it is not possible to effect a physical division, the allotment of separate....
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....reme Court in Tatavarthi Rajah v. CWT [1997] 225 ITR 561 wherein the Supreme Court considered the effect of section 20 of the Wealth-tax Act and held that section 20 would apply to transactions entered into prior to the enactment of the Wealth-tax Act. There can be no dispute about the proposition of law, but the facts of the case before the Supreme Court are different and, hence, the proposition is inapplicable. In the case before the Supreme Court, the assessee was a Hindu undivided family consisting of father, and three sons and there were deaths in the family, viz., the death of the karta and the death of an eldest male member leaving behind them two widows of the deceased coparceners and two sons. One of the widows filed a suit for partition in the year 1954 and ultimately a preliminary decree was passed in the year 1956 and a final decree was passed in the year 1961 on the basis of compromise. The question arose in the assessment years 1958-59, 1959-60 and 1960-61 regarding the continuance of the joint family, though a suit for partition was instituted in the year 1954 and the written statement was filed by the remaining two sons in October, 1954, agreeing for the division of....
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....not recognise the partition of a Hindu undivided family even if it is effected by a decree of court, unless there is a physical division of the property of the family and if the property is not capable of being physically divided, then, unless there is a division of the property to the extent it is possible, otherwise, the severance of status would not amount to partition. The Supreme Court also held that Linder the Hindu law, members of a joint family may agree to partition of the joint family property by private settlement, agreement, arbitration or through a court decree and the members of the family may also agree to share the income from the property according to their respective shares and in all such eventualities, the joint status may be disrupted, but such disruption of family status is not recognised by the Legislature for the purposes of income-tax. The Supreme Court in CIT v. Venugopal Inani [1999] 239 ITR 514 held that although the mere severance of status in the family was tantamount to partition under the Hindu law of joint family, the requirement of the Income-tax Act is a little more and a partition to be recognised under the Income-tax Act must lead to a physical ....
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.... 1021) and Musammat Inder Kuer v. Musammat Prithipal Kuer (49 CWN 689) are authorities for the proposition that separation of the family can be proved by the conduct of the members in the attendant circumstances. The Privy Council also held that once shares are defined, there is severance of joint status and the parties may then make a physical division of the property or they may decide to live together and enjoy the property in common, but the property ceases to be joint immediately the shares are defined and their subsequent living together and joint enjoyment can be regarded as tenants-in-common. Though under the Wealth-tax Act, the mere severance of status is not sufficient and there must be a division by metes and bounds, on the facts of the case, we find that in 1943, the only method of dividing the properties by metes and bounds would be to divide the income from the properties which has been done and we hold that it would amount to partition by metes and bounds. We hold that the decision of this court in CWT v. K. Ramakrishnan [1983] 139 ITR 965 is nearer to the facts of the case. In that case, the partition in a Hindu undivided family took place prior to the commenceme....
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....nd absolutely. It is not possible to hold that the property originally vested in the father and then from the father, it devolved on the three brothers. We hold that the three brothers derived the property directly from their sister and not from their father. Therefore, we hold that the property in Desabandhu Street, Coimbatore, was rightly not held to be a joint family property as the property was not obtained from any ancestral source and it was obtained by way of bequest from their sister. It is also not the case of the Revenue that after the property was obtained by them, the three brothers treated the property as joint family property. We therefore hold that the Appellate Tribunal was also correct in holding that the property at Desabandhu Street, Coimbatore, was not joint family property. Accordingly, the third question is answered in favour of the assessee and against the Revenue. As far as the fourth question is concerned, learned standing counsel for the Revenue, in his fairness, has not seriously disputed the application of the rental capitalisation method to value the properties in the occupation of the tenants. As far as the properties in the occupation of the tenant....