1969 (9) TMI 26 - HC - Wealth-tax

Impartible properties - whether, on the facts and circumstances of the case, the department is correct in law in determining the status of the assessee as an individual and not as joint family

Summary

Issues Involved:
1. Determination of the status of the assessee as an individual or as a joint family.
2. Inclusion of 4/5th of Rs. 16,96,470.63 compensation amount in computing the 'net wealth' for the assessment years 1957-58 and 1958-59.

Issue-Wise Detailed Analysis:

Issue 1: Determination of the Status of the Assessee

Relevant Question: "Whether, on the facts and circumstances of the case, the department is correct in law in determining the status of the assessee as an individual and not as joint family?"

Facts and Contentions:
- The assessee, a Rajah, claimed his assets as part of a Hindu undivided family (HUF) consisting of himself and his two minor sons.
- The Wealth-tax Officer rejected this claim, treating the properties as the assessee's separate property.
- The Appellate Assistant Commissioner and the Appellate Tribunal upheld this view, treating the status of the assessee as an individual.

Court's Analysis:
- The court noted that the question was inaccurately phrased and should focus on whether the assets shown by the assessee constitute the assets of an individual or a joint family.
- The court emphasized the need to distinguish between partible and impartible properties, as different tax treatments apply.
- The court referred to the Supreme Court's judgment in Pushpavathi Vijayaram v. Pushpavathi Visweswar to ascertain the nature of the properties.
- The court highlighted that the Tribunal must investigate and decide which properties are partible and which are impartible.

Legal Principles:
- Impartible estates, by custom, are treated as individual property for purposes of income and wealth tax, even though they may be considered joint family property for succession purposes.
- The court referenced the Privy Council's decision in Shiba Prasad Singh v. Praya Kumari Debi, which outlined the rights associated with impartible estates.
- The court also considered the impact of the Madras Impartible Estates Act, 1904, and the Estates Abolition Act, 1948, on the nature of impartible estates.

Conclusion:
- The court concluded that the Prince of Wales Market and 38 items of jewelry (regalia) are impartible properties and thus the individual property of the assessee.
- Other properties need to be investigated by the Tribunal to determine if they are partible or impartible.
- The status of the assessee as an individual is affirmed for the two specific impartible properties, but further investigation is required for other properties.

Issue 2: Inclusion of Compensation Amount in Net Wealth

Relevant Question: "Whether, on the facts and circumstances of the case, the department is correct in including 4/5th of Rs. 16,96,470.63, the compensation amount payable to the assessee in computing the 'net wealth' on the valuation dates June 30, 1956, and June 30, 1957, for the relevant assessment years 1957-58 and 1958-59?"

Facts and Contentions:
- The Vizianagaram estate was abolished, and compensation was determined at Rs. 40,66,242.
- The Wealth-tax Officer included an amount of Rs. 20,33,121 as part of the assessee's wealth, considering it an ascertainable debt.
- The Appellate Assistant Commissioner and the Tribunal upheld this view.

Court's Analysis:
- The court referred to previous decisions, including Chandramanipattamaha Devi v. Commissioner of Wealth-tax, which held that compensation amounts, even if not fully determined, constitute a debt and should be included in the net wealth.
- The court emphasized that a present liability to pay a sum of money, ascertainable in the future, constitutes a debt in law.
- The court noted that by the time the Tribunal made its order, the compensation amount was finally determined.

Legal Principles:
- Compensation amounts, even if not fully determined during the assessment years, are considered debts and should be included in the net wealth.
- The court cited supporting decisions from other High Courts, including Maharajakumar Kamal Singh v. Commissioner of Wealth-tax and Sardar C. S. Angre v. Commissioner of Wealth-tax.

Conclusion:
- The court affirmed that the compensation amount is a debt and should be included in the net wealth of the assessee.
- The department's inclusion of 4/5th of Rs. 16,96,470.63 in computing the net wealth is correct.

Final Judgment:
1. The department is correct in determining the status of the assessee as an individual regarding the two items of impartible properties (Prince of Wales Market and 38 items of jewelry). The Tribunal must investigate other properties to determine their nature.
2. The department is correct in including the compensation amount in computing the net wealth for the relevant assessment years.

Costs:
- Both parties are to bear their own costs.