COMMISSIONER OF WEALTH TAX KANPUR Vs. CHANDER SEN

JUDGEMENT

(1.) - These appeals arise by special leave from the decision of the High Court of Allahabad dated 17th August, 1973. Two of these appeals are in respect of assessment years 1966-67 and 1967-69 arising out of the proceedings under the Wealth-tax Act, 1957. The connected reference was under the Income-tax Act, 1961 and related to the assessment year 1968-69. A common question, of, law arose in all these cases and these were disposed of by the High Court by a common judgment.

(2.) One Rangi Lal and his son Chander Sen constituted a Hindu undivided family. This family had some immovable property and the business carried on in the name of Khushi Ram Rangi Lal. On October 10, 1961, there was a partial partition in the family by which the business was divided between the father and the son, and thereafter, it was carried on by a partnership consisting of the two. The firm was assessed to income-tax as a registered firm and the two partners were separately assessed in respect of their share of income. The house property of the family continued to remain joint. On July 17, 1965, Rangilal died leaving behind his son, Chander Sen, and his grandsons i.e. the sons of Chander Sen. His wife and mother predeceased him and he had no other issue except Chander Sen. On his death there was a credit balance of Rs. 1,85,043/- in his account in the books of -the firm. For the assessment year 1966-67 (valuation date October 3, 1965), Chander Sen, who constituted a joint family with his own sons, filed a return of his net wealth. The return included the property of the family which on the death of Rangi Lal passed on to Chander Sen by survivorship and also the assets of the business which devolved upon Chander Sen on the death of his father. The sum of Rs. 1,85,043 standing to the credit of Rangi Lal was not included in the net weath of the family of Chander Sen (hereinafter referred to as 'the assessee-family') on the ground that this amount devolved on Chander Sen in his individual capacity and was not the property of the assessee-family. The Wealth-tax Officer did not accept this contention and held that the sum of Rs. 1,85,043 also belonged to the assessee-family.

(3.) At the close of the previous year ending on October 22, 1962, (sic) relating to the assessment year 1967-68, a sum of Rs. 23,330 was credited to the account of late Rangi Lal on account of interest accruing on his credit balance. In the proceedings under the Income-tax Act for the assessment year 1967-68, the sum of Rs. 23,330 was claimed as deduction. It was alleged that interest was due to Chander Sen in his individual capacity and was an allowable deduction in the computation of the business income of the assessee-family. At the end of the year the credit balance in the account of Rangi Lal stood at Rs. 1,82,742/- which was transferred to the account of Chander Sen. In the wealth-tax assessment for the assessment year 1967-68, it was claimed, as in the earlier year, that the credit balance in the account of Rangi Lal belonged to Chander Sen in his individual capacity and not to the assessee-family. The Income-tax Officer who completed the assessment disallowed the claim relating to interest on the ground that it was a payment made by Chander Sen to himself. Likewise, in the wealth-tax assessment, the sum of Rs. 1,82,742/- was included by the Wealth tax Officer in the net wealth of the assessee family. On appeal the Appellate Assistant Commissioner of Income-tax accepted the assessee's claim in full. He held that the capital in the name of Rangi Lal devolved on Chander Sen in his individual capacity and as such was not to be included in the wealth of the assessee family. He also directed that in the income-tax assessment the sum of Rs. 23,330/- on account of interest should be allowed as deduction. The Revenue. felt aggrieved and filed three appeals before the Income-tax Appellate Tribunal, two against the assessments under the Wealth-tax Act for the assessment years 1966-67 and 1967-68 and one against the assessment under the Income-tax Act for the assessment year 1967-68. The Tribunal dismissed the Revenue's appeals.