2004 (8) TMI 94 - HC - Wealth-tax

Assessee is a HUF effected partial partition of the Hindu undivided family property - Whether, Tribunal was legally correct in holding that the amended section 20A of the Wealth-tax Act inserted by the Finance (No. 2) Act, 1980, would not be applicable to the assessment year 1979-80? - in as much as section 20A(1) of the Act specifically provides that a partial partition taking place after December 31, 1978, is to be ignored, the effect of the provisions would be that any partial partition taking place after December 31, 1978, is to be ignored altogether. Even if section 20A is introduced with effect from April 1, 1980, it would not make any difference as the language of section 20A is very clear and unambiguous and has to be given full effect. The interpretation placed by the Tribunal on the memorandum, while introducing the Bill in Parliament on the aforesaid section is misplaced. Question is answered in negative, i.e., in favour of the Revenue

Summary

Issues:
Interpretation of section 20A of the Wealth-tax Act, 1957 regarding the applicability of partial partition after December 31, 1978 for assessment year 1979-80.

Analysis:
The case involved a reference from the Income-tax Appellate Tribunal regarding the legality of applying the amended section 20A of the Wealth-tax Act to the assessment year 1979-80. The respondent-assessee, a Hindu undivided family, claimed a partial partition effective from January 1, 1979, but the Wealth-tax Officer assessed the family as undivided based on section 171(9) of the Income-tax Act. The Tribunal ruled in favor of the assessee, recognizing the partial partition despite the amendment brought by section 20A of the Act for the assessment year 1980-81.

The Revenue contended that section 20A, inserted by the Finance (No. 2) Act, 1980, disregarded partial partitions post-December 31, 1978, and the family should be assessed as undivided. Referring to the Explanation, the Revenue argued that any partial partition after the specified date should not be considered. Citing legal precedents, including the Supreme Court's decision in Union of India v. M.V. Valliappan, the Revenue emphasized the non-recognition of partial partitions post-December 31, 1978, under the Act.

The court analyzed the provisions of section 20A and section 171(9) of the Income-tax Act, highlighting that post-December 31, 1978, partial partitions were not recognized under the Income-tax or Wealth-tax Act. Referring to previous judgments, including Kalloomal Tapeswari Prasad (HUF) v. CIT, the court emphasized the legal position that unless specific conditions were met, partial partitions were not accepted for assessment purposes. The court also cited ITO v. Smt. N.K. Sarada Thampatty, reinforcing the special meaning assigned to "partition" under the Explanation to section 171.

The Constitution Bench in Union of India v. M.V. Valliappan upheld the validity of section 171(9) of the Income-tax Act and section 20A of the Wealth-tax Act. The court reiterated that post-December 31, 1978, partial partitions were not to be recognized for income-tax purposes. The court concluded that section 20A unequivocally directed the non-recognition of partial partitions after December 31, 1978, irrespective of the amendment's effective date. The court ruled in favor of the Revenue, emphasizing the clear and unambiguous language of section 20A.

In conclusion, the court answered the referred question in favor of the Revenue, emphasizing the non-recognition of partial partitions post-December 31, 1978, under section 20A of the Wealth-tax Act for the assessment year 1979-80.