1984 (7) TMI 74 - HC - Wealth-tax

Summary

Issues:
Extent of interest of assessee in converted property for wealth-tax assessment.

Analysis:
The judgment pertains to a case where the assessee's separate properties were thrown into the family hotchpot by declaration, and the issue was the inclusion of the value of these converted properties in the assessee's wealth-tax assessment. The Wealth Tax Officer (WTO) included the entire value of the converted properties in the assessee's net wealth, citing section 4(1A) of the Wealth Tax Act. The assessee contended that the value of converted properties should not be assessed in his hands. However, the Appellate Assistant Commissioner (AAC) upheld the assessment, stating that the provisions of section 64(2) of the Income Tax Act were similar to section 4(1A) of the Wealth Tax Act. The Income Tax Appellate Tribunal also dismissed the appeals, relying on its earlier judgment.

The key provision in question was section 4(1A) of the Wealth Tax Act, which dealt with the treatment of converted properties belonging to a Hindu undivided family (HUF). The section deemed the converted property to be transferred to the family members for joint holding, attributing the assets to the individual and not the family. The Tribunal referred the question to the High Court, which analyzed the provisions and relevant case laws. The court emphasized that the purpose of the statute must be understood to interpret its provisions correctly. It clarified that the deeming provision did not create a transfer to family members but established joint holding. The court also explained the method of determining the individual's interest in the converted property.

The court addressed the contention that the notional share should be assessed in the hands of the smaller family consisting of the individual and his wife. It highlighted that under Mitakshara law, the mother is not entitled to a share upon partition between sons and the father. The court emphasized that the provisions were designed to compute the individual's interest in the converted property based on the Explanation provided. It distinguished previous judgments that did not consider the scope of section 4(1A) of the Wealth Tax Act.

In conclusion, the court answered the question in the affirmative, stating that the value of the converted property falling to the share of the assessee on notional partition is assessable in the hands of the assessee as an individual and not as an HUF. The court also clarified the applicability of the provision from a specific date and ruled on the costs in the matter.