1982 (8) TMI 32 - HC - Wealth-tax

Summary

Issues Involved:
1. Justification of the Appellate Tribunal in cancelling the wealth-tax assessments for the years 1958-59, 1959-60, and 1960-61.
2. Determination of the date of partition of the Hindu Undivided Family (HUF) for tax purposes.
3. Applicability of Section 20 of the Wealth-tax Act in cases of partition before the commencement of the Act.
4. Interpretation of "partition in definite portions" under Section 20 of the Wealth-tax Act.
5. Whether the Tribunal was correct in quashing the assessments based on a new factual ground.

Detailed Analysis:

1. Justification of the Appellate Tribunal in Cancelling the Wealth-tax Assessments:
The primary question was whether the Appellate Tribunal was justified in cancelling the wealth-tax assessments for the years 1958-59, 1959-60, and 1960-61. The Tribunal had allowed the appeal, quashed the assessments, and remitted the matter to the Wealth-tax Officer (WTO) to decide afresh who the assessee was and what assets formed part of its net wealth. The Tribunal permitted the assessee to produce all evidence and allowed the Department to use any material it had.

2. Determination of the Date of Partition of the HUF:
The HUF claimed a partition on April 1, 1956, based on a compromise memo filed in court, leading to a preliminary decree. However, the final decree, which divided the properties by metes and bounds, was passed on March 16, 1961. The court held that the partition could only be recognized on the date of the final decree.

3. Applicability of Section 20 of the Wealth-tax Act:
Section 20 of the Wealth-tax Act was examined to determine its applicability to partitions alleged to have taken place before the commencement of the Act. The court concluded that no distinction could be made between partitions before and after the Act's commencement. Section 20 requires the WTO to be satisfied that the joint family property has been partitioned as a whole among the members in definite portions, regardless of when the partition occurred.

4. Interpretation of "Partition in Definite Portions":
The court referred to the interpretation of "partition in definite portions" as requiring a physical division where each member takes a specific portion of the property. This interpretation was supported by precedents, including the Supreme Court's approval of the Bombay High Court's decision in Gordhandas T. Mangaldas v. CIT. The court emphasized that a mere division in status is insufficient; the properties must be divided into definite portions.

5. Whether the Tribunal was Correct in Quashing the Assessments:
The Tribunal had quashed the assessments based on a new factual ground that there was a severance in status before the Act's commencement. The court disagreed with this approach, stating that the requirements of Section 20 must be satisfied, and a mere division in status does not suffice. The court held that the HUF must be deemed to continue to exist for the purpose of the Act until the properties are divided into definite portions.

Conclusion:
The court answered the referred question in the negative and in favor of the Department, indicating that the Tribunal was in error in quashing the assessments. The HUF must be deemed to continue to exist for the relevant assessment years, and the assessments should not have been set aside based on the new factual ground. The court also granted leave to appeal to the Supreme Court, acknowledging the difference of opinion among various High Courts on the issue.