High Court Of Karnataka
Commissioner Of Wealth Tax vs. N.A. Mayanna By LRs
Sections WT 3, WT 4, WT 20, WT 2(e), WT 2(m)
K. Shivashankar Bhat & K.B. Navadgi, JJ.
TRC No. 15 of 1984
4th January, 1991Â
G. Chandrakumar & S. R. Shivaprakash, for the Revenue : P. A. Bhat, for the Assessee
K. SHIVASHANKAR BHAT, J. :
The following question of law is referred for our consideration under the provisions of the WT Act, 1957 : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the partition is deemed to have taken place under Explanation I to s. 6 of the Hindu Succession Act and the half share of the deceased which has devolved on the heirs cannot be included in the net wealth of the HUF ?”
2. The relevant facts are : The HUF consisted of Shri Appayyanna, his wife, Smt. Eeramma, and his son, Mayanna. On 11th April, 1974, Shri Appayyanna died. His share of the property devolved on his widow, Eeramma, and his son, Mayanna. Mayanna filed a return of wealth declaring half of the wealth as belonging to the family in the status of an HUF and the other half as belonging to the individual. The WTO accepted the returns and assessed only half of the wealth as that of the HUF. The CWT was of the view that the order of the WTO was erroneous and prejudicial to the interests of the Revenue. He invoked the provisions of s. 25(2) of the WT Act to which the assessee objected. The Commissioner did not accept the objections of the assessee. He held that the properties of the HUF will remain with the family till a partition is effected ; since no partition is effected, all the properties of the family are assessable to wealth-tax as belonging to the family. Accordingly, he set aside the assessment and directed the WTO to redo the same bringing to tax the entire wealth of the family. In the appeal filed by the assessee, the Tribunal found that the deceased had left surviving a female relative specified in class I of the Schedule to the Hindu Succession Act (for short “the Act”), that is the widow of the deceased and hence the proviso to s. 6 would apply ; thus the property shall not devolve by survivorship but only by intestate succession ; as the deceased has not left any will, under Explanation 1 to s. 6, a notional partition shall be deemed just before the death of the deceased. The share in the coparcenary property which would have been allotted to the deceased on partition if the partition had taken place immediately before his death would devolve on his heirs ; this does not affect the continuance of the HUF ; where the proviso to s. 6 applies, no disruption of joint family status takes place. The coparcenary will continue till a partition is effected but the coparcenary property will not include the interest of the deceased coparcener which devolves on his heirs. That share of the deceased which devolved on the heirs by intestate succession goes out of the HUF and the HUF continues to be the owner of the remaining share only. The share of the deceased in the coparcenary property which has devolved on his heirs by intestate succession having gone out of the family to the heirs who held them as tenants-incommon cannot be included in the net wealth of the HUF. Thus, the property of the HUF stood diminished to the extent of the share of the deceased. Consequently, this reference was invited by the Revenue and has come up before us.
3. Two decisions, one of this Court and another of the Gujarat High Court, seem to be directly on the point and have been referred to by the Tribunal.
4. In CIT vs. Smt. Nagarathnamma (1970) 76 ITR 352, the Bench of this Court held that (at p. 353): “When a male Hindu dies after the commencement of the Hindu Succession Act having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property devolves by succession on his heirs if he had left behind him a surviving female relative specified in class I of the Schedule to the Hindu Succession Act. For the purpose of computation or determination of the share of the male Hindu, Explanation I to s. 6 of the Hindu Succession Act assumes that a notional partition in the family had taken place immediately before his death. Notwithstanding the death of a male member of an HUF, the HUF continues, but, the property of the HUF gets diminished to the extent of the share of the male Hindu dying. Therefore, on the death of Ramaswamy Setty, the share of the joint family in the two firms is reduced from 13/17th to 9/17th share.”
5. In the concluding paragraph, the Bench again stated that (at p. 354): “The joint family, notwithstanding the death of one of its male members, continues for the purpose of income-tax but the share of that joint family is diminished as in the case of alienation of any of the joint family properties.”
6. The ratio of this decision is quite clear. On the death of a male member, whenever the proviso to s. 6 of the Act applies, the joint family is not disrupted ; to compute the share of the deceased which will devolve on the heirs, a notional partition is resorted to by virtue of the said provision of law. The share that is succeeded to by the heirs is not by virtue of any partition but by virtue of the operation of law. To the same effect is the Bench decision of the Gujarat High Court in CWT vs. Kantilal Manilal (1973) 90 ITR 289. Chief Justice Bhagwati, as he then was, speaking for the Bench, accepted the statement of this Court in Nagarathnamma’s case (supra) as a correct proposition of law. It was pointed out by the Bench that, but for the Act, the interest of the deceased in the HUF would have gone to the other coparceners by survivorship and the Act made a radical departure in this regard. At page 293, it was observed that : “Turning to s. 6, the main part of that section provides that when a male Hindu dies after the commencement of the Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Act. This provision became necessary, because, otherwise, interest in coparcenary property being ‘property’ of a coparcener, its devolution on the death of the coparcener would have been governed by s. 8. The Legislature wanted to preserve devolution by survivorship except in cases covered by the proviso and, therefore, enacted the main provision in s. 6. The proviso, however, sets out certain exceptional cases in which the interest of a deceased coparcener in coparcenary property shall devolve not by survivorship but by testamentary or intestate succession, as the case may be, under the Act. If for example the deceased coparcener leaves him surviving a female relative specified in class I of the Schedule and class I specifies both wife and mother his interest in the coparcenary property would, according to the proviso, devolve by intestate succession.”
7. Thereafter, the Bench proceeded to consider the nature or quality of the interest which devolves by virtue of s. 6 of the Act. The following questions were posed (pp. 294, 295) : “What would be the nature or quality of the interest which devolves ? Would it be of the same nature and quality as that possessed by the coparceners whilst alive ? Would there be unity of interest between the surviving coparceners and the heirs on whom the interest of the deceased coparcener devolved ? Would that interest be a fluctuating interest as in the case of a coparcener ? Would the heirs step into the shoes of the coparcener wholly so far as his interest in the coparcenary property is concerned. This spectrum of questions is answered by Explanation 1 which provides that, for the purposes of s. 6, the interest of a coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death, irrespective of whether he was entitled to claim partition or not. It would, therefore, appear to be obvious that when the proviso says that the interest of a deceased coparcener in coparcenary property shall devolve by intestate succession, what is meant is that the share in the coparcenary property which would have been allotted to him on partition, if a partition had taken place immediately before his death shall devolve on the heirs. The concept of a notional partition is brought in for the purpose of defining the nature and quality of the interest which devolves by succession. It is the share which would have been allotted to the deceased coparcener on partition, if a partition had taken place at that time. 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 HUF. 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 HUF, 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 HUF having devolved on the heirs by intestate succession, that share goes out of the HUF and the HUF continues to be the owner of only the remaining share. The result is that in the properties which belonged to the HUF 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 HUF.”
8. Therefore, the share of the deceased that devolved on others under s. 6 of the Act was not to be held by them as coparceners, but as tenants-in-common. It is something like the individual property of the deceased that is being enjoyed by them after his death as his heirs; Though the particular item of property is not identified, the share is identified and that identification of the share is not because of a de facto partition, but by virtue of a legal fiction and it is well known that the legal fiction created for a particular purpose will have to be confined within the bounds of that purpose.
9. In Venkiteswara Pai Rama Pai vs. Luis, AIR 1964 Ker 125, the Full Bench of the Kerala High Court had occasion to consider the effect of s. 6 of the Act. The Full Bench pointed out that (at pp. 126, 127) : “What is provided in s. 6, Hindu Succession Act, is not a partition at all but devolution of interest of a person in coparcenary property. The notional partition mentioned therein is solely for the purpose of ascertaining the extent of such interest as would be the subject-matter of the devolution when the deceased Hindu died undivided from his coparceners. The case is not one of partition inter vivos to attract s. 52 of the Transfer of Property Act.”
10. Mr. Chandrakumar, learned counsel for the Revenue, however, contended that the HUF will have to be treated as continuing as such in the absence of a definite order under s. 20 of the WT Act. Learned counsel referred to a few decisions to point out that the concept of partition of an HUF for the purpose of taxation is a statutory concept and gets validity and enforceability so as to disrupt the HUF when an appropriate order is made under the relevant legislation. Learned counsel referred to s. 171 of the IT Act. Similarly, s. 20 of the WT Act was referred to point out that an HUF continues as HUF until the Assessing Officer after enquiry is satisfied that the joint family property has been partitioned as a whole among the various members or groups of members in definite portions and he shall record an order to that effect. In this regard, though learned counsel cited several decisions, it is sufficient if reference is made to the decision of the Supreme Court in Kalloomal Tapeswari Prasad (HUF) vs. CIT (1982) 133 ITR 690, AIR 1982, SC 760, 767. The Supreme Court traced the history of the legislation commencing with s. 25A of the earlier IT Act leading to the present s. 171 of the IT Act and held that until a partition is accepted and recorded as such by the assessing authority, the HUF will have to be assessed as an HUF, and even if there is a partial partition the same will have to be recognised and recorded under the provisions of s. 171 of the IT Act. Regarding s. 25A of the Indian IT Act, 1922, the principle was stated thus (p. 699 of 133 ITR) : “The substance of all these decisions was that under s. 25A of the 1922 Act, an HUF which had been assessed to tax could be treated as undivided and subjected to tax under the Act in that status unless and until an order was made under s. 25A(1) and if in the course of the assessment proceedings it is claimed by any of the members of the HUF that there has been total partition of the family property resulting in physical division thereof as it was capable of, the assessing authority should hold an enquiry and decide whether there had been such a partition or not. If he held that such a partition had taken place, he should proceed to make an assessment of the total income of the family as if no partition had taken place and then proceed to apportion the liability as stated in s. 25A amongst the individual members of the family. If no claim was made, or if the claim, where it was made, was disallowed after enquiry, the HUF would continue to be liable to be assessed as such. This was the legal position under the 1922 Act.”
11. The nature of the partition under Hindu law was considered and the Supreme Court stated at page 768 of AIR 1982 SC (at p. 702 of 133 ITR) : “Under Hindu law partition may be either total or partial. A partial partition may be as regards persons who are members of the family or as regards properties which belong to it. Where there has been a partition, it is presumed that it was a total one both as to the parties and property but when there is a partition between brothers, there is no presumption that there has been partition between one of them and his descendants. It is, however, open to a party who alleges that the partition has been partial either as to persons or as to property to establish it. The decision on that question depends on proof of what the parties intended-whether they intended the partition to be partial either as to persons or as to properties or, as to both. When there is a partial partition as to property, the family ceases to be undivided as regards properties in respect of which such partition has taken place but continues to be undivided with regard to the remaining family property. After such partial partition, the rights of inheritance and alienation differ according as the property in question belongs to the members in their divided or undivided capacity. Partition can be brought about, (1) by a father during his lifetime between himself and his sons by dividing properties equally amongst them, (2) by agreement, or (3) by a suit or arbitration. A declaration of intention of a coparcener to become divided brings about severance of status.”
12. The Supreme Court further pointed out in page 768 of AIR 1982 SC that (at P. 702 of 133 ITR): “A physical division of the property which is the subject-matter of the partition is not necessary to complete the process of partition in so far as that item of property is concerned under Hindu law. The parties to the partition may enjoy the property in question as tenants-in-common.”
13. Coming to s. 171 of the present IT Act, it is stated at page 769 of AIR 1982 SC that (at p. 704 of 133 ITR):
“A finding to the effect that partition had taken place has to be recorded under s. 171 by the ITO. He can record such a finding only if the partition in question satisfies the definition of the expression ‘partition’ found in the Explanation to s. 171. A transaction can be recognised as a partition under s. 171 only if, where the property admits of a physical division, a physical division of the property has taken place. In such a case mere physical division of the income without a physical division of the property producing income cannot be treated as a partition. Even where the property does not admit of a physical division then such division as the property admits of, should take place to satisfy the test of a partition under s. 171. Mere proof of severance of status under Hindu law is not sufficient to treat such a transaction as a partition. If a transaction does not satisfy the above additional conditions it cannot be treated as a partition under the Act even though under Hindu law there has been a partition-total or partial. The consequence will be that the undivided family will continue to be assessed as such by reason of sub-s. (1) of s. 171.”
14. It is thus clear that the purpose of s. 171 of the IT Act (corresponding to s. 20 of the WT Act) is to make an order on being satisfied about the factum of partition that the HUF has got disrupted. Obviously, this is to govern the case of some positive act on the part of the members of the HUF, such as an act of issuing a notice for partition or Ming a suit for partition or the members voluntarily entering into the act of partition by executing an appropriate deed. In fact, even an oral partition is recognised under Hindu law.
15. There is some difference between the language of s. 171 of the IT Act and the language of s. 20 of the WT Act. Partial partition is not contemplated under s. 20 of the WT Act. The WT Act contemplates partition of the joint family property as a whole among the various members in definite portions, if not, the HUF would be, treated as in existence for the purpose of taxation under the WT Act. Under s. 20(2) of the WT Act, if the Assessing Officer is not satisfied that the joint family property has been partitioned as a whole in definite portions among the various members or groups of members, he shall declare that the family shall be deemed to be an HUF for the purposes of the Act and liable to be assessed as such. The purpose of s. 20, sub-s. (2), is thus clear, i.e., that it preserves the status of the HUF as a unit for taxation under the WT Act. At the same time, it is clear that it does not declare or specify the properties to be deemed as belonging to the HUF for the purpose of the assessment, while s. 20 identifies the person to be assessed, the subject of charge under the Act will have to be identified by reference to other provisions such as the charging section. If this distinction is borne in mind, there should not be any difficulty in applying the provisions of the Act reasonably.
16. The charging section is s. 3 under the WT Act. Under s. 3, there shall be charged for every assessment year, wealth-tax in respect of the net wealth (on the corresponding valuation date) of every individual, HUF and company at the rate or rates specified in Schedule I. Therefore, the charge is on the net wealth of the person to be assessed. As per s. 2(m), net wealth means the amount by which the aggregate value computed under the Act of all the assets belonging to the assessee (emphasis supplied) on the valuation date is in excess of the aggregate value of all the debts. The basic idea of this definition of net wealth requires the wealth to belong to the assessee. Under s. 4, certain assets are included in the net wealth of the assessee. Nowhere is it stated that the asset belonging to a coparcener of an HUF should be included in the assets of the HUF. If the intention of Parliament was to treat the share of the deceased as belonging to the HUF itself in spite of s. 6 of the Act, it would have most appropriately clarified as such under s. 4 of the WT Act something like s. 4(1A).
17. While interpreting the provisions of the law, not only the scheme of the particular legislation should be seen but also the constitutional background in which the legislation is enacted will have to be considered. If a particular interpretation is likely to render the law invalid for any reason while another interpretation will keep alive the law as valid, certainly the Courts will have to apply the latter interpretation. When the basis of the charge under the Act is the wealth belonging to the assessee, a special treatment of the HUF for the purpose of taxation by comprising within its assets, an asset which does not belong to it, may bring the law in conflict with the provisions of Art. 14 of the Constitution.
18. The idea may be conveyed more emphatically by the following illustration: Suppose a member of the HUF possessed individual property, certainly it cannot be included in the assets of the HUF for valuation. If so, can it be said that such an asset will be included in the assets of the HUF only because the said individual dies and his property devolves on others who are incidentally the coparceners in the HUF? To extend the analogy, suppose a member of the HUF having a right in the HUF property dies, bequeathing his entire share to a stranger who is not a member of the HUF, is it legally permissible to include the said share in the assets of the HUF for the purpose of valuation under the Act ? The answer to these questions will have to be necessarily in the negative.
19. In Nagarathnamma’s case (supra), the penultimate paragraph has conveyed the idea very neatly when it said that the joint family, notwithstanding the death of one of its male members, continues for the purpose of income- tax but the share of that joint family is diminished as in the case of alienation of any of the joint family properties.
20. A decision of the Supreme Court in Gurupad Khandappa Magdum V. Hirabai Khandappa Magdum (1981) 129 ITR 440 ; AIR 1978 SC 1239 was cited. In the said decision, the question involved was the mode of computing the share of the members at a partition of the family in which, earlier, a coparcener had died. The widow of the deceased had 1/4th right in case of a partition during the lifetime of her husband. The deceased husband also had 1/4th share by virtue of the Act. The 1/4th share of the deceased member devolved on the widow and five children. In the partition suit filed by the widow, the question was the quantum of share of the widow. Her contention was that because of the personal law, if there was a partition during the lifetime of her husband, she should have got 1/4th share. Therefore, on his death, in the notional partition for the purpose of s. 6 of the Act, that share will have to be set apart for her and in addition she will have sharing along with her children the 1/4th share that would have gone to her husband. This contention of the widow was upheld by the High Court as well as by the Supreme Court. At page 1241, the Supreme Court observed that (at p. 444 of 129 ITR) : “Before considering the implications of Explanation 1, it is necessary to remember that what s. 6 deals with is devolution of the interest which a male Hindu has in a Mitakshara coparcenary property at the time of his death. Since Explanation I is intended to be explanatory of the provisions contained in the section, what the Explanation provides has to be correlated to the subject-matter which the section itself deals with. In the instant case, the plaintiff’s suit, based as it is on the provisions of s. 6, is essentially a claim to obtain a share in the interest which her husband had at the time of his death in the coparcenary property. Two things become necessary to determine for the purpose of giving relief to the plaintiff : One, her share in her husband’s share and two, her husband’s own share in the coparcenary property. The proviso to s. 6 contains the formula for fixing the share of the claimant while Explanation 1 contains a formula for deducing the share of the deceased. The plaintiff’s share, by the application of the proviso, has to be determined according to the terms of the testamentary instrument, if any, made by the deceased and since there is none in the instant case, by the application of the rules of intestate succession contained in ss. 8, 9 and 10 of the Hindu Succession Act.”
21. The Supreme Court pointed out that a situation wherein a partition had taken place will have to be imagined as existing just prior to the death of the husband and if so full effect shall be given to the fiction. The Supreme Court further pointed out that the imagination required under s. 6 of the Act shall not be boggled down when it comes to the inevitable corollaries of the particular state of affairs.
22. The Supreme Court further pointed out on page 1243 that (at p. 447 of 129 ITR) : “The assumption which the statute requires to be made that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one’s imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased. The allotment of this share is not a processual step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position 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 notional partition.”
23. This decision would in no way aid the contention of learned counsel for the Revenue. In fact, if the ratio is taken to its logical end, the share of the deceased will have to be definitely excluded from the assets of the HUF.
24. In State of Maharashtra vs. Narayan Rao Sham Rao Deshmukh (1985) 46 CTR (SC) 349 : (1987) 163 ITR 31 ; AIR 1985 SC 716, the contention was that, on the death of one of the members of the HUF, the joint family stood disrupted by the application of s. 6 of the Act. This contention was negatived while applying the provisions of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act wherein the joint Hindu family could possess A particular extent of land only. The members of the family contended that because of the disruption of the family by virtue of s. 6 of the Act, each member was entitled to possess the land up to the extent of ceiling. This contention was negatived. The Supreme Court pointed out that the purpose of s. 6 was to compute the share of the deceased for the purpose of devolution and creates a legal fiction for a particular purpose, but the joint family as such in fact was not disrupted. In spite of s. 6, the Supreme Court said that the joint family continues as an HUF. This decision also cannot help the Revenue except for the proposition that the HUF continues even after the death of one member of the family and after applying s. 6 of the Act. This decision has nothing to do with the assets of the HUF as such. This decision establishes that the status of the HUF as a legal entity continues. This is quite different from saying that the entire erstwhile property of the HUF also continues to belong to the HUF.
25. At page 721, the Supreme Court stated with reference to Hirabai’s case (supra) that: “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 s. 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.” (emphasis supplied)
26. This decision in fact points out the difference between the status of the HUF as a legal entity and its assets.
27. CWT vs. Chander Sen (1986) 58 CTR (SC) 119 : (1986) 161 ITR 370 ; AIR 1986 SC 1753, has to be noted. There was a partition between the father and the son. Thereafter, the father and the son formed a partnership firm and continued the business. The son formed a joint family of his own with his sons. The father died. The amount standing to the credit of the deceased father devolved on the son. This sum was included in the son’s HUF while computing the wealth. The Supreme Court held that such a computation was not warranted. It was pointed out that the son inherited the property as an individual and not as Karta of his own family and, therefore, the amount which devolved on him was a separate property. The ratio of this decision clearly establishes that the separate property held by a member of the HUF cannot be included in the assets of the HUF for valuation. If so, the share of the deceased which devolved by virtue of s. 6 of the Act also cannot form part of the assets of the HUF. The share of the deceased which devolved on the members of the HUF as heirs to the deceased will be held by them as separate property. The contention of the Revenue has mixed up the two concepts the concept of the status of the HUF as an entity and the concept of the assets to be included in the net wealth of the assessee. Both are entirely different. The assets are relevant to compute the tax, while the status of the assessee is relevant to identify, the person to be charged. Sec. 20 has been appropriately described as a machinery section. It cannot, in the absence of a clear and specific language in it, alter and affect the operation of the charging provisions.
28. Two more decisions are required to be noted. One is Goswami Brijratanlalji Maharaj vs. CWT (1971) 79 ITR 373. This is a decision of the Gujarat High Court. The question was whether a claim for partition will disrupt the family and whether, in the absence of an order under s. 20 of the WT Act, the HUF cannot be assessed. The Gujarat High Court held that the HUF will continue to be an HUF for the purpose of the Act until a specific order is made under s. 20. The basic contention raised therein was that s. 20 could not be applicable when the assessment to be made was the first assessment under the WT Act. The Bench was not concerned with the effect of s. 6 of the Act. There can be no doubt about the ratio that, in the absence of a specific order under s. 20 holdings that the HUF has stood disrupted, the unit will continue as HUF. That position is now firmly established by the decision of the Supreme Court in Kalloomal Tapeswari Prasad (HUF) vs. CIT (1982) 26 CTR (SC) 415 : (1982) 133 ITR 690 ; AIR 1982 SC 760. At page 389, the scope of s. 20 of the WT Act was considered and the Bench held that: “In our opinion, the question that has to be considered by the WTO is not whether there has been a disruption in status according to notions of Hindu law but whether there has been a partition by metes and bounds and whether there has been a physical partition of properties of the HUF amongst the different members ; and it is only after that test of a physical partition by metes and bounds is satisfied that the necessary consequences for the purposes of assessment under the WT Act will follow.”
29. The decision of the Andhra Pradesh High Court in CWT vs. Tatavarthi Rajah and Satyanarayana Murthy (1983) 33 CTR (AP) 261 : (1983) 143 ITR 441, again is similar to the above case before the Gujarat High Court. The scope of s. 20 was considered by the Bench which held that it was mandatory. The Andhra Pradesh High Court also pointed out that a mere division in status does not indicate which member is entitled to which of the properties and, therefore, it is not possible to hold that the joint family properties are divided into definite portions and allotted to each individual member. Therefore, it was held that a finding under s. 20 was necessary before the HUF can be treated as having disrupted. On the facts, it was found that a mere notice claiming partition will not disrupt the HUF for the purpose of the WT Act and the person who issued the notice also will be treated as a member of the HUF.
As already observed, these decisions are relevant only to construe the provisions of s. 20 and to find out as to when an HUF ceases to exist as a taxable entity and as to how the erstwhile HUF will have to be taxed under a given set of circumstances. To summarise, we may once again point out that s. 20 has nothing to do with the quantification of the net wealth of the HUF on the death of a member of an HUF leaving behind other members in the family including a female warranting the application of s. 6 of the Act ; the share of the deceased devolves on the heirs and the legal fiction imagining a partition just prior to the death of the member is only for the purpose of quantifying the share of the deceased without disrupting the unity of the family in any manner though resulting in the diminution of the net wealth of the HUF.
Consequently, our answer to the question is in the affirmative and against the Revenue.
[Citation : 191 ITR 535]