1991 (8) TMI 71 - HC - Wealth-tax

Summary

Issues Involved:
1. Assessment of erstwhile Hindu undivided family (HUF) after the death of its Karta.
2. Applicability of section 19 of the Wealth-tax Act, 1957.
3. Interpretation of the Wealth-tax Act provisions regarding assessment of non-existent entities.

Summary:

1. Assessment of erstwhile HUF after the death of its Karta:
The primary issue was whether an assessment could be made on an erstwhile HUF when the Karta, who filed the wealth-tax return, died before the completion of the assessment. The court noted that the HUF ceased to exist upon the death of the Karta, leaving only a minor son. The Appellate Tribunal held that there was no provision in the Wealth-tax Act to assess an HUF that ceased to exist after filing the return.

2. Applicability of section 19 of the Wealth-tax Act, 1957:
The Revenue contended that the HUF is a "person" and its cessation is akin to the death of a person, thus invoking section 19 of the Act. They argued that the surviving member could be assessed as the legal representative of the erstwhile HUF. However, the court found that section 19 pertains to individual persons and not to HUFs, and there was no provision in the Act to assess an HUF that ceased to exist due to the death of its Karta.

3. Interpretation of the Wealth-tax Act provisions regarding assessment of non-existent entities:
The court examined the nature of the charge under the Wealth-tax Act, noting that the tax is on the net wealth of the person, not on the assets themselves. It referenced several precedents, including the Privy Council and Supreme Court decisions, which emphasized the necessity of a specific provision to assess a non-existent entity. The court highlighted that the absence of such a provision in the Wealth-tax Act meant that an erstwhile HUF could not be assessed post its cessation.

The court concluded that without a specific provision in the Act to assess an HUF that ceased to exist, the assessment orders made after the death of the Karta were invalid. The question referred was answered in the affirmative and against the Revenue, affirming the Appellate Tribunal's decision.