1983 (5) TMI 76 - AT - Wealth-tax

Summary

Issues:
1. Whether there was a valid partial partition of the Hindu Undivided Family (HUF) for the assessment year 1976-77.
2. Whether the entire wealth of the HUF should be assessable in its hands due to the absence of partial partition.
3. The applicability of Section 20 of the Wealth Tax Act regarding partial partition.
4. The impact of the Tribunal's reversal of the AAC's order in the income tax matter on the present case.

Analysis:
1. The appeal pertained to the validity of a partial partition of the HUF involving the mother, two minor sons, and a minor daughter on 3rd March 1975. The assessee contended that the assets divided during the partial partition should not be included in the HUF's wealth. The WTO and the AAC rejected this claim, stating that there was no partial partition for income tax purposes, leading to the entire wealth being assessable in the HUF's hands.

2. The Tribunal, in its order dated 18th January 1982, reversed the AAC's decision in the income tax matter for the same year, acknowledging the validity of the partial partition among the family members. Citing a Supreme Court decision, it was established that partial partition between the Karta and minors is legally permissible without the consent of coparceners. The Tribunal's ruling invalidated the AAC's reasoning, leading to the allowance of the appeal.

3. The appellant argued that Section 20 of the Wealth Tax Act does not allow for partial partition, relying on a Karnataka High Court case. The court held that Section 20 does not apply to cases of partial partition, emphasizing the importance of Mitakshara law in determining partial partition under the Wealth Tax Act. Consequently, the value of assets subject to partial partition should not be included in the HUF's wealth.

4. The Tribunal's reversal of the AAC's order in the income tax matter significantly impacted the present case, as it established the legality of the partial partition. This reversal, along with the Supreme Court's ruling on partial partition, rendered the AAC's reasoning unsustainable, leading to the allowance of the appeal and the exclusion of assets involved in the partial partition from the HUF's wealth assessment.