1976 (4) TMI 1 - SC - Wealth-tax

It is not in dispute that the property in question was the individual property - coparcenary had unity of possession but not unity of ownership on the property. Each coparcener therefore took a defined share in the property and was the owner of his share. Each such defined share thus belonged to the coparcener. It was his net wealth within the meaning of section 2(m) of the Act and was liable to wealth-tax as such under section 3

Issues Involved:
1. Whether properties possessed jointly by the members governed by the Dayabhaga school of Hindu law were assessable to wealth-tax jointly in the status of a Hindu undivided family.

Issue-wise Detailed Analysis:

1. Assessment of Properties under Dayabhaga School of Hindu Law:

The primary issue in this case was whether the properties possessed jointly by the heirs of a Hindu male, governed by the Dayabhaga school of Hindu law, could be assessed to wealth-tax jointly in the status of a Hindu undivided family. The Wealth-tax Officer had assessed the heirs as a Hindu undivided family after the death of Bireswar Chatterjee, who was governed by the Dayabhaga school of Hindu law. However, the Appellate Assistant Commissioner held that the properties could not belong to the Hindu undivided family and were to be taxed "in the hands of the co-sharers separately." The Income-tax Appellate Tribunal, by majority opinion, upheld the Wealth-tax Officer's view, stating that the property, until partitioned, was assessable to wealth-tax in the hands of the Hindu undivided family.

2. High Court's Reframing of the Question:

The High Court reframed the question to consider whether the properties possessed by the heirs of a Hindu male governed by the Dayabhaga school of Hindu law were assessable to wealth-tax jointly in the status of the Hindu undivided family. The High Court referred to its earlier decisions, including Commissioner of Wealth-tax v. Gouri Shankar Bhar, where it was held that the heirs do not inherit the estate as members of a Hindu undivided family but remain as co-owners with definite and ascertained shares unless they voluntarily decide to live as members of a joint family. The High Court also noted that a suit for partition had been filed and a preliminary decree had been obtained, and answered the reframed question in the negative.

3. Arguments by the Commissioner of Wealth-tax:

The Commissioner of Wealth-tax argued that under the Dayabhaga school of Hindu law, the property left by the father is taken by the sons jointly by descent, as coparceners, and their joint family comes into existence by operation of law. It was contended that the father's property is liable to be taxed as a unit until it is partitioned amongst its members by metes and bounds. Reference was made to certain commentaries and judgments to support this argument.

4. Interpretation of Section 3 of the Wealth-tax Act:

Section 3 of the Wealth-tax Act is the charging section, which provides for the charge of wealth-tax in respect of the net wealth of every individual, Hindu undivided family, and company. The term "net wealth" is defined in section 2(m) as the amount by which the aggregate value of all the assets belonging to the assessee exceeds the aggregate value of all the debts owed by the assessee. The expression "belong" is defined as "to be the property or rightful possession of." Therefore, the liability to wealth-tax arises out of ownership of the asset, not mere possession.

5. Ownership and Inheritance under Dayabhaga Law:

The court examined whether the estate or property of Bireswar Chatterjee could be said to belong jointly to his heirs after his death. It was established that the property in question belonged to Bireswar Chatterjee, who was its sole owner during his lifetime. Under the Dayabhaga school of Hindu law, the heirs inherit the property in well-defined shares, and there is no unity of ownership. The heirs become co-owners with definite shares, and the heritage does not become the joint property of the heirs or the joint family.

6. Precedents and Legal Doctrines:

The court referred to various legal doctrines and precedents, including the concept of fractional ownership under the Dayabhaga law, which contrasts with the aggregate ownership under the Mitakshara law. The court cited the case of Gouri Shankar Bhar, where it was held that the shares of the coparceners in the property of the deceased were definite and ascertained, and the assessment should be made on the individual coparceners on their respective shares.

7. Conclusion and Judgment:

The court concluded that the property in question was the individual property of Bireswar Chatterjee and devolved on his heirs according to the provisions of the Hindu Succession Act, 1956. Each coparcener took a defined share in the property and was the owner of his share. Each such defined share "belonged" to the coparcener and was his "net wealth" within the meaning of section 2(m) of the Act, liable to wealth-tax under section 3. The High Court was right in answering the reframed question in the negative. The appeal was dismissed with costs.

Appeal dismissed.

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