1967 (7) TMI 22 - HC - Wealth-tax

On the death of a Hindu governed by the Dayabhaga school of Hindu law, his heirs do not spontaneously, by operation of law, become members of a Hindu joint family - Heirs must be assessed separately not as HUF

Issues Involved:
1. Status of the assessee as a Hindu Undivided Family (HUF) under Dayabhaga law.
2. Assessment of wealth-tax on individual members versus HUF.
3. Application of Section 21 of the Wealth-tax Act, 1957.
4. Interpretation of "belong to" versus "owner" in the context of the Wealth-tax Act.

Detailed Analysis:

1. Status of the Assessee as a Hindu Undivided Family (HUF) under Dayabhaga Law:
The primary issue is whether the assessee should be treated as a Hindu Undivided Family (HUF) or as individual members for wealth-tax purposes. The deceased, Prafulla Chandra Bhar, was governed by the Dayabhaga school of law. Upon his death, his estate was inherited by his widow and three sons, each receiving a one-fourth share. The Wealth-tax Officer initially treated the status of the assessee as a HUF. However, the Appellate Tribunal reversed this, stating that under Dayabhaga law, each coparcener has a definite share in the property and is legally the owner thereof. The Tribunal held that assessments should be made on individual coparceners based on their respective shares, not as a HUF.

2. Assessment of Wealth-tax on Individual Members versus HUF:
The Appellate Assistant Commissioner initially overruled the objections, maintaining that even in a Dayabhaga family, the property continued to belong to the HUF until partition. However, the Tribunal found that under Dayabhaga law, the shares of the coparceners are definite and ascertained, and thus, the wealth-tax should be levied on individual members. The Tribunal emphasized that the assessment of the total wealth in the hands of the HUF, some members of which are not owners of any part of the property, would be illegal.

3. Application of Section 21 of the Wealth-tax Act, 1957:
Section 21 of the Wealth-tax Act was pivotal in this case. It stipulates that wealth-tax should be levied upon and recoverable from the administrator in the same manner as it would be from the person on whose behalf the assets are held. The court concluded that the assessment should not be made on the HUF but on the individual members, as the properties were held by an administrator under a letter of administration granted by a court. This reinforced the Tribunal's decision to cancel the assessment made on the HUF and to make assessments on individual coparceners.

4. Interpretation of "Belong to" versus "Owner" in the Context of the Wealth-tax Act:
The court also discussed the distinction between "belong to" and "owner" as used in the Wealth-tax Act. Mr. Pal, representing the revenue, argued that the estate belonged to the joint family even if the heirs inherited property in definite shares. However, the court found this distinction too subtle and concluded that the plain dictionary meaning of "belong to" is "to be owned by." Thus, the assessment should be based on individual ownership rather than on the property belonging to a joint family.

Conclusion:
The court concluded that on the death of a Dayabhaga father, his successors do not automatically form a joint family by operation of law. Instead, they own the inherited property as joint property, i.e., as tenants-in-common, unless they decide to live together as a HUF. Consequently, for taxation purposes, they should be treated as individuals. The court answered the question in the affirmative, in favor of the assessee, and held that the assessment should be made on individual members rather than as a HUF. The Commissioner of Wealth-tax was directed to pay the costs of the reference to the assessee.

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