1991 (1) TMI 84 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the partition is deemed to have taken place under Explanation I to Section 6 of the Hindu Succession Act.
2. Whether the half share of the deceased that devolved on the heirs can be included in the net wealth of the Hindu undivided family (HUF).

Issue-wise Detailed Analysis:

1. Deemed Partition under Explanation I to Section 6 of the Hindu Succession Act:
The court examined whether a notional partition of the HUF property is deemed to have occurred immediately before the death of a coparcener, as per Explanation I to Section 6 of the Hindu Succession Act. The Tribunal found that the deceased had left behind a female relative specified in class I of the Schedule to the Act, which triggered the proviso to Section 6. This meant the property would devolve by intestate succession rather than survivorship. The court affirmed that a notional partition is assumed to have taken place just before the death of the deceased, and the share that would have been allotted to the deceased on such notional partition devolves on his heirs.

2. Inclusion of Deceased's Share in the Net Wealth of HUF:
The court considered whether the share of the deceased coparcener that devolved on his heirs could be included in the net wealth of the HUF. The Tribunal held that the share of the deceased, which devolved on the heirs by intestate succession, goes out of the HUF and is held by the heirs as tenants-in-common. This share cannot be included in the net wealth of the HUF. The court supported this view, stating that the HUF continues to exist but the property of the HUF is diminished to the extent of the deceased's share, which is now held separately by the heirs.

Relevant Case Law and Judicial Precedents:
1. CIT v. Smt. Nagarathnamma [1970] 76 ITR 352: The court held that the interest of a deceased male Hindu in a Mitakshara coparcenary property devolves by succession on his heirs if he leaves behind a female relative specified in class I of the Schedule to the Hindu Succession Act. The joint family continues, but the property of the HUF is diminished to the extent of the deceased's share.
2. CWT v. Kantilal Manilal [1973] 90 ITR 289: The Gujarat High Court concurred with the Karnataka High Court's view, emphasizing that the interest of the deceased coparcener devolves by intestate succession and the HUF continues to exist with the remaining property.
3. Venkiteswara Pai Rama Pai v. Luis, AIR 1964 Ker 125: The Kerala High Court clarified that the notional partition under Section 6 is solely for ascertaining the extent of the deceased's interest and is not a partition in the traditional sense.
4. Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690: The Supreme Court held that the HUF continues to be assessed as such until a partition is accepted and recorded by the assessing authority.
5. State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31: The Supreme Court stated that the joint family continues as an HUF even after the death of a member, and Section 6 creates a legal fiction for a specific purpose without disrupting the family.
6. CWT v. Chander Sen [1986] 161 ITR 370: The Supreme Court held that property inherited by an individual from a deceased coparcener is held as separate property and not as part of the HUF's assets.

Conclusion:
The court concluded that the share of the deceased coparcener, which devolved on his heirs by intestate succession, cannot be included in the net wealth of the HUF. The HUF continues to exist, but its property is diminished by the deceased's share. Consequently, the court answered the question in the affirmative and against the Revenue.