Income Tax Appellate Tribunal - Bangalore
Prithvi Baveja vs First Wealth-Tax Officer on 10 August, 1990
Equivalent citations: [1990]35ITD224(BANG)
ORDER
A.V. Balasubramanyam, Judicial Member
1. These appeals are by the assessee, Prithvi Baveja (HUF). The proceedings relate to wealth-tax assessment for 1980-81 to 1986-87. Prithvi Baveja was a member of Hindu joint family. He had separated from his brothers on 27-6-1974 after the death of the father. After the partition, the HUF consisted of himself, his wife, a minor son and a minor daughter. The HUF of the branch of Prithvi Baveja was being assessed.
2. Prithvi Baveja who was the karta of the joint family died on 13-7-1978, leaving him surviving his wife (Anita Baveja), a minor son (Nikhil) and a minor daughter (Saloni). The joint family and mother (Prabha Baveja) held immovable properties, jewellery, shares of companies, etc. Wealth-tax returns were filed declaring the value of the assets and the details are as hereunder:
Assessment year Valuation Date Value returned
1980-81 31-3-1980 Rs. 3,74,800
1981-82 31-3-1981 Rs. 3,74,800
1982-83 31-3-1982 Rs. 3,74,800
1983-84 31-3-1983 Rs. 3,74,800
1984-85 31-3-1984 Rs. 3,74,800
1985-86 31-3-1985 Rs. 3,07,500
1986-87 31-3-1986 Rs. 2,27,084
The Wealth-tax Officer did not accept the returned valuation.
3. Before the assessing officer, there were other disputes. One was in regard to character of the shares. The shares stood in the name of the mother Prabha Baveja. It was contended that the value thereof is not includible in the wealth-tax assessment of the HUF.
4. One major controversy was in regard to the extent of the assets includible in the HUF assessment. Prithvi Baveja had died without leaving any testament and his share, in the HUF properties devolved on Class I heirs under the Hindu Succession Act, 1956; and that a half share alone was assessable in the HUF assessment as the other half is assessable in the hands of the Class I heirs of the deceased who had inherited the same. The Wealth-tax Officer held that the mother of Prithvi Baveja had inherited 1/8th share and the value of that was not includible in the HUF assessment.
5. There was an estate duty assessment. The Wealth-tax Officer determined the value of the HUF properties at Rs. 48,00,000 as on 5-11-1986 on the basis of the estate duty assessment. He deducted 7.5 per cent out of that attributing the same to the rise in prices and fixed the value, as on 31-3-1986, at Rs. 38,88,000. For the earlier years, he gave a deduction of 15 per cent for each year and accordingly determined the value.
6. There were appeals to the Commissioner of Wealth Tax (Appeals) which he disposed of by a common order. On the point of valuation, the Commissioner (Appeals) directed the Wealth-tax Officer to refer the question of valuation to Valuation Cell and to adopt the value as determined by them. On shares, it was held that their value was includible in these assessments. The Commissioner (Appeals) upheld the order of the Wealth Tax Officer excluding the value of 1/8th share of the mother Prabha Baveja.
7. The assessee is on further appeal to the Tribunal. Before us, Shri Parthasarathy, the learned counsel for the assessee, addressed on three points which we will deal with now.
8. With regard to valuation, it was stated that a reference under Section 16A can only be made by the Wealth Tax Officer and that the Commissioner (Appeals) had no power to give a direction in this regard. In the case of one Prem Baveja [WT Appeal No. 164 (Bang.) of 1987] a similar thing had happened and the Tribunal's order is at page 6 of the compilation. It is for the Wealth-tax Officer to form an opinion whether a reference under Section 16A is necessary to determine the actual market value. That opinion has to be made considering all relevant data on record. As pointed out by the Tribunal in the case of Prem Baveja (supra) it may be premature for the Commissioner (Appeals) to give such a direction. Dealing with this aspect, the Bench observed:
... This is a matter which has to be left to the discretion of the Wealth-tax Officer. On a due consideration of all the relevant facts, we therefore, agree with the assessee that the Commissioner (Appeals) was not justified in straight away directing that the Wealth-tax Officer should refer the matter to the valuation cell. We would uphold the order of the Commissioner (Appeals) setting aside the assessment to be redone in accordance with law. The Wealth-tax Officer will make a fresh assessment in accordance with law after taking into account all relevant facts as obtaining on the valuation date and other factors which may influence the market value and will also consider all the contentions of the assessee.
We do know better than to pass a similar order in the present appeals. While we affirm the order of the Commissioner (Appeals) restoring this issue of valuation to the file of the Wealth-tax Officer, we observe that the Wealth-tax Officer shall take into consideration all relevant facts and pass a fresh order taking into account all aspects including the point whether a reference under Section 16A is warranted. With this observation, we dispose of the first ground.
9. The second ground relates to inclusion of the value of the shares of a company. The mother, Prabha Baveja, had filed a suit in Civil Court for partition and separate possession of her share in the family properties. The parties reported a compromise and accordingly a decree was passed. In the compromise, the shares were treated as belonging to the family. It must, in the circumstances, be held that the shares belong to the HUF and the value thereof is includible in these HUF assessments.
10. The last ground has reference to exclusion of value of 1/8th share from the net wealth of the HUF. The Wealth-tax Officer held that the share of the mother was not includible in the net wealth of the HUF. There were only two coparceners and the family comprised of female relatives specified in Class I. He worked out the share of the deceased Prithvi Baveja on the basis of Explanation 1 to Section 6 of the Hindu Succession Act and held that one half was the share that would have been allotted to him if there was a division just prior to his death. As there were in all four Glass I heirs, he concluded that 1/8th was the share of the mother. The parties belong to Sindhi Community. They are not Hindus of South India to be regarded as governed by Mitakshara Law as applied in South India. A wife is entitled to a share equal to that of a son and to hold and enjoy that share separately even from her husband if a partition takes place except in South India - See Article 315, Mulla's Hindu Law. Even in a notional partition to be made for the. purpose of ascertaining the share of the deceased, the females who are entitled to share must be allotted one. It must be assumed that there was, in fact, a division just prior to the death of the deceased and the females who are entitled in law for a share must be allotted and by making such allotment, the share of the deceased must be ascertained and this is the principle explained by the Supreme Court in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440. If a partition as contemplated by Explanation I to Hindu Succession Act is made bearing in mind the rule enunciated in Gurupad Khandappa Magdum's case (supra) then the mother Prabha Baveja will have to be allotted 1/3rd share and Prithvi Baveja would also have got 1/3rd. It is this 1/3rd share that passed on to all the Class I heirs. Thus the mother will not only get a share in the interest of the deceased son, but, in addition, a share received or must be deemed to have been received in the notional partition. In the present case, it would be 1/3rd plus 1/12th =5/12th.Whatisincludible in these assessments is the extent of the property that still remains with the HUF after the death of the coparcener Prithvi Baveja. The wife of Prithvi Baveja would also inherit a share in the interest of her deceased husband and what the wife gets is her personal property. Similarly, the share inherited by the unmarried daughter is also her personal property.
11. At the time of address, a reference was made to the decision of the Supreme Court in the case of State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31, where the decision in Gurupad Khandappa Magdum's case (supra) has been referred and the following stated by Their Lordships is apposite to be extracted:
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, he 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 I 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.
The Supreme Court was concerned with the question whether a female heir who inherited a share can be deemed to have divided and their Lordships were concerned with the meaning of "Person" and "Family" for the purpose of Section 6 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961. Though a Class I female heir is not separated from the joint family, it is, however, certain that what she inherits as heir in the joint family property gets fixed and the interest she acquires is as enunciated in Gurupad Khandappa Magdum's case (supra).
12. A very useful reference may be made to the decision of the Gujarat High Court in the case of CWT v. Kantilal Manilal [1973] 90 ITR 289. The interest of the Hindu undivided family would not extend to the whole of the property though there is continuance of the HUF. Bhagwati C.J. (as he then was) points out:
...The quantum of share is fixed: the proportion in which the share is to be counted are also crystallized. This specific share in definite ascertained properties, subject of course to payment of proportionate share of the debts and liabilities, devolves on the heirs by intestate succession. But, that does not affect the continuance of the Hindu undivided family. The fiction of partition is introduced for the limited purpose of defining the nature and quality of the interest which devolves by succession and it cannot be extended beyond its legitimate field. The Hindu undivided family, therefore, continues with the surviving coparceners as it would have done under ordinary Hindu law, but the share of the deceased coparcener in the properties of the Hindu undivided family having devolved on the heirs by intestate succession, that share goes out of the Hindu undivided family and the Hindu undivided family continues to be the owner of only the remaining share. The result in that in the properties which belonged to Hindu undivided family at the date of death of the coparcener, the heirs have a defined share, namely, the share which the deceased coparcener whom they have succeeded would have had, if a partition had taken place immediately before his death and the remaining share belongs to the Hindu undivided family. Now, once this position is reached, it is clear that the Hindu undivided family and the heirs hold these properties as tenants-in-common...The properties are thus clearly held by the Hindu undivided family and the heirs as tenants-in-common. This conclusion is considerably fortified by Section 19 which provides that if two or more heirs succeed together to the property of an intestate which would include the interest of a deceased coparcener in coparcenary property, they shall take the property as tenants-in-common and not as joint tenants. The heirs would, threrefore, take the share of the deceased coparcener in the properties of the Hindu individed family between themselves as tenants-in-common and, a fortiori, it must follow that each of the heirs can (sic) the Hindu undivided family would hold the properties as tenants-in-common... we must, therefore, hold that Usha, Pushpavati and the assessee Hindu undivided family held the properties which belonged to the Hindu undivided family at the date of death of Dinesh as tenants-in-common. Usha and Pushpavati each having one-sixth share and the assessee Hindu undivided family having the remaining two-third share.
The Mysore High Court had occasion to consider the same question in the case of CIT v. Smt. Nagarathnamma [1970] 76 ITR 352, wherein it is pointed out that on the death of a male member of a Hindu undivided family, though the Hindu undivided family continues, the property of the Hindu undivided family gets diminished to the extent of the share of the male Hindu dying.
13. There is no doubt that the shares inherited by Class I female heirs of Prithvi Baveja no longer belonged to the HUF as their respective shares were personal properties of those female heirs. Therefore, what was excludible was not only the share of mother Prabha Baveja but also the share of the other two female heirs (wife and daughter). Though we have shown the true legal position, we, in these appeals, cannot disturb the order of the wealth-tax officer excluding 1/8th share as the interest of the mother since the revenue cannot be worse off because the assessee has appealed challenging the exclusion of 1/8th share. In the circumstances, we, while pointing out the correct legal position, have to reject this ground also.
14. For the foregoing, the appeals are dismissed.