1995 (3) TMI 15 - HC - Wealth-tax

Summary

Issues Involved:

1. Whether the Tribunal was right in holding that the partition of the family took place on November 18, 1974, and not on January 10, 1967, as contended by the applicant.
2. Whether the Tribunal was right in holding that the requirement of section 20 of the Wealth-tax Act is not satisfied.

Issue-wise Detailed Analysis:

1. Partition Date:

The primary issue was whether the partition of the family occurred on November 18, 1974, or January 10, 1967. The assessees, legal heirs of the late B. Muthukumarappa Reddiar, contended that the partition took place on January 10, 1967, the date when the suit for partition was filed. They argued that the preliminary decree passed on November 6, 1968, and the subsequent compromise decree on November 18, 1974, should relate back to the date of filing the suit. The Department, however, maintained that the partition occurred only on November 18, 1974, when the final decree was passed, allotting shares by metes and bounds.

The Tribunal and lower authorities held that the partition took place on November 18, 1974, as per section 20 of the Wealth-tax Act. The court agreed with this view, emphasizing that a complete partition by metes and bounds is necessary under section 20 of the Wealth-tax Act. The court referred to various judicial precedents, including the Supreme Court's decision in Kalloomal Tapeswari Prasad (HUF) v. CIT, which stated that a mere severance of status is insufficient without a physical division of property. The court concluded that the partition, as recognized under the Wealth-tax Act, only occurred on November 18, 1974.

2. Requirement of Section 20 of the Wealth-tax Act:

The second issue was whether the requirement of section 20 of the Wealth-tax Act was satisfied. The assessees argued that section 20 is a machinery provision and does not necessitate a partition by metes and bounds. They relied on the Supreme Court's decision in A. Raghavamma v. A. Chenchamma and the Calcutta High Court's decision in Bijoy Kumar Burman v. ITO to support their contention that the partition should relate back to the date of filing the suit.

The Department countered that section 20 requires a partition by metes and bounds, and the mere filing of a suit or a preliminary decree is insufficient. The court agreed with the Department, stating that section 20 incorporates the requirement of a physical division of property, similar to the Explanation to section 171 of the Income-tax Act. The court referred to various judicial decisions, including those of the Gujarat High Court in Goswami Brijratanlalji Maharaj v. CWT and the Andhra Pradesh High Court in CWT v. Tatavarthi Rajah and Satyanarayana Murthy, which supported the view that a partition must be by metes and bounds to satisfy section 20.

The court concluded that the assessees failed to satisfy the conditions of section 20, as the final decree declaring the shares by metes and bounds was only passed on November 18, 1974. Therefore, the Tribunal was correct in holding that the partition occurred on that date, and the requirements of section 20 were not met for the earlier date of January 10, 1967.

Conclusion:

The court held that the Tribunal was right in holding that the partition took place on November 18, 1974, and not on January 10, 1967. It also upheld the Tribunal's view that the requirements of section 20 of the Wealth-tax Act were not satisfied for the earlier date. The questions referred to the court were answered in the affirmative and against the assessee, with no order as to costs.