Sethuraman, J.@mdashThis is a reference under s. 27(1) of the W. T. Act, 1957, and questions referred are as follows :
1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee was not liable to tax in the status of
an HUF ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the provisions of section 20(2) cannot apply to the
assessee''s case to sustain the assessments made ?
2. There was on K. Rengiah, who has two sons by name Kamatchisundaram and Subbarayalu. The said three constituted a joint Hindu family,
Kamatchisundaram and Subbarayalu executed two release deeds on November 20, 1932, and February 11, 1932, respectively, in favour of their
father, after receiving a sum of Rs. 1,00,000. Prior to these releases, the income from all properties belonging to the family was assessed in the
hands of the family. After the release deeds, Rengiah was assessed in the status of an ""individual"". It appears that the two sons were also assessed
in the status of individuals respectively. It is not, however, clear as to when they were married and got any child or children.
3. Rengiah died intestate on July 9, 1949. Thereafter, the properties left by Rengiah devolved on the two sons, and they were, however, assessed
to Income Tax and wealth-tax in the status of an HUF describing Kamatchisundaram as the karta. Kamatchisundaram died in 1968.
4. The wealth-tax assessments for the assessment year 1966-67 came to be made on K. Ramakrishnan, son of Kamatchisundarm, as legal
representative to the estate of Kamatchisundaram and Subbarayalu in the status of a ""Hindu Undivided Family"". The assessee contested the
assessment in the status of an HUF. The AAC held that the separate property obtained by a Hindu father on partition of joint family property
cannot acquire the character of coparcenary property on his death and that after his death, the divided sons would take the property only as
tenants-in-common. In any event, even if the two brothers constitute an HUF on the death of their father, the status of the joint family came to an
end, when Kamatchisundaram filed a suit (O.S. No. 142 if 1951) in the court of Subordinate Judge, Madurai. It was, therefore, held that the
wealth-tax assessment could not be made in the status of an HUF with regard to the properties left by Rengiah.
5. The WTO filed an appeal before the Tribunal, which confirmed the order of the AAC. It is this order which has given rise to the reference of the
two questions set out above.
6. The learned counsel for the Commissioner, Mr. A. N. Rengasami, contended that assessment had been made on Kamatchisundaram as
representing an HUF consisting of himself and his brother, and that until a partition of this was recognised, the property could be taken as
belonging to the HUF. His further submission was that in the connected Income Tax proceedings the case put forward by the assessee was that
there was a partition in the family with effect from June 12, 1966 and that as the valuation date was March 13, 1966, which fell before the date of
partition claimed by the assessee itself, the assessment could only be made in the status of an HUF. For the respondent the submission was that
there was no HUF at any time consisting of Kamatchisundaram and his brother and that the assessment could be made only on the respective co-
owners with reference to their share in the properties. The proceedings under s. 171 of the I.T. Act did not, it was submitted, affect the assessment
under the W.T. Act.
7. From the facts mentioned above, one position so clear, namely, that the release by the two sons in 1932 was taken to be a partition and is how
the separate individual assessments came to be made on the three erstwhile members. We are now concerned with the properties left by Rengiah,
who died on July 9, 1949, before the coming into force of the Hindu Succession Act, 1956. Under the law applicable to the parties prior to the
passing of the Hindu Succession Act, 1956, any property left by an undivided father could devolve on the sons, who had also become divided,
only separately. It may be that the two sons, Kamatchisundaram and Subbarayalu, had their own HUFs, and any properties inherited from the
father would be ancestral properties in their hands so as to belong to the HUF consisting of each with his children. But there can be no common
assessment describing the status as ""HUF"" in so far as the properties left by Rengiah are concerned, jointly in the hands of the two sons.
8. From the records, it is clear that there ware assessments made on Kamatchisundaram as if he was the karta of the HUF consisting of himself
and his brother Subbarayalu. They in fact became divided in the year 1932. The assessments were practically left uncontested as far as this aspect
is concerned. However, we do not find any provision the W.T. Act, which stands in the way of an assessee putting forward the correct position so
as to describe the status properly and in accordance with the law in relation to any particular year.
9. It is this context, that we may refer to the corresponding legal position under the Indian I.T. Act, 1922, as that was the Act which was in force in
the year 1949, when Rengiah died and compare it with the provision in the W.T. Act. Before the death of Rengiah, it is clear that there was no
assessment of an HUF. An HUF could have come into existence only by reunion of the two brothers. There is no evidence of any such reunion.
Even assuming that there was an undivided family because the two brothers acquiesced in the assessments as if there was one, we may consider
the legal position now. Section 25A of the Indian I.T. Act, 1922, to the extent relevant runs as follows :
(1) Where, at the time of making an assessment u/s 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as
undivided that a partition has taken place among the members of such family, the Income Tax Officer shall make such inquiry there into as he may
think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite
portions he shall record an order to that effect.
10. Sub-section (3) of that section provides :
(3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the
purposes of this Act, to continue to be a Hindu undivided family.
11. This provision would have applied if we were concerned with the Income Tax assessment in the present case. We are now concerned with the
wealth-tax assessment and any assessment made on the HUF for the earlier years would have to be considered in the light of s. 20, which is the
relevant provision under the W.T. Act.
12. Section 20 of the W.T. Act, in so far as it is relevant, runs as follows :
(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 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 members shall be liable jointly and severally
for the tax assessed on the net wealth of the joint family as such.
(2) Where the Wealth-tax 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.
13. The opening words of this provision would come into operation only if and when the partition had taken place among the members of an HUF.
The postulate is the existence of the family which has been disrupted. If there was no family, there is no question of any disruption or partition, and
therefore, s. 20 has no scope for application. This section does not empower assessment of an HUF which has ceased to be an HUF prior to the
relevant valuation date according to Hindu law.
14. It is necessary to bear in mind the difference in language between s. 25A of the Indian I.T. Act, 1922, and s. 20 if the W. T. Act. Section 25A
of the Indian I.T. Act refers specifically to cases where there is an HUF ""hitherto assessed as undivided"". When the ITO takes up the file for any
later year, he may proceed on the basis of the continuance of the said family unless a claim is made by or on behalf of the said family that there has
been a partition by metes and bounds and unless he accepts such a claim. It is unnecessary to express any opinion on the applicability of s. 25A if
the Indian I.T. Act, 1922, to a case where is or can be no HUF.
15. However, as far as s. 20 of the W.T. Act is concerned, the language being different, the WTO is not bound to start with the presumption that
there is an HUF, when once he has made such an assessment. According to s. 20(2), as seen earlier, there must have been a HUF. If there was no
such family, then any assessment made on such a family cannot bring into existence one. Hindu undivided family is not brought into existence by
making a reassessment. The status is acquired by birth under the relevant personal law. The constitution of the family is thus : governed by the
provisions of the personal law and not by what the ITO does in any particular case.
16. The above discussion would make it clear that notwithstanding the assessment made with reference to the properties left by Rengiah as an
HUF, it would be proper and necessary for the WTO to go into the question whether there was in fact, an HUF in the relevant year and if there
was such a family alone, he would have to further inquire about the question of partition, if such a claim is made before him. In the present case,
along with the return made by the assessee, there was a covering letter dated December 21, 1970, in which it is stated thus :
As already submitted, in view of the fact that Rengiah Chettiar, Kamatchisundaram Chettiar and Subbarayalu Chettiar had already ceased to be
undivided coparceners by virtue of the partition in about 1931 between Rengiah Chettiar and his sons named above, there could hardly be any
circumstance to entertain a legal view that the already divided brothers had constituted to join as joint family members to inherit the properties of
late Rengiah Chettiar after his demise. The correct position of Hindu law would be that the properties devolved on the two sons as tenants-in-
common and as constituting two separate junior families for themselves. In view of the matter, I am advised the above stand is the only lawful and
appropriate course for purpose of wealth-tax assessment.
17. The relevant return with the status of HUF was made under protest, because notice had been issued to such a family by the WTO. It is this
claim which came to be adjudicated upon by the WTO and the appellate authorities. The appellate authorities rightly accepted the position that
there was no HUF consisting of Kamatchisundaram and Subbarayalu after 1932.
18. Very strong reliance was placed on the fact that in the corresponding Income Tax assessment, the assessee put forward the position that there
was an HUF till June 12, 1966. That date apparently refers to what happened in the suit. We do not have before us the relevant records of the
said suit or the judgment pronounced by the court therein. The only information we have before us is that there was a decree for partition with
effect from June 12, 1966. Even the said decree is not before us. We do not know whether the suit was filed by the plaintiff as if there was an
HUF or whether the suit was merely for partition between two co-owners. A suit for partition could lie in either of the circumstances and,
therefore, it was not possible to draw the inference that the decree could have been passed only in the case of a division of a HUF. Further, we
have already pointed out that the position in the I.T. Act would be different, having regard to the language of s. 25A and, therefore, we do not
think it necessary to pursue the matter further.
19. The learned counsel for the Revenue drew out attention to the decision of this court in Controller Commissioner of Gift-tax, Madras Vs. N.S.
Getti Chetttiar, . In that case one Getti Chettiar, was the karta of an HUF consisting of himself, and his son, Govindaraju Chettiar, who had six
sons. There was a partition of the immovable properties of this family by a registered deed executed on January 17, 1958, and of movable
properties by entries in the books on April 13, 1958. On November 29, 1958, the claim of the assessee for partition was accepted by the
Department. The total value of the joint family properties so divided was Rs. 8,51,540. Though the half share of Getti Chettiar would be Rs.
4,25,720 he took only Rs. 1,78,343 the balance being allotted to his son and grandson. The question that arose for reference under the G.T. Act
was whether there was a ''gift'' when the father took only a smaller share that what he would be entitled to. This court answered the reference in
favour of the assessee and the judgment was confirmed by the Supreme Court in The Commissioner of Gift Tax, Madras Vs. N.S. Getty Chettiar,
. In the course of the said judgment, this court pointed out that (p. 465-6 of 60 ITR) :
It has been held u/s 25A of the Income Tax Act, that though a joint family has come to on net in law, if a physical division of the family property,
though possible, has not been effected and consequently no finding is given u/s 25A(1), the family would be deemed for the purpose of the Income
Tax Act to continue to be a joint family and taxed as such. Even if there is a total partition and division of properties, when no claim is made before
the Income Tax Officer or when a claim is made and no finding regarding partition is made by the officer, the family should be deemed to continue
to be a Hindu undivided family. The purpose of this section as well as section 20 of the Gift-tax Act is to enable the collection of the tax due from
the joint family in spite of the fact that subsequently the joint family ceased to exist. The device adopted is to deem the family to continue to be joint
in spite of a division in status, until the properties are physically divided and the officer makes a record as to the fact of partition.
20. The learned judges further observed that there was no distinction between s. 20 of the G.T. Act and s. 25A of the Indian I. T. Act, 1922, in
principle. This decision would have applied if really there is a joint family in the present case. We have pointed out that even before the Hindu
Succession Act, 1956, came into force Kamatchisundaram and Subbarayalu had become divided and, therefore, there was no question of any
joint family which could be assessed and which could be deemed to continue until a record is made regarding the factum of partition.
21. We do not find, therefore, anything to support the stand taken by the Department in this case. The result is that the first question referred to us
is answered in the affirmative and in favour of the assessee. As we have held that s. 20 does not apply to this case, the answer on the second
question would also be in the affirmative. The assessee is entitled to his costs. Counsel''s fee is fixed at Rs. 500.
