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TMI Blog1972 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... on February 27, 1958. Penalty proceedings dragged on and eventually terminated by an order, dated August 22, 1963, by which the Income-tax Officer imposed a penalty on the assessee for concealing its income. The assessee had while the penalty proceedings were pending claimed a partition of the joint Hindu undivided family as from the 6th May, 1958. The Income-tax Officer had not accepted the partition but the assessee went up in appeal against that order and the appeal was eventually allowed on the 12th December, 1963, by an order recognising the partition as from 6th May, 1958. Against the order of penalty, the assessee filed an appeal by W.T.R. No. 344 of 1969 (Lala Narendra Lal, Shamli v. Commissioner of Income-tax). Rajendra Lal and Narendra Lal are two brothers. The family of Rajendra Lal consists of himself and his wife, Shrimati Shusheela Devi, while that of Narendra Lal consists of himself, his wife, Shrimati Kamla Devi, a major daughter, Manjula Rani, and a minor daughter, Roopa Ramni. The family was joint and a partial partition took place on August 7, 1959. In that partition, 2,200 shares of Upper Doab Sugar Mills, Shamli, were divided as under : (1) Rajendra Lal -10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of the Wealth-tax Act, 1957 : " 4. Net wealth to include certain assets.-(1) In computing the net wealth of an individual, there shall be included, as belonging to him--- (a) the value of assets which on the valuation date are held- (i) by his wife to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live separately, or (ii) by a minor child not being a married daughter to whom such assets have been transferred by the individual otherwise than for adequate consideration, or......" It will be noticed that before section 4 may be brought in aid, two conditions are necessary. Firstly, that the assessment must be in respect of an individual and, secondly, that assets which are sought to be included should have been transferred by that individual either to his wife or to his minor child. In the present case, the assessee is an individual and so the first test is satisfied. The dispute centres round the question as to whether the second condition is satisfied. The assets, i.e., the shares which were allotted to the two coparceners, i.e., Rajendra Lal and Narendra L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the family property can properly be described as 'joint property of the undivided family'. Applying this test it is clear, though in the absence of male issue the dividing coparcener may be properly described in a sense as the owner of the properties, that upon the adoption of a son or birth of a son to him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it and the partition only cuts off the claims of the dividing coparceners. The father and his male issue still remain joint. The same rule would apply even when a partition had been made before the birth of the male issue or before a son is adopted, for the share which is taken at a partition by one of the coparceners is taken by him as representing his branch. Again, the ownership of the dividing coparcener is such ' that female members of the family may have a right to maintenance out of it and in some circumstances, to a charge for maintenance upon it ' : see Arunchalam's case. It is evident that these are the incidents which arise because the properties have been and have not ceased to be joint family properties. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sole coparcener as " in one sense the owner of the properties ", because the management of the property in such a case is exclusively of the divided coparcener. This, in our view, is the only possible way of interpreting the decision of the Supreme Court, so as not to bring about an inconsistency in the judgment. For, in case the aforesaid decision is held to be laying down that a divided single coparcener is the owner of the properties, the latter conclusion of their Lordships of the Supreme Court that the property belongs to the Hindu undivided family would become inconsistent with the first part of the decision. In the case of L. Hirdey Narain v. Commissioner of Income-tax, which has been referred to in Rajendra Lal's case and distinguished, a Bench of this court has taken the view that the provisions of section 16(3)(a) (iv) of the Income-tax Act, which are in pari materia with section 4(1)(a) apply only to a case of an individual, and not to that of a Hindu undivided f ami1y. The basis for distinguishing this case was that the assessee, Rajendra Lal, became the sole owner of the property after the partition. This view, as we have already held, does not appear to be well-foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the parties, they shall bear their own costs. Counsel's fee is assessed at Rs. 200. H. N. SETH J.-After hearing the arguments advanced in this case and having discussed the matter with my learned brothers, Gulati and C. S. P. Singh JJ., I have reconsidered the view which I shared with Hon. Oak C.J. in the case, Rajendra Lal v. Commissioner of Income-tax. Under the Wealth-tax Act, all property belonging to an individual is to be included in computing his net wealth. It was apprehended that in order to reduce the incidence of taxation, an assessee would be tempted to formally transfer his property to his wife and minor children, while for all practical purposes continuing to enjoy its benefits as if it was his own property. Accordingly, the legislature enacted section 4(1)(a)(i) and (ii) providing that the value of the assets transferred by an individual, directly or indirectly, otherwise than for adequate consideration to his wife or minor child, not being a married daughter, shall in computing the net wealth of the transferor be included in his net wealth. This section was not enacted with the idea that merely because a property is transferred by a person its value should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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