1981 (7) TMI 125 - AT - Wealth-tax

Summary

Issues:
1. Applicability of section 4(1A) of the Wealth Tax Act to the assessee.
2. Whether the assets received from the maternal grandfather constituted HUF property.
3. Correct application of section 4(1A) to the HUF status of the assessee.

Detailed Analysis:
1. The revenue challenged the finding of the AAC regarding the applicability of section 4(1A) of the Wealth Tax Act to the assessee. The assessee, claiming to be the karta of the HUF, had inherited properties from the maternal grandfather. The WTO initially held that the assets were thrown into the family hotchpot, making the status that of HUF. However, the WTO applied section 4(1A) to exclude a portion of the wealth, leading to an appeal by the assessee to the AAC of Income-tax.

2. The AAC categorically found that the assets received from the maternal grandfather constituted HUF property. He held that section 4(1A) could not be applied to the HUF, and thus, no part of the wealth should have been excluded. The AAC enhanced the net wealth by amounts excluded by the WTO under section 4(1A), leading to the revenue's appeal.

3. The department argued that the property received should be treated as separate property of the receiver, citing Mulla's Hindu Law. The counsel for the assessee argued that the affidavit filed merely stated the property was enjoyed as joint family property, supporting the AAC's decision. The Tribunal found that the property received by the minor assessee from the maternal ancestor remained individual property until blending into the HUF could occur, which did not happen before the relevant date. The Tribunal concluded that section 4(1A) could not be applied to the HUF status granted by the WTO, upholding the AAC's decision for different reasons.

In conclusion, the Tribunal dismissed the revenue's appeals, affirming that section 4(1A) was not applicable to the HUF status of the assessee. The Tribunal clarified the incorrect application of the provision by the WTO and upheld the AAC's decision based on different legal grounds.