1987 (1) TMI 192 - AT - Wealth-tax

A Partner, Assessment Year, Equity Shares, Immovable Property, Movable Property, Partnership Firm, Valuation Date

Summary

Issues Involved:
1. Status of properties received on partition of HUF.
2. Whether properties received by the assessees on partitions of their respective HUFs were assessable in their hands in the status of individual or HUF.

Detailed Analysis:

1. Status of Properties Received on Partition of HUF:

The primary issue in these appeals is the status in which the properties received on the partition of the Hindu Undivided Family (HUF) should be assessed. The appellants, Phoolchand Bharmal Agrawal and Rajesh Kumar Phoolchand Agrawal, contended that the properties received by them on the partition of their respective HUFs should be assessed in the status of HUF, not as individual properties.

Phoolchand Bharmal Agrawal claimed that the properties allotted to him on the partition of the HUF were not his individual properties but belonged to a smaller HUF consisting of himself and his three unmarried daughters. Similarly, Rajesh Kumar Phoolchand Agrawal argued that the properties allotted to him on partition belonged to a HUF consisting of himself and his daughter Pooja.

2. Assessment Status of Properties:

The Wealth Tax Officer (WTO) and the Appellate Assistant Commissioner (AAC) did not accept the claims of the assessees. They held that the properties received by the assessees on the partition of the HUFs were their individual properties and assessed them accordingly. The assessees, being aggrieved by this decision, appealed to the Appellate Tribunal.

The Tribunal considered the arguments and precedents cited by the assessees, including decisions from the Nagpur and Ahmedabad Benches of the Tribunal and the Supreme Court's ruling in N.V. Narendranath v. CWT. However, the Tribunal emphasized that once there is a complete partition of the HUF, the properties allotted to the members on partition become their individual properties. The Tribunal stated, "The effect of a partition is to dissolve the coparcenary, with the result that the separating members thenceforth hold their respective shares as their separate property."

The Tribunal further explained that the HUF is a creature of law and cannot be brought into existence by the act of parties. It cannot be said that some of the erstwhile members have continued as a joint family after a complete partition. The Tribunal noted, "If the father and the daughter enjoy the property in common, this will not mean that the property belongs to the HUF consisting of them."

The Tribunal distinguished the present cases from the Supreme Court's decision in N.V. Narendranath, where the issue was whether the property coming on partition to a family with only one male member should be regarded as individual property or joint family property. In the present cases, the issue is the nature of the property coming into the hands of a coparcener qua other members of the erstwhile family in which a complete partition had taken place.

The Tribunal also referred to the decision of the Madhya Pradesh High Court in CIT v. Dhannamal, which held that after a complete partition of the HUF, the share income of the karta from the firm was his individual income. The Tribunal concluded that in cases of complete partition, it is not possible to say that the HUF continues to exist.

Conclusion:

The Tribunal upheld the department's contention that the properties received by Phoolchand Bharmal Agrawal and Rajesh Kumar Phoolchand Agrawal on the partitions of their respective HUFs were their individual properties. The appeals of the assessees were dismissed, affirming the assessments made in the status of individual.