1989 (10) TMI 87 - AT - Income Tax

Summary

Issues Involved:
1. Justification of including Rs. 2,50,000 set aside for marriage expenses in the appellant's taxable wealth.
2. Applicability of partial partition provisions under section 171(9) of the Income-tax Act, 1961 and section 20A of the Wealth-tax Act, 1957.
3. Legal and moral obligations under Hindu Law regarding the provision for the marriage of unmarried daughters.

Detailed Analysis:

1. Justification of Including Rs. 2,50,000 in Taxable Wealth:
The primary issue was whether the Commissioner of Wealth-tax was justified in upholding the Wealth-tax Officer's decision to include Rs. 2,50,000, set aside by the appellant for the marriage expenses of Archana Singal, in the appellant's taxable wealth. The Wealth-tax Officer included this amount in the net wealth of the assessee for the assessment years 1979-80 and 1984-85, arguing that the partial partition was not recognized under the Finance Act, 1980. The Tribunal found that the setting aside of Rs. 2,50,000 was a bona fide act, justified by the moral and legal obligations of the karta under Hindu Law. Therefore, the sum should not be included in the net wealth of the assessee.

2. Applicability of Partial Partition Provisions:
The Tribunal examined the provisions of sub-section (9) of section 171 of the Income-tax Act, 1961, and section 20A of the Wealth-tax Act, 1957, both inserted by the Finance (No. 2) Act, 1980, effective from 1-4-1980. These provisions state that partial partitions after 31-12-1978 are not recognized for tax purposes, and the family continues to be assessed as undivided. The Tribunal concluded that the fiction created by these provisions applies only to partial partitions and does not extend to the act of setting apart a sum for the marriage of an unmarried daughter. The Tribunal emphasized that this act precedes the partial partition and is not an integral part of it.

3. Legal and Moral Obligations under Hindu Law:
The Tribunal referred to various provisions of Hindu Law and judicial precedents to establish the legal and moral obligations of the karta to provide for the marriage expenses of unmarried daughters. Articles 225, 242, and 243 of Mulla's Hindu Law, along with judgments from the Supreme Court and High Courts, were cited to support the view that such provisions are obligatory and customary. The Tribunal highlighted that the setting apart of Rs. 2,50,000 was in line with these obligations and was done with the consent of all family members.

Conclusion:
The Tribunal concluded that the setting apart of Rs. 2,50,000 for the marriage expenses of Archana Singal was a bona fide act, justified by the moral and legal obligations of the karta under Hindu Law. The fiction created by the provisions of the Income-tax Act and Wealth-tax Act does not apply to this act. Therefore, the sum should not be included in the net wealth of the assessee for the assessment years 1979-80 and 1984-85. The appeals were allowed, and the orders of the lower authorities were reversed.