1. These departmental appeals relate to assessment years 1981-82 and 1982-83 and they are being disposed of together as a common issue is involved.
2. The assessee is a HUF consisting of Kishandas, karta, his wife Smt.
Iswara Devi, two major sons Shri Damodar Das Agarwal and Prabhudas Agarwal. Shri Damodar Das Agarwal died on 8-11-1980 leaving behind his wife Smt. Urmila Agarwal and two minor sons. The assessee filed the return claiming deduction of l/4th share in the value of the properties due to the deceased's widow and her children. The Wealth-tax Officer disallowed the claim of the assessee. On appeal the Appellate Assistant Commissioner accepted the assessee's claim and directed the Wealth-tax Officer to exclude the share of the deceased from the total wealth of the assessee for these two years. He followed the decisions of the Mysore High Court in CIT v. Smt. Nagarathnamma [1970] 76 ITR 352 and of the Gujarat High Court in CWT v. Kantilal Manilal [1973] 90 ITR 289.
Against the same the revenue has preferred these appeals.
3. The learned departmental representative strongly urged that after the death of Shri Damodar Das Agarwal, his wife Smt. Urmila Agarwal continued to be a member of the HUF and she did not partition the deceased's share from the HUF. Thus there was no actual partition though she might be entitled to a fixed share notionally. Hence the deceased's share cannot be excluded from the total wealth of the assessee. He placed strong reliance on the decision of the Supreme Court in State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31 and orders of the Delhi and Allahabad Benches. He submitted that in view of the decision of the Supreme Court the two decisions relied on by the Appellate Assistant Commissioner must be deemed to have been impliedly overruled. The learned counsel for the assessee submitted that under the proviso to Section 6 of the Hindu Succession Act, the share of the deceased in the deceased's property is fixed.
Once the share is fixed she enjoys the property as tenant-in-common.
The partition is deemed to have taken place and the deceased's share goes out of the family. Hence the deceased's share cannot be included in the net wealth of the family. Inheritance can never be postponed. He relied on the decisions reported in Smt. Nagarathnamma's case (supra) and Kantilal Manilal's case (supra). He also submitted that Section 171 deals with partition amongst members of the family and it has no bearing when the partition is by statutory provisions. He also submitted that there is no provision for partial partition in view of Section 179.
4. We have considered the rival submissions. The question for consideration is whether the deceased's share has to be excluded from the total wealth of the HUF. It is no doubt true that under the proviso to Section 6 of the Hindu Succession Act read with Explanation 1 thereto the deceased's wife gets a share in the property of the deceased in. the joint family. The share is fixed. The said provision was considered by the Supreme Court in Gurupad Khandappa Magdum v.Hirabai Khandappa Magdum [1981] 129 ITR 440 wherein it was held that it has to be assumed that a partition had in fact taken place between the deceased and his coparceners immediately before his death. Thereafter the entire process of ascertainment of the ultimate shares of the heirs through all its stages should be assumed. All the consequences which flow from a real partition has to be logically worked out. The inevitable corollary of this petition is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the normal partition. The above decision of the Supreme Court was considered in Narayan Rao Sham Rao Deshmukh's case (supra). In this case one Sham Rao Bhagawant Rao Deshmukh and his son Narayan Rao were members of a Joint Hindu Family. His wife Sulochanabai and his mother Gangabai alias Taibai were also members of that family. Sham Rao died on June 15, 1957 and on his death his interest in the coparcenary property devolved on his son, wife and mother in equal shares under Section 6 of the Act.
They, however, continued to live together enjoying the family property as before. On 26-1-1962 the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961 came into force. Narayan Rao filed a declaration stating that they were holding the lands in distinct and separate shares and each should be treated as a separate unit. On these facts, the Supreme Court after referring to the decision of the Supreme Court in the case of Gurupad Khandappa Magdum (supra) observed as under at page 38 : We have carefully considered the above decision and we feel that this case has to be treated as an authority for the position that when a female member who inherits an interest in the joint family property under Section 6 of the Act files a suit for partition expressing her willingness to go out of the family, she would be entitled to get both the interest she has inherited and the share which would have been notionally allotted to her as stated in Explanation 1 to Section 6 of the Act. But it cannot be an authority for the proposition that she ceases to be a member of the family on the death of a male member of the family whose interest in the family property devolves on her without her volition to separate herself from the family. A legal fiction should no doubt ordinarily be carried to its logical end to carry out the purposes for which it is enacted but it cannot be carried beyond that. It is no doubt true that the right of a female heir to the interest inherited by her in the family property gets fixed on the death of a male member under Section 6 of the Act but she cannot be treated as having ceased to be a member of the family without her volition as otherwise it will lead to strange results which could not have been in the contemplation of Parliament when it enacted that provision and which might also not be in the interest of such female heirs. To illustrate, if what is being asserted is accepted as correct, it may result in the wife automatically being separated from her husband when one of her sons dies leaving her behind as his heir. Such a result does not follow from the language of the statute. In such an event, she should have the option to separate herself or to continue in the family as long as she wishes as its member though she has acquired an indefeasible interest in a specific share of the family property which would remain undiminished whatever may be the subsequent changes in the composition of the membership of the family. As already observed, the ownership of a definite share in the family property by a person need not be treated as a factor which would militate against his being a member of a family. We have already noticed that in the case of a Dayabhaga family which recognises unit of possession but not community of interest in the family properties amongst its members, the members thereof do constitute a family. That might also be the case of families of persons who are not Hindus. In the instant case, the theory that there was a family settlement is not pressed before us. There was no action taken by either of the two females concerned in the case to become divided from the remaining members of the family. It should, therefore, be held that notwithstanding the death of Sham Rao, the remaining members of the family continued to hold the family properties together though the individual interest of the female members thereof in the family properties had become fixed.
It was held in the above decision that no action has been taken by either of the two females concerned to become divided from the remaining members of the family and it should therefore be held that notwithstanding the death of Sham Rao, the remaining members of the family continued to hold the family properties together though the individual interest of the female members thereof in the family properties had become fixed. The order of the Tribunal Allahabad Bench in Dharmendra Prasad Singh v. WTO [1987] 22 ITD 44 and the order of the Tribunal Delhi Bench in the case of J.M. Prithvi Raj v. WTO [WT Appeal Nos. 1740 to 1745 and 2048 (Delhi) of 1982] supports the revenue's case. The above ratio squarely applies to the instant case. In view of the ratio laid down therein it has to be held in the instant case also that Smt. Urmila Agarwal, the widow of the deceased did not take any action either by filing a suit or by demanding a partition of the share and take away her share and live separately from the remaining members of the family. Notwithstanding the death of Damodardas Agarwal, all the members of the family including Smt. Urmila Agarwal continued to hold the family properties together though her individual interest in the family property had become fixed. She continued to be a member of the family and the entire property was with the joint family only including her share. Thus the deceased's share which fell to his legal heirs Smt.
Urmila Agarwal and two sons cannot be excluded from the total wealth of the HUF as the entire property was with the joint family only. Thus the Appellate Assistant Commissioner was not right in excluding the deceased's share from the net wealth of the HUF. No doubt the decision of the Mysore High Court in Smt. Nagarathnamma's case (supra) and the decision of the Gujarat High Court in Kantilal Manual's case (supra), support the assessee's case. But in view of the decision of the Supreme Court in Narayan Rao Sham Rao Deshmukh's case (supra) it should be presumed that those decisions are impliedly overruled though they are not referred in this decision.