TATAVARTHI RAJAH Vs. COMMISSIONER OF WEALTH TAX HYDERABAD

JUDGEMENT

(1.) These appeals by the assessee raise the question whether the provision of Section 20 of the Wealth-tax Act, 1957 (hereinafter referred to as 'the Act') can be applied to a case where the partition in the Hindu Undivided Family in accordance with the principles of Hindu Law has taken place before the commencement of the Act.

(2.) The assessee was a Hindu Joint Family constituted by T. Nagapotha Rao and his three sons, Sitarama Rao, Raja and Satyanarayana Murthy. Sitarama Rao died in 1947 and Nagapotha Rao died in 1950. Thereafter the family constituted of the two minor coparceners Raja and Satyanarayana Murthy and Smt. Mahalakshmamma, widow of Nagapotha Rao and Smt. Raja Syamalal, widow, of Sitaram Rao. Difference arose between Smt. Raja Syamala and the other members of the family and on October 7, 1950 Smt. Raja Syamala gave a registered notice expressing her desire to separate. On April 7,1954 she filed a suit [O. S. No. 47 of 1954] for partition in the Court of Subordinate Judge, Tanali. In the said suit Smt. Mahalakshmamma on behalf of herself and her two minor sons filed a written statement on October 27, 1954 agreeing to the division of all the family properties into four equal shares. On attaining majority Raja as well as Satyanarayana Murthy filed written statements making similar request. On the basis of compromise between the parties a preliminary decree for partition was passed in the said suit on April 1, 1956. The final decree was passed in the suit on March 16, 1961. The present appeals relate to assessment years 1958-59, 1959-60 and 1960-61. In respect of these years returns were filed by the assessee as a Hindu Undivided Family consisting of three members, namely, Smt. Mahalakshmamma and her sons Raja and Satyanarayana Murthy. The Wealth-tax Officer made the assessment on the basis that there was no partition by metes and bounds and that Hindu undivided family consisted of four members including Smt. Raja Syamala and the properties allotted to Smt. Raja Syamala were included in the joint properties of Hindu undivided family. On appeal it was submitted on behalf of the assessee before the Appellate Assistant Commissioner that the assessee should be treated as a Hindu Undivided Family with three members and not four members. This contention of the assessee was, however, rejected by the Appellate Assistant Commissioner. On further appeal before the Income-tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') the assessee raised an additional ground that there was severance in status of Hindu Undivided Family as early as on October 7, 1950 when the first registered notice was issued by Smt. Raja Syamala to the other three members and on April 7, 1954 when Smt. Raja Syamala filed the suit for partition as well as on October 27, 1954 when Smt. Mahalakshmamma, on behalf of herself and her two minor sons, filed the written statement claiming that all the properties be divided in four equal shares. The said additional ground was permitted to be raised by the Tribunal since, according to the Tribunal, it went to the root of the matter, namely, whether assessee was in existence at all. After considering the submissions of both the sides the Tribunal has stated that the present claim of the assessee is that in fact on the valuation dates for all these assessment years there was no Hindu Undivided Family of the type taken by the Wealth-tax Officer and the family was, if at all, disrupted a long time before the Wealth-tax Act came into force and accordingly the provisions of Section 20 (2) of the Act do not apply and the Wealth-tax Officer ought to have assessed the assessee on what exactly were his assets rather than on the assets held by all the members of the erstwhile family together. The Tribunal felt that the assessee had reasonable ground for the present claim to be considered in the light of the facts and the law applicable to them and if the family had acquired different status long before the Act came into force, the family as assessed for these assessment would not be in existence on the valuation dates. The Tribunal, therefore, cancelled the assessment orders for the three assessment years before it and sent the matter back to the Wealth-tax Officer to decide afresh the question as to who the assessee is and what assets formed part of his net wealth. At the instance of the Revenue, the Tribunal referred the following question for the opinion of the High Court of Andhra Pradesh :

(3.) The said question has been answered by the High Court by the impugned judgment dated August 26, 1982 in favour of the Revenue and against the assessee. The High Court has held that having regard to the language of sub-section (1) of Section 20, no distinction can be made between a case where the partition is alleged to have taken place before the commencement of the Act and where the partition is said to have taken place after the commencement of the Act. The idea behind Section 20 of the Act is that unless the joint family properties are divided into definite portions and allotted to each individual member, it cannot be said that a particular member can be assessed with respect to particular properties. If it is contended that a mere division in status is sufficient for the purpose of putting an end to the Hindu Undivided Family, even for the purpose of the Act, the resultant situation would be that, while the Hindu Undivided Family cannot be assessed on the ground that no Hindu Undivided Family is in existence, the members also cannot be assessed, because until the properties are divided into definite portions, it cannot be said which member is entitled to which property. The High Court has agreed with the decision of the Gujarat High Court in Goswami Brijratan-lalji Meharaj v. Commr. of Wealth-tax, (1971) 79 ITR 373, and has 'differed from the decision of the Calcutta High Court in Shri Sirlal Bagri v. Commr of Wealth-tax, (1970) 77 ITR 901. In view of the difference of opinion between the High Court on the question, the High Court has granted certificate of fitness for appeal to this Court. Hence this appeal.