9911796707
TMI Blog1992 (11) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,250 p.m. shall be paid by the son S.B.S. Raman to Mrs. Shantha Balachandran, his mother and wife of the assessee by way of maintenance and as a security thereon, a charge was created on the ground floor of the said property which was allotted to Shri S.B.S. Raman in the above said partition. Thus Shri S.B.S. Raman came to be the owner of the Ground Floor of the building and eastern half of the land and site adjoining the same as per the partition deed dated 31-10-1977 as mentioned in Schedule 'B'. The assessee herein was allotted 'A' scheduled property in the said deed which consisted of First Floor of the building and western half of the land etc. The Wealth-tax Officer was of the view that the value of the right of maintenance for life of his spouse payable by the major son of the assessee is part of the converted property and is, therefore, a deemed asset transferred to the spouse of the assessee which can be treated as an asset in her hand transferred by the husband but includible in the husband's hand under the provisions of section 4(1A)(c) of the Wealth-tax Act, 1957. The value of such right was fixed at Rs. 1,80,000. The order of the Wealth-tax Officer on this point run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the payment of maintenance is not an interest in property and, therefore, the provisions of section 4(1A)(c) is not applicable. According to the learned representative, the maintenance charge payable is independent of the property partitioned and the obligation cast on the son has no nexus with the income from the property partitioned and, therefore, there is no transfer within the meaning of section 4(1)(a)(i) of the Wealth-tax Act. Lastly, it was submitted that the maintenance charge payable to the wife is in discharge of the obligation of the husband under section 18(1) of the Hindu Adoption and maintenance Act and, therefore, even if there be a transfer it is for valid consideration and hence the said provisions are not applicable. After hearing the parties, the A.A.C. confirmed the view taken by the Wealth-tax Officer on this point. Aggrieved, the assessee is in appeals before us in all the assessment years under consideration. 4. Before us, the learned counsel appearing for the assessee submitted that the A.A.C. erred in sustaining the inclusion of Rs. 1.80,000 under section 4(1A)(c) of the W.T. Act. It was further submitted that the A.A.C. is not correct in coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's wife. For this purpose the property mentioned in the 'B' Schedule which was allotted to the son shall stand as security". It further provided that "In the event of increase in the cost of living warranting a corresponding increase In the amount of maintenance his son shall be liable to pay the increased maintenance as prescribed therein". 6. On reading of sub-section (1A) along with the clauses (c) and (d) of the Explanation of section 4 of the Wealth-tax Act, the following propositions emerge: (i) where an individual, being a member of a Hindu undivided family, has converted his separate property into the property belonging to the Hindu undivided family after 31st day of December, 1969: and (ii) such conversion is effected through the act of impressing the separate property with the character of the property belonging to the family or by throwing it into the common stock of the family. The separate property so converted into the joint-family property is, for the purpose of section 4(1A) known as the converted property and for the, purpose of computing the net-wealth of the individual under this Act for any assessment year commencing on or after April 1. 1972 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a portion of the property with an obligation to pay maintenance to his mother for the lifetime. For this purpose, a charge was created on the property allotted to the son of the assessee. The question now is whether such charge created on the property will amount to transfer of an interest in the converted property. According to the above said two decisions, a charge created on the Immovable property should be considered only as a security and It will not amount to creating an interest in the property. Therefore, even if according to the above said partition deed, a portion of the property was allotted to the son and the son was asked to pay maintenance to his mother, it will lead to the conclusion that the assessee has not transferred any interest to his wife in the converted property. That is why Section 4(1A)(c) will not be applicable to the facts of this case. The obligation to pay maintenance by the son to his mother has no nexus to the portion of the converted property allotted to the son. Therefore, viewed in any angle, the value of maintenance payable by the son to his mother cannot be included in the net wealth of the assessee. The decision rendered by the Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the self-acquired property into the property belonging to the family through the act of impressing such separate property with the character of property belonging to the family. On 31-10-1977 there was partition of immovable properties of the HUF. In the partition evidenced by a deed of partition, Mrs. Shanta Balachander insisted upon making due provision for her future maintenance from out of the HUF property. Therefore, the assessee and his son agreed for the same. As per the partition deed, the son of the assessee shall from out of his share of joint family property allotted to him (Schedule B) make due arrangement for her maintenance for life to her satisfaction by payment of a sum not less than Rs. 1,250 per month. As per clause 4 of the deed she is entitled to maintenance at the rate of Rs. 1,250 per month for life and the property in Schedule B shall stand as a security for ft. The maintenance allowance is to be increased with the increase in the cost of living index at the rate of Re. 1 per point. As per clause 5, each of the parties to the partition including Mrs. Shanta Balachander released and relinquished his/her interest and conveyed each separately, his/her interest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include any disposition, conveyance, settlement, delivery, payment or other alienation of property and without limiting the generality of the foregoing includes the creation of the trust in property, the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property etc. including any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person. In this case the assessee obtained the properties mentioned in Schedule A and had the maintenance been charged on his share of property, the need for such charge would become unnecessary as the husband is expected to maintain his wife or the inclusion of value of such interest in husband's net wealth would be made feasible. The obligation to pay a specified sum towards maintenance is not. in my opinion, an independent obligation of the son as such totally unconnected with his share of the converted property or the right of Mrs. Shanta Balachander for maintenance out of HUF property in general or the share of the property allotted to the assessee's son in particular. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents the taxing authorities are not required to put on blinkers but the surrounding circumstances, the realities of recital made in the documents are to be considered. This dicta is squarely applicable to this case also. The 'McDowell principle' is also to be applied in McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). 8. There is also an another aspect which requires to be highlighted. The partition came closely on the heels of the amendment of section 4(1A) made by the Taxation Laws Amendment Act, 1975 with effect from 1-4-1976 especially in clause (b) and by insertion of clause (c). The newly inserted sub-clause (c) speaks only of "property" and not "asset". According to this clause, if any converted property or any part thereof is received by the spouse out of partition partial or total It shall be deemed to be asset transferred indirectly by the individual to the spouse and the provisions of sub-section (1) of section 4 shall apply. Thus after 1-4-1976, if the converted property remained without partition it shall be deemed to be asset belonging to the individual. In case of partition of such converted property, the share received by the spouse or minor child wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than a personal obligation and it is a "Jus ad rem" i.e. a right to payment out of the property specified. The Tribunal also pointed out that section 64(2)(c) does not require the spouse or minor child should receive any share or interest in the property which is the subject-matter of partition. The aforesaid findings and conclusion of the Tribunal in the income-tax matter would apply with equal force in the wealth-tax matter under consideration as the income of an asset and the value of an asset are both inter-related aspects of the same property in the same manner as obverse and converse of the same coin. For these reasons the orders of the AAC are upheld. The appeals filed by the assessee are dismissed. THIRD MEMBER ORDER Per Shri T.N.C. Rangarajan, Vice-President--In these appeals there being a difference of opinion between the Members who first heard the case, it has been referred under section 24(11) of the Wealth-tax Act, 1957 read with section 255(4) of the Income-tax Act, 1961 to the Third Member. The questions proposed for the opinion of the Third Member are as follows: 1. "Whether there is nexus between the right of maintenance received by Smt. Shantha Balachande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's wife was referable to and could be said to be derived from the property forming subject-matter of partition, i.e. the share allotted to the son as there was a nexus created by virtue of the various clauses in the partition deed. Accordingly, the addition made under section 64(2)(c) was sustained on the ground that the provisions of section 64(1)(iv) were attracted. It is stated that a reference is pending in the High Court on that issue. 5. In the Wealth-tax assessment for the assessment year 1978-79, a similar addition was made under section 4(1A)(c). The W.T.O. stated that by virtue of the partition deed the wife was given a share of the property in the form of maintenance and the value of that share had to be added to the net wealth of the assessee. Similar additions were made for the subsequent assessment years. On appeal, by a common order for the assessment years 1978-79 to 1981-82 the Appellate Asst. Commissioner upheld the addition on the ground that the provision for maintenance was in fact the share for the wife cast as a legal obligation on the son. He held that it was a deemed asset transferred by the assessee to his spouse includible in his hands under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly to the family otherwise than for adequate consideration (the property so converted or transferred being hereinafter referred to as the converted property), then notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, for the purpose of computing the net wealth of the individual under this Act for any assessment year commencing on or after the 1st day of April, 1972, (a) the individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly; (b) the converted property or any part thereof shall be deemed to be assets belonging to the individual and not to the family; (c) where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the converted property or any part thereof which is received by the spouse or minor child of the individual on such partition shall be deemed to be assets transferred indirectly by the individual to the spouse or minor child and the provisions of sub-section (1), shall, so far as may be, apply accordingly: Provided that the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was quantified at Rs. 1,250 per month. The partition deed itself did not assign any asset to her as she did not derive a right to receive maintenance by that document, since that right already existed in her favour. Therefore, when no part of the converted property was received by the spouse, it is not possible to deem the maintenance which was being paid by the son to the mother as her asset indirectly transferred by the assessee to his spouse. I am, therefore, convinced that the transaction does not fulfil either of the two conditions required by section 4(1A) so as to include the value of maintenance right as an asset includible in the net wealth of the assessee. 9. It was submitted on behalf of the revenue that this conclusion will be inconsistent with the decision in the income-tax proceedings and the Bench will not have the jurisdiction to come to a different conclusion on the same facts. I am unable to accept this contention because firstly the provisions of the Wealth-tax Act deal with the asset whereas the Income-tax Act deals with the income and the subject-matter of the dispute is, therefore, quite different. Secondly, the Tribunal has itself held in the income-tax cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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