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TMI Blog1969 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... us of a Hindu undivided family. It was a Hindu undivided family governed by the Mitakshara school of Hindu law. A suit for partition was filed in this court being Suit No. 322 of 1950, and the final decree was made on 26th March, 1957. The Hindu undivided family had contended in its income-tax assessments that the Hindu undivided family had been disrupted on the passing of the preliminary decree on the 26th June, 1950, and no assessments could be made on the Hindu undivided family after that date. This contention had been consistently rejected by the income-tax authorities. For the assessment years 1951-52 and 1952-53, the Tribunal held that as under the preliminary decree the properties had not been partitioned in definite portions the Hindu undivided family would be deemed to continue to exist under section 25A of the Indian Income-tax Act, 1922. The Wealth-tax Act came into force on 1st April, 1957. The Wealth-tax Officer served a notice on the Hindu undivided family under section 14(2) of the said Act. As no return was filed in response to the said notice the Wealth-tax Officer served a notice under section 16(4) on Shri Srilal Bagri as the karta of the Hindu undivided family, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indu undivided family. Therefore, it was submitted that, as there was no unit as Hindu undivided family on the relevant valuation date, there could not be any assessment. It was then submitted that section 20 of the Wealth-tax Act was not a charging section and would have no application in the facts and circumstances of this case. Learned counsel relied on some decisions and authorities some of which, so far as they are relevant for the purpose of this reference, will be considered later in this judgment. Mr. B. L. Pal, learned counsel for the revenue, first contended that section 20 of the Wealth-tax Act is in pari materia with section 25A of the Indian Income-tax Act, 1922, and until there is evidence that the properties which once belonged to a Hindu undivided family have been partitioned in " definite portions " amongst the members of the family, the family could be assessed as a Hindu undivided family by virtue of section 20 of the Wealth-tax Act. Mr. Pal contended that a preliminary decree for partition might create a disruption of status as well as might declare the shares of the parties in the joint family properties but do not establish that the properties have been part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it remains undivided, can predicate, of the joint and undivided property, that he, that particular member, has a definite share, one-third or one-fourth. His interest is a fluctuating interest, capable of being enlarged by deaths in the family, and liable to be diminished by births in the family. It is only on a partition that he becomes entitled to a definite share. The most appropriate term to describe the interest of a coparcener in coparcenary property is ' undivided coparcenary interest '." In the case of Nawl Nain v. Budh Singh, the Privy Council has held that the institution of a suit for partition by a member of a joint Hindu family governed by Mitakshara is an unequivocal intimation of his intention to separate and there, consequently, is a severance of his joint status from the date when it is instituted. The Supreme Court has also reiterated the same position in the case of A. Raghavamma v. A. Chenchamma. The Supreme Court has held in that case that it is settled law that a member of a joint Hindu family can bring about his separation in status by a definite and unequivocal declaration of his intention to separate himself from the family, and enjoy his share in several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take place, years after the division in interest. But under the Dayabhaga system the members of the joint family are divided in interest ; they are in a position analogous to that of tenants-in-common, that is to say, they are originally in much the same position as the members of a Mitakshara family after the family has disrupted, and there has been a division in interest. I do not see what effect section 25A can have on the property of a Dayabhaga joint family, if the opinion of the Income-tax Officer must be directed merely to a division in interest which always existed. It seems to me that section 25A will have no effect at all on families under the Dayabhaga system, unless it is held to involve a physical division into definite portions. " The aforesaid observation was quoted with approval by the Supreme Court in the case of Joint Family of Udayan Chinubhai v. Commissioner of Income-tax. In the case of B. Jyoti Bhushan Gupta v. Commissioner of Income-tax it was held by the Allahabad High Court that in order to be entitled to an order under section 25A of the Indian Income-tax Act, 1922, what is necessary is that joint family property should have been partitioned in definite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in sub-section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it ; and the Income-tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23 : Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such. (3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u family, which was in existence in the accounting year but has become defunct in the year of assessment, can be computed and calculated. In Hindu law where there is severance of joint status, the joint family ceases to exist as an entity although the properties are not partitioned. " The Supreme Court in the case of Lakhmichand Baijnath v. Commissioner of Income-tax had occasion to consider the scheme of section 23A of the Indian Income-tax Act. At page 421 of the report the Supreme Court observed : " That section was, it should be noted, introduced by the Indian Income-tax (Amendment) Act, 1928 (3 of 1928), for removing a defect which the working of the Act, as enacted in 1922 had disclosed. Under the provisions of the Act, as they stood prior to the amendment, when the assessee was an undivided family, no assessment could be made thereon if at the time of the assessment it had become divided, because at that point of time there was no undivided family in existence which could be taxed, though when the income was received in the year of account the family was joint. Nor could the individual members of the family be taxed in respect of such income as the same is exempt from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression " hitherto, assessed as undivided " in sub-sections (1) and (3) of section 25A of the Indian Income-tax Act, 1922, and did not lay down the proposition that the family not previously assessed to tax may be assessed after partition in the status of the Hindu undivided family until an order under section 25A was passed by the Income-tax Officer. It has to be observed however, that in section 20 of the Wealth-tax Act, the expression " hitherto assessed as undivided " as in section 25A of the Indian Income-tax Act, 1922, does not appear. From the aforesaid judicial decisions it is manifest therefore that section 20 of the Wealth-tax Act, if it is in pari materia with section 25A of the Indian Income-tax Act, 1922, then it is only a machinery section and not a charging section. In that case section 20 of the Wealth-tax Act will only have application in respect of any year in which at the time of the accrual of liability, that is to say, at the time of the relevant valuation date, the family was joint but has disrupted at the time when the assessment was being made. It was, therefore, contended by counsel on behalf of the revenue, that though similar language has been used, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken place, provided only, if the partition takes place on the last date of the previous year. This appears to be a significant factor. Under the scheme of the Wealth-tax Act liability arises on the net wealth of an assessee on the relevant valuation date. The relevant valuation date is the last date of the previous year. So if, on that last date a partition takes place, then what is to happen. The Act provides that, in that case, if the conditions of section 20 are satisfied the Wealth-tax Officer would make an assessment on the Hindu undivided family in respect of the property as belonging to the Hindu undivided family. That provision, in the section, in our opinion, is no indication of the proposition that by these provisions authority was given to the Wealth-tax Officer to tax a Hindu undivided family as such if before the accrual of liability the family had ceased to remain joint under the provisions of Hindu law. We are, therefore, of the opinion that section 20 of the Wealth-tax Act is in pari materia with section 25A of the Indian Income-tax Act, 1922. The difference in language in section 20 of the Wealth-tax Act has been necessitated due to the scheme of the Wealth-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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