TMI Blog1990 (3) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the bigger HUF, known as the converted property was includible in the wealth of the assessee in his individual hands. In this conclusion he was supported by the fact that the property had been converted by the individual into the property of the bigger HUF after 31st Dec., 1969 and hence, in view of cl. (b) of s. 4(1A), the property in question for the purposes of wealth-tax continued to belong to him in his individual capacity. On appeals, such inclusion in the individual's hands was upheld by the appellate authority. 3. The learned counsel for the assessee contended before us that the Tribunal had an occasion under the IT Act, while considering s. 64(2), to examine this issue. Taking us through the said order of the Tribunal under the IT Act in ITA No. 962(Bom)/1976-77 dt. 16th June, 1977 for asst. yr. 1972-73 and in ITA No. 2666-7/Bom/76-77 dt. 27th Sept., 1977 for asst. yrs. 1973-74 and 1974-75, he contended that s. 4(1A) has no application to this case. It would have application had the property continued belonging to the HUF after throwing of individual property on 1st April, 1970. On the basis of the principles of Hindu Law, what the assessee received on partition on 9th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subsequent partition of the same. We, therefore, confirm the orders of the lower authorities on this point and decide the issue in favour of the Revenue." 5. We have heard the parties. It is not in doubt that the appeals before us are under the WT Act. Normally, therefore, we would have dismissed the assessee's appeals by following the said order of the Tribunal. However, due to subsequent decision of the Andhra Pradesh High Court in Seth Tulsidas Bolumal vs. CIT (1988) 67 CTR (AP) 4 : (1988) 170 ITR 1 (AP) we have to reconsider the whole matter afresh. 6. The institution of HUF is an ancient old institution in India. It constitutes a separate unit of assessment under the tax laws. It consists of all persons lineally descendants from a common ancestor and includes their wives and unmarried daughters without any limit to the members and remoteness of their descendant. An HUF is different from a Hindu coparcenery, though, normally is smaller called also an HUF. Though like HUF, a Hindu coparcenery is not limited to any numbers, it is limited to members within four degrees of the common male ancestor including the common ancestor. A property can be brought into the family hotc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minor son, from the whole or any part of the converted property allotted to the spouse or the minor son on partition should also be deemed to arise to them from the assets transferred to them indirectly by the individual and be includible in the income of the individual under s. 64. For the purpose of determining the amount of income from the converted property, which is attributable to the interest of the individual, his spouse or minor son in the property of the family, a notional partition was assumed to have taken place in the family on the last day of the relevant pervious year and the income attributable to their respective interest was taken to be the part of the income from the converted property, which was proportionate to the share so ascertained. By the Finance (No. 2) Act, 1971 a new sub-s. (1A) on similar lines was added to s. 4 of the WT Act, 1957 for inclusion of such converted property in the assessment of the individual and sub-s. (2) in s. 4 of the GT Act, 1958 for treating the share of the other members of the family in such converted property as 'gift' for charging gift-tax thereon. 8. The memorandum explaining these provisions in the Finance Bill stated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he individual, his spouse or minor son in the family property. Further, the income received by the spouse or the minor child (minor son previously) out of his or her share in the said converted property obtained on partial or full partition of the family shall also be includible. Similar amendments were made in s. 4(1A) of the WT Act by deleting the words "in so far as it is attributable to the interest of the individual in the property of the family" from cl. (b) to the section and by substituting cl. (c). There were some other amendments by Finance Act, 1980 to include even the gifted property by a member of the HUF in the net of provision of s. 4(1A) of the WT Act. The amended provision now stands as under: 4(1A). Where in the case of an individual being a member of HUF any property having been the separate property of the individual has at any time after the 31st Dec., 1969 been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family or been transferred by the individual, directly or indirectly to the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e individual assessment of the person throwing the property into the common stock. 11. The question which arises for our consideration is as to what happens when the HUF is partitioned—(i) would cl. (b) still be applicable for the inclusion of such converted property even though the property was partitioned; and (ii) what would be the nature of the property received on such partition. If we accept the contention of the learned Departmental Representative that the effect of cl. (b) is to enrope the entire property thrown into HUF in all circumstances and for all time to come, then cl. (c) providing for inclusion of only that part of the property which is received by the spouse or the minor children on partition would be redundant. In that case, it would not have been necessary for the legislature to insert cl. (c) at all. In our opinion, both the cls. (b) and (c) are mutually exclusive. Clause (b), as the language suggests, would be operating till the property remains with and continued belonging to the HUF. Say for example, when a property is lost or destroyed by the HUF and was not in existence on the valuation date, could it be said that the individual would be liable to tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 64(2)(c) of the IT Act and s. 4(1A) (c) of the WT Act. These provisions authorise that after the partition of the converted asset, only the income arising to the spouse or minor child of the individual, who initially converted his individual property into joint family property, has to be deemed to be the income of the individual. Similarly for wealth-tax, the extent of converted property which fell to the share of individual's spouse and minor child has to be deemed to be property of the individuals. The statutory provisions are categorical to this effect. In the present case, on partition of the converted asset, no share was allotted to the spouse of the assessee. There was, of course, no minor child in the family. Consequently, the provisions contained in s. 64(2)(C) of the IT Act and s. 4(1A)(c) of the WT Act cannot be applied in order of the assess in the hands of the assessee as individual income arising from the converted property allotted to him on partition; likewise, the extent of the converted property allotted to him on partition cannot also be deemed to be property of the individual. On the facts stated above, neither of the provisions, namely, s. 64(2) (C) of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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