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TMI Blog1983 (9) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,96,328 and Rs. 3,89,107 for the assessment years 1976-77 and 1977-78, respectively. Inasmuch as the wife of the karta who is also a member of the HUF had taxable wealth for these two years, the learned Commissioner came to the conclusion that the WTO obviously committed a mistake in taking the status of the assessee as non-specified HUF. According to the Commissioner, the WTO ought to have treated the assessee as specified HUF and adopted higher rate of wealth-tax. Hence, the learned Commissioner came to the conclusion that the assessments made by the WTO were erroneous and prejudicial to the interests of the revenue. Thereupon, the assessee was required to show cause why its status should not be taken as a specified HUF and higher rate of wealth-tax should not be levied for the two assessment years under consideration, in view of section 25(2). In response to that the assessee submitted before the learned Commissioner that the wife of the karta of the joint family Smt. Naga Satyavathi had relinquished and released all her rights in the properties of the HUF, vested in her and under Hindu law by a relinquishment deed dated 5-4-1971. Hence, it was submitted that after execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the other hand, the learned departmental representative supported the order passed by the Commissioner. 7. We have heard the rival submissions made by the parties. For the assessment years 1976-77 and 1977-78, the wealth-tax assessments were completed by adopting the status of the assessee as HUF (non-specified). The assessee also filed declarations to the effect that the members of the HUF did not have any taxable wealth for the assessment years under consideration. It is on this basis that the WTO has treated the status of the assessee as non-specified HUF. Smt. Naga Satyavathi, who is the wife of Shri M.A.R. Raja Kumar, had substantial wealth and was assessed on the net wealth of Rs. 5,96,328 and Rs. 3,89,107 for the assessment years 1976-77 and 1977-78, respectively. Inasmuch as the wife of the karta who is also a member of the HUF had taxable wealth for these two years, the learned Commissioner came to the conclusion that the WTO went wrong in taking the status of the assessee as the specified HUF. The assessee produced a relinquishment deed, dated 5-4-1971, executed by Smt. Satyavathi stating that she had relinquished all her rights in the joint family properties in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under these circumstances we consider that there is nothing illegal on the part of Smt. Satyavathi in relinquishing her status as member of the HUF by executing a relinquishment deed, dated 5-4-1971. 9. In view of the fact that Smt. Satyavathi has already executed a relinquishment deed dated 5-4-1971 and she has already been assessed individually with regard to her separate wealth for the assessment years under consideration, we are of the opinion that the orders passed by the WTO in the case were neither erroneous nor prejudicial to the interest of the revenue. Accordingly, we hold that the orders passed by the WTO are quite correct and reasonable in treating the status of the assessee as a HUF (nonspecified). In that view of the matter, we set aside the order passed by the Commissioner (Appeals) and restore the orders passed by the WTO for the years under consideration. 10. In the result, the appeals filed by the assessee are allowed. Per Shri S. Rajaratnam, Accountant Member --- I regret I am unable to agree with the conclusion of my learned brother in the above appeals. 2. The assessee is a. HUF. Smt. Naga Satyavathi, wife of Shri M.A.R. Raja Kumar, karta of HUF, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve no right to ask for Partition and get out of the family. 3. A joint Hindu family consists of mate members descended lineally from a common male ancestor together with their mothers, wives and unmarried daughters bound together by the fundamental principle of sapindaship or family relationship which is the essence and distinguishing feature of the institution. This body is purely a creature of law and cannot be created by act of parties. A stranger can become a member of family only by adoption or marriage with family. Possession of property is only an adjunct of a joint Hindu family and is not necessary for its constitution---Indranarayan v. Roop Narayan AIR 1971 SC 1962. It is not necessary that every member of the family should have a right in family property in order that he or she may be a member. It is in this context that the supposed relinquishment of her right by the wife of the karta makes no difference to her status as a member of the family. For instance, female members and mate descendants remoter than great grandson had no share in the family and yet they were members. Besides, the daughters cannot remain as member of her father's family even after the Hindu Succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceremonies of either party essential for a marriage : and directly " it exists, creates a relation and a status not imposed or defined by contract but by law ....." Mulla's Hindu Law further observes that marriage even under the Act is the union of one man with one woman to the exclusion of all others. It creates a relation between the parties and what is called status of each. "The status of an individual, used as a legal term, means the legal position of the individual, in or with regard to the community : the relation between the parties, and that status of each of them with regard to the community, which are constituted upon marriage, are not imposed or defined by contract or agreement but by law." (page 710 of 15th edition of Mulla's Hindu Law). This concept of status of wife as a part of her husband had been invoked by the Bombay High Court in the case of Pandurang Narayan Salunke v. Sindhu AIR 1971 Bom. 413 (extracted at page 122 of 15th edition of Mulla's Hindu Law) as the principle underlying section 2 of the Hindu Widow's Remarriage Act, 1856, read with section 14(1) of the Hindu Succession Act, 1956, to the effect that the widow on her remarriage does not have a right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew to avoid legitimate tax consequences, will have no legal effect and has to be ignored. The Tribunal's decisions were cited by both parties. But no other case dealt with an attempt on the part of a lady member to walk out of the family and, hence, there is no precedent either way to follow. 6. There is also one more aspect. The Wanchoo Committee felt that the entitlement of a Hindu to have more than one status (one as an individual and another one or more as HUF) defeated the principle underlying progressive rate of taxation. It did not favour abolition of this right from tax point of view but suggested this concept of a higher rate for specified family on the principles that a person with higher income should pay a higher rate of tax. It is on this recommendation that the Finance Act, 1973, introduced differential rates of tax for HUF with reference to income/wealth of the members. Paragraph 11 of memorandum explaining the provisions of the Finance Bill, 1973 stated " In view of the position that the institution of HUF has been widely used for tax avoidance, it is proposed to restrict the tax benefits which can be acquired through this institution " and proceeded to propose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther and the karta, his two sons and his wife, Smt. Naga Satyavathi. By a deed of relinquishment, dated 5-4-1971, Smt. Naga Satyavathi relinquished all her rights and interest in ' the property ' and also her status of being a member of the joint Hindu family. The position under the Hindu law is that while the father and the two sons were coparceners, the wife's status was that of a member of the family only who would be entitled to a share equal to that of her sons in the event of a partition between her husband and the sons but had no right to claim partition. She had, of course, the right to maintenance out of the property. Smt. Naga Satyavathi, it is common ground, is continuing to stay with her husband, the karta, and her sons as earlier, i.e., before 54-1971, the date on which she relinquished all her rights and interest in the property, etc. It is also common ground that she has her separate property liable to the assessment under the Act. ' The property ' is being assessed in the hands of the HUF. The short question that arises for consideration is whether the HUF is entitled to be assessed as non-specified HUF or specified HUF. It is pertinent to mention that if the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove well known principles of Hindu law in the present case, it appears to me that Smt. Naga Satyavathi could have relinquished all her rights and interest in the joint family property which she has, admittedly, done by executing a deed of relinquishment dated 5-4-1971. However, she could not, in law, relinquish her status of being a member of the joint Hindu family. All the same it cannot be disputed that after the relinquishment, Smt. Naga Satyavathi did not have any interest in ' the property ' which is the subject-matter of the assessments herein. In this connection, it may be observed that there does not appear to be any merit in the argument advanced on behalf of the revenue that Smt. Naga Satyavathi could, in certain circumstances, change her stand of claiming maintenance out of the HUF property. To my mind, her right to maintenance under section 18 of the Hindu Adoptions and Maintenance Act, 1956 is entirely different from the right to maintenance and/or a share at the time of partition of the HUF property under the Hindu law. 7. In order to appreciate the point, let us take an example. There is a HUF comprising of husband, wife and two sons. The said HUF owns joint prope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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