ORDER
Egbert Singh, Accountant Member
1. In these appeals, the assessee has raised similar grounds of appeal. It is the appeal by the assessee that the assessments made by the assessing officer and as confirmed by the DCWT(A) was not justified as the same was bad in law and on facts. It is submitted that the authorities concerned should have accepted the claim of the assessee for freezing the value of the property at Shillong under Section 1(4) of the Act. It is also the appeal by the assessee that the benefit under Section 1(4) should be allowed for freezing the value for the year under consideration on the basis of the value determined for 31-3 -1971 and that the assessee had not submitted and accepted the valuation as determined by the department.
2. We have heard both the sides at length and we have gone through the orders of the authorities below for our consideration. In the assessment order, it is seen that there is a property at Police Bazar, Shillong (residence) which value was shown at Rs. 1,85,000. The value was determined for assessment at Rs. 5,45,409 in the original assessment on the basis of the Valuation Officer’s report made during the original assessment. The assessing officer noted that the assessee claimed for freezing of the value of that property under Section 1(4). The assessing officer did not agree and took the value as assessed in the original assessment for the assessment year 1982-83.
3. For the assessment year 1983-84, the assessing officer noted that the facts were similar with those of the earlier year. He noted that the value of the entire property as it stood before the partition of the HUF M/s. Ganeshdas Sreeram, was determined at Rs. 7,69,000 as on 31-3-1979 by the Valuation Officer. He noted that there was a total partition effected on 11-12-1980 on the basis of which, the land and the residential premises of 8729 square feet had been allotted to the assessee HUF M/s. Rameswar Prasad Goenka. It was submitted before the assessing officer that the value has been shown at Rs. 1,85,000 in the return and the assessee claimed that the said property had been used for residential purposes of the assessee and it was an old property and the value should be taken as on 31- 3-1971 and not as on 31 -3-1979, in view of Section 1(4) of the Act. The assessing officer noted that the assessee became the owner of the property as a consequence of the Arbitration agreement which was effective from 1-1-1982. According to the assessing officer, the assessee became the owner only on 1-1-1982and, therefore, the value as on 31-3-1971 cannot be accepted for the purposes of Section 7(4). The assessing officer, therefore, determined the value at Rs. 5,45,409 for the assessment year 1983-84.
4. The assessee took up the matter before the DCWT(A) and claimed that the property which has been used as residence of the assessee HUF has been received from the bigger HUF on partition effected on 11-12-1980 and, therefore, the present assessee HUF continues to be the owner of the property as in the beginning, till the year of assessment and, therefore, the value should have been allowed to be freezed under Section 1(4) as on 31-3-1971. The case of the assessee before DCWT(A) was that as a member of the bigger HUF and that prior to the partition, the assessee was having a share in the said property and was residing in that property and that he was also the owner of his share in the said property by birth as the assessee is governed by the Mitakshara School of Hindu Law. The DCWT(A) did not agree with the assessee. He found that the building previously belonged to the bigger HUF and the assessee became the owner only with effect from 11-12-1980, i.e., on partition and as such benefit stipulated by Section 1(4) was not available and the property has been acquired by the assessee after 1-4-1971 and 1 -4-1976. The appeals for both the years were dismissed. Hence, these appeals by the assessee.
5. Submissions made before us arc identical. It is submitted that the assessee is a member of the bigger HUF had interest in the said property and on partition the property was allotted to the assessee who resides therein as a Karta of the HUF and that after partition, the interest of the assessee in the property was crystallised specifically. According to the assessee, each one of the members of the HUF were the co-owners of the said building and the said family house belonged to the assessee even prior to the partition of the bigger HUF. The assessee’s learned counsel draws an analogy as compared with the provisions of Section 39(7) of the Estate Duty Act. It is reiterated by him that interest of a member in the HUF properties (Mitakshara) passes on the death and was includible in the estate and, accordingly, relief under Section 33(7)(n) of the Estate Duty Act was allowable.
6. It is also submitted that similar would be the position where the residential house is reflected in the assets of the partnership firm and the partners were deemed to be the owners of the firm’s property for the purpose of Section 33(7)(n) It is urged that this is in consonance with the spirit of the Circular No. 330, dated 6-3-1982 [135 ITR 14 (Statute)]. It is, therefore, urged that in view of the different circumstances and having regard to the position in law, the claim of the assessee was wrongly rejected by the authorities below and the relief may be allowed now.
7. The learned counsel for the revenue, on the other hand, submits that the authorities below have properly appreciated the correct principles in law as far as the rights and liabilities of the assessee is concerned in respect of the property included. In fact, the reasons adopted by the authorities below in their respective orders are repeated before us also on behalf of the revenue.
8. We have gone through the various submissions and authorities for our consideration. The assessee’s learned counsel refers to the decisions as reported in CIT v. Bagyalakshmi & Co. [1965] 55 ITR 660(SC) and CED v. Jyotirmoy Raha [1978] 112 ITR 969 (Cal.) with emphasis at page 972 in support of the various submissions made by him. The revenue, on the other hand, pointed out that the property did not belong to the present assessee prior to the partition as it was jointly owned by the co-owners and in fact, the assessee cannot dispose of or sale out this property or alienate it in any way. It is also submitted that the provisions of the Estate Duty Act and Wealth-tax Act are different and, therefore, no analogy can be drawn therefrom. In this connection, it may be useful to refer to other decisions also to obtain a better approach to the problem. In the case of Ranganayaki Ammal v. CED [ 1973] 88 ITR 96 (Mad.), the Hon’ble Madras High Court, amongst other things, and on the facts of that case while dealing with the Estate Duty matter, noted at page 105 that it is true that a partition is not a transfer in the sense in which that term is normally understood with reference to the Transfer of Property Act, and it is too late in the day to contend that a partition amounts to a transfer in the normal sense as the true nature of a partition arrangement is that each co-owner gets a specific property in lieu of his rights in all joint properties; that is to say each co-sharer renounces his rights in other common properties in consideration of his getting exclusive right to and possession of specific properties in which the other co-sharers renounce their rights and that it amounts to a renunciation of mutual rights and this process did not involve any transfer by one co-sharer of his interest in the properties to the other. The Hon’ble Madras High Court referred to the decision in the case of Gutta Radha krishnayya v. Gutta Sarasamma AIR 1951 Mad. 213 in which it was held that a partition cannot be treated as a conveyance but is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty and that each one of the sharers had an antecedent title and, therefore, no conveyance was involved in the process. It may be mentioned here that this Madras decision was affirmed by the Hon’ble Supreme Court in the case as CED v. Kantilal Trikamlal [1916] 105 ITR 92.
9. In the case of Gowli Buddanna v. CIT [1966] 60 ITR 293, the Hon’ble Supreme Court held on the facts of that case the property of the joint family did not cease to belong to the family merely because the family was represented after the death of one male member, by a single coparcener, who possessed rights which an owner of property might possess, and the income received therefrom was taxable as income of the Hindu undivided family. In the case of Gowli Buddanna (supra), the observation of the Judicial Committee as observed at page 543 (1957), A.C. 540, was reproduced at page 301 partly. Amongst other things, it was noted that the family, a body fluctuating in numbers and comprised of male and female members, may equally well be said to be owners of the property, but owners whose ownership is qualified by the powers of the coparceners. It was noted that there is in fact nothing to be gained by the use of the word ‘owner’ in this connection and it is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as ‘joint property’ of the undivided family, JO, In the case of CED v. Kanckarla Kesava Rao [1973] 89 ITR 261 in an estate duty matter, the Hon’ble Supreme Court had the occasion to deal, amongst other things, the significance of the word “disposition”. Amongst other things, it was observed that under the partition deed, there was merely an adjustment of rights of the various members of the family and the partition in the HUF did not amount to a “disposition” within the meaning of Section 24 of that Act. At page 265, the decision given by the Hon’ble Madras High Court in the case of Gutta Radhakrishnayya (supra) was also considered in which it was held that the partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty and each one of the sharers had an antecedent title and, therefore, no conveyance is involved in the process as a conferment of a new title is not necessary. It is in such a situation that the assessee has stressed his claim that he as a coparcener of the bigger HUF had an antecedent title to the property in question and the partition has merely made some adjustment of such rights and entitlement and as the assessee was the owner prior to the partition, no conveyance deed would be necessary to give effect to the partition which was only an adjustment of rights and liabilities etc. vis-a-via such co-sharers, it is, therefore, urged on behalf of the assessee that he was entitled to have the value of the property in question determined as on 31 -3-1971 in view of Section 1(4) and not as done by the ITO in the present case.
11. But we have also to take other later decisions of the Hon’ble Supreme Court and other High Courts into consideration so that the claim of the assessee can be looked into properly. In this connection, it will be helpful to refer to another decision of the Hon’ble Supreme Court in the case of Kantilal Trikamlal (supra) in which on the facts of that case, it was held amongst other things that the term “disposition” is not a term of art nor legalese but a plain English word of wide import and what is more, the word has acquired, beyond its normal ambit, an extended meaning on account of the special definition is to be found in Explanation 2 to Section 2(75) of the Estate Duty Act. In this decision, the Hon’ble Supreme Court has distinguished the earlier decision in the case of Kancharla Kesava Rao (supra) At page 101, it was observed that the proposition is trite that in an undivided Hindu family coparceners have no predictable or defined share but each has an antecedent title in every parcel of property and is jointly the owner and in enjoyment with the others. It was observed further that it is well established that at the very moment members decide upon a partition, a division in status takes place whereupon the share of the demanding member gets crystallised into a definite fraction and if there is division by metes and bounds the allotment of properties vivifies and specifies such shares in separate ownership.
12. For the purpose of computation of Income under the Income-tax Act and in particular in respect of Section 9 of the Indian Income-tax Act, 1922, the Hon’ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 has observed that for the purposes of the said Act, the owner must the person who can exercise the rights of the owner and not on behalf of the owner but in his own right. That was the case in which the income was sought to be assessed in the hands of the custodian of the evacuee property.
13. In the case of CGT v. M.S. Getti Chettiar [1971] 82 ITR 599 the Hon’ble Supreme Court on the facts of that case, amongst other things, has observed that a member of a Hindu undivided family has no definite share in the family property before division and he cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he would have gone to a court to enforce his claim. That was in connection with the point of assessing the gift in respect of the difference of the value of the lesser share received by the coparcener concerned. At page 603 of the said decision, it was noted that it was necessary to mention that according to the true notion of an undivided Hindu family, no individual member of that family, whilst it remains undivided, can predicate of the joint and undivided property, that he, that particular member, has a certain definite share, namely, a third or a fourth. It was also observed that all the coparceners in a Hindu joint family are the joint owners of the properties of the family and so long as the family remains joint, no coparcener can predicate what his share in the joint family is. His share gets determined only when there is a division of status or a division by metes and bounds. It was concluded that it is not correct to assume that a coparcener in Hindu joint family has any definite share in the family property before its division.
14. In the case of Attorney-General of Ceylon v. AR. Arunachalam Chettiar [1958] 34 ITR (ED) 20, the Privy Council had the occasion to deal with a similar situation. On the facts of that case and in the context of the Estate Duty Ordinance of Ceylon, it was held that it was a misuse of language to say that a coparcener had a “half share” or any “share” of the family property and the essential nature of his interest was that whilst the family remained undivided, he could not predicate that he had a certain definite share.
15. The Hon’ble Gujarat High Court in the case of CED v. Balmbhai. Panchal [1982] 133 ITR 455 has also referred to the decision of the Privy Council mentioned above while dealing with the similar claim of the parties concerned. At page 464, in the case of Babubhai T. Panchal {supra), the Hon’ble Gujarat High Court noted that in the light of the passage from Green’s Book on Death Duties, it has been held by the .Supreme Court that the right of a coparcener to demand a partition and to obtain his legitimate share in the joint family property is an inchoate right. It was also noted that when an actual partition takes place, it is clear that the share of the disponer in the property becomes known and vested and the value of that share can be very easily ascertained as at the date of disclaimer or release. It was further noted in the said judgment that until such demand is made, it is not possible to predicate what his exact share is and what the value of his share in the Hindu coparcenary property is.
16. As far as wealth-tax matters concerned relating to the claim for exemption under Section 5(1){iv) pertaining to a house, such exemption can be allowed in the hands of the partners though the property might have been owned by the partnership firm. This was after considering Rule 2 of the Wealth-tax Rules read with Section 2(m) of the Wealth-tax Act. In such cases, it was held that the firm is not an wealth-tax assessee and in calculating the net wealth of the firm, allocation to the partners would have to be made but at that stage exemption under Section 5(7) would not come in the computation. But after the net wealth of the firm is proportionately allocated to the partners, then such partner can claim exemption under Section 5(1)(iv) etc. It was also by the Hon’ble Madhya Pradesh High Court in the case of Jagdish Chandra Grover v. CWT [1985] 156 ITR 560, that under the Indian Law, a partnership firm is not a legal entity as the firm name is only a compendious way of describing the partners collectively. Similar claim for exemption under Section 5(i)(iv), by the assessee partners was upheld by the Hon’ble Gauhati High Court in the case of Tarachand Agarwalla 2 G.L.R. 129.
17. But in the case of HUF, the situation is different as the HUF itself is an assessee under the Wealth-tax Act and in that situation, the coparceners constituting that HUF is not liable to wealth-tax pertaining to the interest in the properties of the HUF. As such coparcener or other members of the said HUF could not be assessed to wealth-tax in respect of such properties and there was no such occasion to claim exemption by such coparceners. In fact, there was no such claim which would have been claimed that a coparcener was entitled to exemption under Section 5(1)(iv) in respect of his interest in the HUF properties in the same manner that a partner of a partnership firm can claim exemption under Section 5(1)(iv) in respect of the property owned or belonging to the firm during the subsistence of the partnership.
18. In the case of CWT v. Arvind Narotlam [1988] 173 ITR 479, the Hon’ble Supreme Court has dealt with the concept of the words and phrases “Property”, “Interest in property” etc. It was observed, amongst other things, that it is true that the expression “property” must bear a comprehensive sense; but there must be a right, present or contingent, before it can be said that the assessee has an “interest” in the property. In the case of Arvind Narotlam {supra), the Hon’ble Supreme Court at page 486 has further noted the observation of the House of Lords in Gart side v. IRC [1968] AC 553, where it was also observed that a mere right to be considered for distribution of the income or of the corpus of the trust fund cannot be regarded as an “interest” since it was not capable of valuation.
19. The right of an assessee to opt for freezing the value of property for the subsequent assessment years can be allowed to be made on the basis of the assessment of that year as determined for the assessment year 1971 -72 or on the later valuation date, following the event when the assessee became the owner of the said property. We have mentioned above that a coparcener is not called upon to pay wealth-tax in respect of his coparcenary right or interest in the HUF properties as the HUF itself is an assessee and any rebate, exemption etc. that would be entitled could be worked out in the hands of the HUF assessee, inasmuch as the coparcener as such, is not an assessee in view of the fact that the coparcener is not the owner of any property which can be said to be belonging to that coparcener for the purpose1 of assessment. Under the Wealth-tax Act, the liability would arise out of ownership of the asset and not otherwise. In the case of CWT v. Bishwanath Chatierjee [1976] 103 ITR 536, the Hon’ble Supreme Court while dealing with the case of Dayabhaga School and on the facts of that case held that mere possession or joint possession, unaccompanies by the right to, or ownership of property would, therefore, not bring the property within the definition of “net wealth” for it would not then be an asset “belonging” to the assessee.
20. After considering the various aspects of the rival claims made before us and after taking into account the different case laws that could be available, it could be seen that the smaller HUF, i.e., the present assessee cannot be said to be the owner of any portion of the property of the bigger HUF or any such property as belonging to this smaller HIJF, prior to the date of partition which took place on 11-12-1980. That was why, no assessment to wealth-tax could have been made in the hands of the smaller HUF prior to the partition. It was after the partition that the property over which relief under Section 1(4) was claimed by the assessee. The assessing officer, in our opinion, has rightly concluded on the facts of the case that the assessee, i.e., the smaller HUF, became the owner of the property in question only after the said partition and not before that and hence freezing of the value as on the basis of the assessment year 1971-72 could not arise.
21. As stated earlier, the assessee has placed reliance on the interpretation of Section 33(7 )(n) of the Estate Duty Act, but as rightly stated on behalf of the revenue, the analogy cannot be drawn as sought to be made out on behalf of the assessee. The present case is under the Wealth-tax Act and the provision regarding exemption has been specified. In fact the charging and machinery provisions of these two enactments are separate. In a slightly different situation in the case of CWT v. Pachigolla Narasimha Rao [1982] 134 ITR 640, the Hon’ble Andhra Pradesh High Court on the facts of that case while dealing with the wealth-tax matters has observed that analogy of Income-tax law cannot be applied to the wealth-tax Act.
22. On the facts available and in view of what we have discussed above, we are of the opinion that the claim of the assessee has correctly been rejected by the authorities below in their respective orders for both the years. Accordingly, the appeals by the assessee are not accepted.
23. In the result, the appeals by the assessee are dismissed.