1973 (3) TMI 4 - SC - Wealth-tax

Whether the compensation distributed to the junior members in a zamindari family u/s 45 of the Madras Estates (Abolition and Conversion into Ryotwari) Act 1948 can be taken into consideration in computing the net wealth of the family - when the compensation amount is paid or is made payable to the sons the same became their absolute property. Therefore there is no question of extending the fiction provided in section 45 - no merit in these appeals

Summary

Issues:
1. Whether the compensation distributed to junior members in a zamindari family under the Madras Estates Act can be considered in computing the net wealth of the family?

Analysis:
The case involved a dispute regarding the inclusion of compensation distributed to the sons of a former zamindar in the assessment of the net wealth of the Hindu undivided family for the year 1957-58. The Wealth-tax Officer initially included the compensation amount in the assessment, but the Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, stating that the compensation payable to the sons should not be considered as part of the family's wealth. The High Court of Andhra Pradesh also sided with the assessee, leading to the appeal before the Supreme Court.

The Supreme Court examined the nature of the Venkatagiri zamindari estate, clarifying that under customary law, the estate belonged exclusively to the holder, and the junior members had no right to claim a share in the income or corpus of the estate. The court referred to relevant provisions of the Madras Estates Act, particularly Section 45, which deals with the distribution of compensation in impartible estates. The Act deems the estate as belonging to the family of the holder, and after specified disbursements, the balance of compensation is distributed among the holder and his legitimate sons as sharers.

The court highlighted Section 49 of the Act, which addresses the devolution of compensation in case of a sharer's death, emphasizing that the compensation paid or payable to the sons of the holder is their absolute property, with no right vested in the holder. The court rejected the revenue's argument that the compensation should be considered part of the family's wealth, stating that the sons' entitlement to the compensation is exclusive and not subject to reimbursement to the holder. The court emphasized that the statutory partition between the father and sons regarding compensation must be recognized, regardless of partition in other properties. Ultimately, the court dismissed the appeals, affirming that the compensation paid to the sons cannot be deemed as the wealth of the holder or his family.

In conclusion, the Supreme Court's judgment clarified that the compensation distributed to junior members in a zamindari family under the Madras Estates Act should not be included in computing the net wealth of the family, as it is considered the absolute property of the sons and not part of the family's wealth.