PRAKASH CHAND SURANA VS COMMISSIONER OF WEALTH TAX

1998 P T D 1480

[228 I T R 604]

[Rajasthan High Court (India)]

Before V.K. Singhal and M.A.A. Khan, JJ

PRAKASH CHAND SURANA

Versus

COMMISSIONER OF WEALTH TAX

D.B. Civil Wealth Tax Reference No.80 of 1985, decided' on 8th May, 1996.

Wealth tax---

---- Status of assessee---Rate of tax ---HUF---Specified HUF---Wife of Karta having taxable wealth ---HUF assessable as specified HUF---Indian Wealth Tax Act. 1957, Sched. I.

Schedule 1 to the Wealth Tax Act, 1957, provides the rates of tax and in Part I of the said Schedule, the rates of tax in respect of an individual or a -Hindu undivided family have been prescribed. Item 2 of Part 1 prescribes the rate of tax in respect of a Hindu undivided family which has at least one member whose net wealth is assessable under the Wealth Tax Act. The use of the word "member" in the Schedule to the Wealth Tax Act, in the light of the decisions of the Supreme Court and the provisions of the Hindu law make it clear that the wife is a member of the family. There is no requirement that the member should be a coparcener. The Supreme Court itself has considered a wife as a member and since the Schedule to The Wealth Tax Act has not required that the member should be a coparcener, the Hindu law concept of a coparcenary cannot be invoked.

Hence, where the wife of the Karta has taxable wealth the correct status of the Hindu undivided family would be that of a specified Hindu undivided family.

Kushal Chand Surana v. CWT (1995) 216 ITR 56 (Raj.) fol.

Gowli Buddanna v. CIT (1966) 60 ITR 293 (SC); Kalyanji Vithaldas v. CIT (1937) 5 ITR 90 (PC); Narendranath (N.V.) v. CWT (1969) 74 ITR 190 (SC) and Surjit Lal Chhabda v. CIT (1975) 101 ITR 776 (SC) ref.

T.C. Jain for the Assessee.

K.S. Gupta for the Commissioner.

JUDGMENT

V.K. SINGHAL J.---This reference under section 27(1) of the Wealth Tax Act, 1957, has been made by the Income-tax Appellate Tribunal. Jaipur Bench, Jaipur, it inspect of the assessment year 1976-77 referring the following question of law arising out of its appellate order, dated August 29, 1984:

"Whether, on the facts and in the circumstances of the case, the correct status of the assessee was specified Hindu undivided family or otherwise?"

The facts of the case are that the family of the assessee consists of the Karta, his son and wife. The Wealth Tax Officer treated the status as specified Hindu undivided family. On appeal before the Commissioner of Wealth Tax (Appeals), it was stated that the only member of the Hindu undivided family who had taxable wealth was the wife of the Karta and no co-partner is having any taxable wealth. In these circumstances, it was submitted that the status of the assessee could not be taken as that of a specified Hindu undivided family. The Commissioner of Wealth Tax (Appeals) allowed the appeal and sent the matter back to the Wealth Tax Officer to give reasons for adopting the status of specified Hindu undivided family. The matter was challenged before, the Income-tax Appellate Tribunal by the Department. It was held that the assessee is a specified Hindu undivided family. The Tribunal has taken into consideration Schedule I, Part I(ii), wherein it is provided that in the case of every Hindu undivided family which has at least one member whose net wealth assessable for the assessment year exceeds Rs.1,50,000 different rates of wealth tax will apply. It was observed that the Karta's wife is also a member of the Hindu undivided family though she cannot claim partition. The distinction between the word "coparcener" and "member" was also pointed out and it was said that in the Schedule the word "member" has been written and not coparcener and, therefore, the wife being a member of the Hindu undivided family, the Wealth Tax Officer was justified in treating the Hindu undivided family as specified.

This matter was, also considered by this Court in the case of Kushal Chand Surana v. CWT (1995) 216 ITR 56 (D.B.Wealth Tax Reference No. 33 of 1986, decided on /01/1995.

"The wife is not a coparcener under the Hindu law and is entitled to maintenance out of the husband's property and has to that extent an interest in his property. She cannot demand partition but, if a partition takes place between her husband and sons she is entitled to receive a share equal to that of a son.

A coparcenary is narrower than the joint family. A person who acquires by birth an interest in the joint or coparcenary property is a coparcener. The joint Hindu family constituting a coparcenary is required to have a common male ancestor with lineal descendants in the male line whereas a joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.

In Kalyanji Vithaldas v. CIT (1937) 5 ITR 90, The Privy Council has made a distinction between a coparcenary and a Hindu undivided family and it was held that a female can be a member of the Hindu undivided family. In this case Moo1ji owned the property as a separate property which was gifted by him to his sons Kanji and Sewdas who had no sons. It was further held that the assessment has to be made as an individual till a son is born. In Gowli Buddanna v. CIT.(1966) 60 ITR 293, it was held by the apex Court that a single male coparcener living with his mother and two sisters can constitute a Hindu undivided family. In this case, the property was ancestral in the hands of the father and after his death devolved by survivorship, on the son and he was the only male coparcener. The reduction of the number of coparceners was considered not a relevant factor. In N.V. Narendranath v. CWT (1969) 74 ITR (SC) 190, the principle of Gowli Buddanna's case (1966) 60 ITR 293 (SC), was followed and this was also a case of a single coparcener with his wife and. two daughters and it was held that a joint family can consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth Tax Act to suggest that the Hindu undivided family as an assessable unit must consist of at least two male members. In Surjit Lal Chhabda v. CIT (1975) 101 ITR 776 (SC), the assessee had no son and it was found that the property was not an asset of a pre-existing joint family of which the assessee was a member and it became an item of joint family for the first time when the assessee threw his separate property into the family hotchpotch. In respect of his own separate property which was so thrown, of which the assessee was the full owner, it was held that since he had no son at that point of time when the property was converted as joint family property, the income of such property has to be considered as the income of the individual and not of Hindu undivided family. It was observed by Chandrachud, J., (at page 783), "the joint Hindu family is, thus, a larger body consisting of a group- of persons who are united by the tie of sapindasship arising by birth, marriage or adoption. 'The fundamental principle of the Hindu Joint family is the sapindaship. Without that it is impossible to form a Joint Hindu family ...It is the family, relation, the sapinda relation, which distinguishes the joint family and is of its very essence... The appellant's wife became his sapinda on her marriage with him. The daughter too, on her birth, became a sapinda and until she leaves the family by marriage, the tie of sapindaship will bind her to the family of her birth'.

Schedule I to the Wealth Tax Act, provides the rates of tax and in Part I of the said Schedule, the rates of tax in respect of an individual or a Hindu undivided family have been prescribed. Item 2 of Part I prescribes the rate of tax in respect of a Hindu undivided family which has at least one member whose net wealth is assessable under the Wealth Tax Act.

The use of the word "member" in the Schedule to the Wealth Tax Act, in the light of the decisions of the apex Court and the provisions of the Hindu law make it clear that the wife is a member of the family and is not a coparcener. There is no requirement under law that the member should be a coparcener. The apex Court itself has considered a wife a member and since the Schedule to the Wealth Tax Act has not required that the member should be a coparcener, the concept of Hindu law of a coparcenary cannot be invoked.

It is not in dispute that the wealth of the wife of the Karta is taxable wealth and she is also a member of the family."

In view of the above, we are of the view that the correct status of the assessee was specified Hindu undivided family.

The reference is answered in favour of the Revenue and against the assessee.

M.B.A./1690/FC Reference answered.