1981 (4) TMI 45 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the properties bequeathed by the will belonged to the HUF or the karta in his individual capacity.
2. Whether the right to compensation under the West Bengal Estates Acquisition Act constitutes an asset within the meaning of the Wealth-tax Act when such compensation has neither been determined nor paid.

Issue-wise Detailed Analysis:

1. Properties Bequeathed by the Will:
The primary issue was whether the properties received by the karta under the will of his father, Jaskaran Bhutoria, belonged to the HUF or to the karta in his individual capacity. The Tribunal, after reading the will, concluded that the testator intended to confer an absolute right of disposal over these properties to his two sons, thus making them the separate properties of the sons and not the ancestral properties in the hands of the sons as regards their male issues. The Tribunal's decision was based on the interpretation of the term "Nibur Sattya," which indicated an absolute and full right of disposal.

The Tribunal's decision was supported by the precedent set in the case of CIT v. Ram Rakshpal Ashok Kumar, where it was held that property inherited by a son from his father, from whom he has separated by partition, would continue to be his separate property unless he decided to merge it with the HUF property. This principle was reinforced by the provisions of the Hindu Succession Act, 1956, which allowed a male Hindu to dispose of his interest in the coparcenary property by testament.

The court also referred to the decision of the Full Bench of the Madras High Court in Addl. CIT v. P. L. Karuppan Chettiar, which held that property inherited by a son from his father constituted his separate and individual property and not the property of a joint family. The court concluded that Jaskaran Bhutoria was competent to dispose of his property by a will in favor of his sons with absolute rights of disposal. Thus, the properties bequeathed by the will did not belong to the HUF, and the wealth represented by these properties could not be assessed in the hands of the assessee-HUF. The court answered question No. 1 in the affirmative and in favor of the assessee.

2. Right to Compensation under the West Bengal Estates Acquisition Act:
The second issue was whether the right to compensation under the West Bengal Estates Acquisition Act constituted an asset within the meaning of the Wealth-tax Act, especially when such compensation had neither been determined nor paid. The Tribunal, relying on the decision of the Calcutta High Court in CWT v. U. C. Mahatab, held that an inchoate right to compensation, where the final compensation assessment roll had not been prepared and published, did not constitute a legal right and hence could not be regarded as an "asset" under the Wealth-tax Act.

The court noted that the Supreme Court, in Pandit Lakshmi Kant Jha v. CWT, did not express any view on the correctness of the decision in CWT v. U. C. Mahatab but distinguished it based on the differences in the provisions of the West Bengal Estates Acquisition Act and the Bihar Land Reforms Act. The court reaffirmed that the decision in CWT v. U. C. Mahatab stood as good law and was binding. Consequently, the right to compensation, which had not been determined or paid, could not be included in the net wealth of the assessee. The court answered question No. 2 in the negative and in favor of the assessee.

Conclusion:
The court concluded that the properties bequeathed by the will did not belong to the HUF and the right to compensation under the West Bengal Estates Acquisition Act, which had not been determined or paid, did not constitute an asset under the Wealth-tax Act. Each party was ordered to bear its own costs.