S.V. Halappa and Sons Vs. Second Wealth-tax Officer - Court Judgment

Excerpt:
1. the question that arises for consideration in this appeal is whether, when there is a partition of the joint family on the last date of the previous year, the assessment could be made on the huf. the valuation date is 31-3-1978. there was a partition of the joint family on 31-3-1978. the assessee-huf filed a nil return of wealth. it was explained before the wto that since the partition has taken place on the last date of the valuation date, the assessee was not having any taxable wealth. the wto did not accept the submission of the assessee.he held that according to section 20(1) of the wealth-tax act, 1957, if the partition has taken place on the last date of the previous year, the assessment has to be made in the hands of the huf as if no partition has taken place. he completed the.....

Judgment:
1. The question that arises for consideration in this appeal is whether, when there is a partition of the joint family on the last date of the previous year, the assessment could be made on the HUF. The valuation date is 31-3-1978. There was a partition of the joint family on 31-3-1978. The assessee-HUF filed a nil return of wealth. It was explained before the WTO that since the partition has taken place on the last date of the valuation date, the assessee was not having any taxable wealth. The WTO did not accept the submission of the assessee.

He held that according to Section 20(1) of the Wealth-tax Act, 1957, if the partition has taken place on the last date of the previous year, the assessment has to be made in the hands of the HUF as if no partition has taken place. He completed the assessment on the HUF on the entire property. The partition was not doubted by him. In fact, an order under Section 20(1) has been passed on 4-3-1980, holding that a genuine partition has taken place in the family and the same was accepted, The assessee preferred an appeal before the AAC. He upheld the assessment made by the WTO. Against the same, the present appeal is filed.

2. The learned counsel for the assessee strongly urged that on the last date of the previous year, i.e., 31-3-1978, there was a partition of the HUF and so there was no joint family in existence on that date on which an assessment could be made. The HUF contemplated under Section 20(1) is one which should be in existence but not one which had already been disrupted. The learned departmental representative submitted that on the last date of the previous year, i.e., 31-3-1978, the joint family was in existence. It is only on that date that there was a partition, Under Section 20(1), if the partition has taken place on the last date of the previous year, the assessment has to be made on the HUF. Thus, he supported the orders of the lower authorities. He placed reliance on a decision reported in Goswami Brijratanlalji Maharaj v.CWT [1971] 79 ITR 373 (Guj.).

3. We have considered the rival submissions. There is no dispute that there was a partition of the joint family on 31-3-1978. In fact, the WTO passed an order dated 4-3-1980 under Section 20(1) accepting the partition. The question that still arises for consideration is whether, when there is a partition on the last date of the previous year, the assessment could still be made on the HUF. Section 20(1) reads as under : 20(1) Where at the time of making an assessment, it is brought to the notice of the Wealth-tax Officer that a partition has taken place among the members of a Hindu undivided family, and the Wealth-tax Officer, after inquiry, is satisfied that the joint family property has been partitioned as a whole among the various members or groups of members in definite portions, he shall record an order to that effect and shall make assessments on the net wealth of the undivided family as such for the assessment year or years, including the year relevant to the previous year in which the partition has taken place. If the partition has taken place on the last day of the previous year and each member or group of members shall be liable jointly and severally for the tax assessed on the net wealth of the joint family as such.

Under the above provision, if the partition has taken place on the last day of the previous year, the assessment shall be made on the HUF so far as that assessment year is concerned, in spite of the partition.

Thus, the assessment has been rightly made on the HUF.4. In Goswami Brijratanlalji Maharaj v. CWT (supra), the Gujarat High Court had an occasion to consider the provisions of Section 20(1). At page 388, it was observed as under : ... What Section 20(1) in our opinion provides is that if a partition by metes arid bounds has taken place on the last day of the previous year relevant to the year of assessment, the undivided family has to be assessed under the Wealth-tax Act as such in spite of the partition having taken place so far as that assessment year is concerned. If this condition of the partition having taken place on the last day of the previous year is not satisfied, then for the assessment year referable to that previous year, the Wealth tax Officer has to treat the Hindu undivided family as completely separate. In our opinion, it is only on the basis of this interpretation which appeals to us that full effect can be given to all the provisions of Section 20(1) and Section 20(2) ....

Thus, it was held that if the partition has taken place on the last day of the previous year, the undivided family has to be assessed so far as that assessment year is concerned, in spite of the partition having taken place. The above ratio squarely applies to the instant case.

5. The decision of the Kerala High Court in Parameswaran Nambudiripad v. IAC [1969] 72 ITR 664, relied upon by the assessee's counsel, has no application to the facts of the instant case. That was a case under the Agricultural Income-tax. The provisions therein are entirely different.

They are not similar to Section 20(1). Hence, that decision has no application to the facts of the instant case.