1984 (5) TMI 105 - AT - Wealth-tax

Summary

Issues Involved:

1. Inclusion of partially partitioned jewellery in the total wealth of the appellant HUF.
2. Recognition of partial partition and its implications on wealth assessment.
3. Legality of treating retained jewellery as part of the HUF wealth after partial partition.
4. Applicability of precedents and legal principles regarding HUF and partial partition.

Detailed Analysis:

1. Inclusion of partially partitioned jewellery in the total wealth of the appellant HUF:

The primary issue revolves around whether the jewellery that was partially partitioned should be included in the total wealth of the appellant HUF. The WTO had excluded the portion of jewellery taken by Shri Lalit Kaman but included the remaining jewellery in the HUF's wealth. The AAC supported this inclusion, arguing that the jewellery retained by other members jointly still belonged to the HUF. The Tribunal, however, found that once partial partition is recognized, the jewellery that was partitioned cannot be included in the wealth of the bigger HUF.

2. Recognition of partial partition and its implications on wealth assessment:

The Tribunal noted that the partial partition of jewellery was a fact recognized by the WTO, who excluded the portion taken by Shri Lalit Kaman. The Tribunal emphasized that the duty of the WTO is to assess the wealth as on the valuation date, and the jewellery that was partially partitioned did not remain the property of the HUF from that date. The Tribunal cited the Supreme Court judgment in Kalloomal Tapeshwari Prasad (HUF) vs. CIT, which held that after partial partition, the property is held by the members as divided members, and the HUF cannot be deemed the owner of such property.

3. Legality of treating retained jewellery as part of the HUF wealth after partial partition:

The AAC had argued that even after partial partition, the jewellery retained jointly by the other members should be considered part of the HUF's wealth. The Tribunal disagreed, stating that the jewellery that was partitioned and retained jointly by some members could not be included in the wealth of the HUF. The Tribunal referenced the Gujarat High Court decision in CIT vs. Shanti Kumar Jagabhai, which held that partially partitioned jewellery could not be assessed in the hands of the bigger HUF.

4. Applicability of precedents and legal principles regarding HUF and partial partition:

The Tribunal considered various precedents, including the Supreme Court's recognition of smaller HUFs within bigger HUFs in Joint Family of Udayan Chinubhai vs. CIT. The Tribunal also referred to the Allahabad High Court's decision in Dwarka Nath vs. CWT, which emphasized that the net wealth at the last moment of the valuation date should be assessed to avoid anomalies. The Tribunal concluded that the jewellery that was partially partitioned could not be included in the wealth of the bigger HUF, aligning with the legal principles and precedents cited.

Conclusion:

The Tribunal held that the jewellery that was partially partitioned during the assessment year 1975-76 could not be included in the wealth of the HUF. The amounts of Rs. 92,763, Rs. 1,05,790, Rs. 1,25,242, Rs. 1,68,517, and Rs. 2,08,047 were deleted from the total wealth of the assessee HUF. The appeals for all the years were allowed, reversing the orders of the AAC and restoring the correct legal position regarding the partial partition of jewellery and its impact on wealth assessment.