V. Ch. Veera Raju vs Commissioner of Wealth-tax

Syed Shah Mohammed Quadri, J.—At the instance of the assessee, the following question is referred to us for our opinion u/s 27(1) of the Wealth-tax Act, 1957 :

"Whether, on the facts and circumstances of the case, and on a correct interpretation of section 20 of the Wealth-tax Act, 1957, the assessment for the assessment year 1979-80 has been validly made on the bigger Hindu undivided family of Vulli Kamaraju ?"

For the reasons which we state below, we are inclined to answer the question in the affirmative, i.e., in favour of the Revenue.

The facts that give rise to the above reference are : the assessee filed the wealth-tax return with reference to the bigger Hindu undivided family comprising himself and his son, Vulli China Veera Raju, disclosing the net wealth as nil on the ground that on the valuation date, namely, March 31, 1979, there was full partition between him and his son, China Veera Raju, and, therefore, there was no wealth which could be subjected to wealth-tax. The Wealth-tax Officer did not agree with that contention and assessed the net wealth of the Hindu undivided family to wealth-tax. On appeal by the assessee, the Assistant Commissioner set aside the assessment made by the Wealth-tax Officer on the ground that there was full partition on the valuation date. However, on further appeal to the Income Tax Appellate Tribunal by the Revenue, the order of the Assistant Commissioner was set aside and the order of the Wealth-tax Officer was restored by order dated February 22, 1984. It is this order that gave raise to the question referred to above.

It is too far to maintain a charge under the Wealth-tax Act under the charging section, namely, section 3 of the Act. The net wealth of the Hindu undivided family as on the valuation date will form the basis of the charge. Section 2(q) of the Wealth-tax Act defines "valuation date" in relation to any year for which an assessment is to be made under the Act, as the last date of the previous year as defined u/s 3 of the Income Tax Act, if an assessment were to be made under that Act for that year. Here the assessment year is 1979-80 for which the previous year would be 1978-79 (April 1, 1978, to March 31, 1979); the last date of the previous year, viz., March 31, 1979, would be the valuation date. The contention was that on that date there was no bigger Hindu undivided family and, therefore, no liability to pay wealth-tax u/s 3 of the Wealth-tax Act could arise. This contention ignores the provision of section 20 of the Wealth-tax Act which reads thus :

"20. (1) Where, at the time of making an assessment, it is brought to the notice of the Assessing Officer that a partition has taken place among the members of a Hindu undivided family, and the Assessing 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 assessment 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.

(2) Where the Assessing Officer is not so satisfied, he may, by order, declare that such family shall be deemed for the purposes of this Act to continue to be a Hindu undivided family liable to be assessed as such."

A perusal of sub-section (1) of section 20 makes it clear that for purposes of the Wealth-tax Act, if it is noticed by the assessing authority that the partition had taken place on the last day of the previous year and even when the partition is made by the members of the Hindu undivided family during the previous year relevant to the assessment year, wealth-tax has to be assessed on the net wealth of the joint family and each member or group of members shall be liable jointly and severally to the tax that is assessed. This provision places the position beyond doubt that partition of the joint family on the valuation date relevant for the assessment year in question, had to be ignored for the purposes of assessing wealth-tax for the assessment year in question. On the strength of the observation of this court in Commissioner of Wealth-tax, Andhra Pradesh Vs. Tatavarthi Rajah and Satyanarayana Murthy, , the Appellate Tribunal has rightly held that the assessment of net wealth of the bigger Hindu undivided family was valid as the partition pleaded took place on the valuation date and so section 20(1) of the Act was attracted.

As we are in entire agreement with the approach of the Appellate Tribunal, we answer the question in the affirmative, that is, in favour of the Revenue and against the assessee.

The reference is answered as mentioned above.