1976 (7) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Application of higher rate of Wealth-tax.
2. Definition of "member" in the context of Hindu undivided family (HUF).
3. Inclusion of female members in HUF for tax purposes.

Detailed Analysis:

1. Application of Higher Rate of Wealth-tax:
The primary issue in this case revolves around whether the higher rate of Wealth-tax prescribed under para 1(1A) of Part I of the Schedule to the Wealth-tax Act is applicable to the assessee family. The Wealth-tax Officer determined the net taxable wealth of the Hindu undivided family (HUF) at Rs. 3,39,630 and applied the higher rate of tax, resulting in a Wealth-tax due of Rs. 6,792. The assessee challenged this application, arguing that the wife of the Kartha should not be considered a member of the HUF for tax purposes.

2. Definition of "Member" in the Context of Hindu Undivided Family (HUF):
The assessee's counsel contended that the term "member" in sub-para 1(A) of the Schedule to the Wealth-tax Act refers only to a coparcener, who has the right to claim partition. Since the wife of the Kartha is not a coparcener, she should not be included as a member of the HUF. This argument was based on the provisions of the Finance Act 1973, which set an exemption limit for HUFs satisfying certain conditions, including having members entitled to claim partition.

3. Inclusion of Female Members in HUF for Tax Purposes:
The revenue's stance, supported by various judicial decisions, was that female members of a HUF are also considered members for tax purposes. The Supreme Court's rulings in cases like N.V. Narendranath vs. Commissioner of Wealth-tax, Andhra Pradesh, C. Krishna Prasad vs. Commissioner of Income-tax, Bangalore, and Surjit Lal Chhabda vs. Commissioner of Income-tax, Bombay, were cited to support this view. These rulings clarified that a HUF includes all persons lineally descended from a common ancestor, including their wives and unmarried daughters, and that a single male member with his wife and daughters can constitute a HUF.

Judgment Analysis:

Application of Higher Rate of Wealth-tax:
The Tribunal upheld the application of the higher rate of Wealth-tax. It was established that the family, consisting of the Kartha, his wife, and his son, met the criteria under para 1(1A) of Part I of the Schedule to the Wealth-tax Act, which prescribes higher rates of tax for HUFs with at least one member whose net wealth exceeds Rs. 1,00,000.

Definition of "Member":
The Tribunal rejected the assessee's argument that the term "member" in the Wealth-tax Act refers only to coparceners. The Supreme Court's interpretation in N.V. Narendranath vs. Commissioner of Wealth-tax, Andhra Pradesh, clarified that a HUF includes all persons lineally descended from a common ancestor, along with their wives and unmarried daughters. The term "member" was thus interpreted broadly to include female members.

Inclusion of Female Members:
The Tribunal emphasized that the Wealth-tax Act does not distinguish between coparceners and other members of a HUF. The omission of the words "entitled to claim partition" in para 1(1A) of the Schedule to the Wealth-tax Act was significant. It indicated that the Parliament did not intend to exclude female members from the definition of "member" for tax purposes. The Tribunal concluded that the wife of the Kartha is indeed a member of the HUF, and her net wealth exceeding Rs. 1,00,000 warranted the application of the higher rate of Wealth-tax.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the orders of the lower authorities, affirming that the higher rate of Wealth-tax was correctly applied to the assessee family. The judgment reinforced that female members are included in the definition of "member" in a HUF for Wealth-tax purposes, aligning with the broader interpretation established by the Supreme Court.