COMMISSIONER OF WEALTH TAX, WEST BENGAL vs. BISHWANATH CHATTERJEE AND OTHERS

CIVIL APPEAL No. 1101/1969Supreme Court[1976] 3 S.C.R. 109608 April 1976Bench: 5 JudgesAuthor: A.N. RAY, M. HAMEEDULLAH BEG, R.S. SARKARIA, P.N. SHINGAL, JASWANT SINGH7 pages
AI SummaryDismissed

What were the facts?

The Wealth-tax Officer assessed the respondents as a Hindu Undivided Family (HUF) for the assessment year 1958-59, rejecting their plea for separate assessment of wealth tax on properties inherited from their father, Bircswar Chatterjee, who was governed by the Dayabhaga School of Hindu Law. The Appellate Assistant Commissioner held that the properties should be taxed separately in the hands of the co-sharers. The Income-tax Appellate Tribunal, by a majority, held that the property, until partitioned, was assessable to wealth tax in the hands of the HUF, despite the absence of unity of ownership and the existence of definite shares under Dayabhaga law. The High Court, on reference, ruled in favour of the assessees.

What did the Supreme Court hold?

The Supreme Court dismissed the appeal, holding that the High Court was right in its decision. The Court reiterated that under the Dayabhaga School of Hindu Law, unlike the Mitakshara School, there is no unity of ownership in family property; instead, each coparcener takes a definite share immediately upon inheritance and is the owner of that share. The Court emphasized that the liability to wealth tax arises from ownership of assets. Since the property in question was the individual property of Bircswar Chatterjee and devolved on his heirs according to the Hindu Succession Act, 1956, each heir took a defined share and was the owner of that share. This defined share constituted their 'net wealth' under Section 2(m) of the Wealth Tax Act and was, therefore, liable to wealth tax individually under Section 3. The Court noted that the coparcenary in this case had unity of possession but not unity of ownership.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that properties possessed jointly by members governed by the Dayabhaga School of Hindu Law were assessable to wealth tax jointly in the status of a Hindu Undivided Family, as per Section 3 of the Wealth Tax Act. Assessee's Contention: The respondents argued that under the Dayabhaga School of Hindu Law, they held definite and determined shares in the inherited properties and were therefore liable for separate assessment of wealth tax. They relied on the principle that Dayabhaga law recognizes fractional ownership, not unity of ownership, and that each coparcener becomes the owner of their defined share immediately upon inheritance. Revenue's Contention: The Commissioner of Wealth Tax argued that under the Dayabhaga School, property inherited by sons is taken jointly by descent as coparceners, forming a joint family by operation of law. Therefore, the father's property was liable to be taxed as a unit (HUF) under Section 3 of the Wealth-tax Act until partitioned.

Which sections of the Income-tax Act were involved?

Section 3,Section 2(m)

AI-generated summary — verify with the full judgment below

A B c D E F 1096 COMMISSLONER OF WEALTH TAX, WEST BENGAL v. BISHW ANATH CHATTERJEE AND OTHERS April 8, 1976 [A. N. RAY, C.J., M. H. BEG, R. S. SARKARIA, P. N. SHINGHAL ANI> JASWANT SINGH, JJ.] Wealth Tax Act, s. 3-Coparceners goi·erned by Dayabhaga School of Hindu Law-If could he assessed as Hindu Undivided Family. llindu Law-Coparcener under Dayabhaga School-If could be t1ss~sscd as Hindu Undivided Fan1ily.

Rejecting the respondents' plea that as persons governed by the Dayabhaga School of Hindu Law they had held definite and determined shares in the properties inherited by them. ·from their father and were liable to separate assessment of wealth tax, the Wealtb. Tax Officer assessed them as a Hindu Un- divided Family. On appeal the Appellate Assistant Commissioner held that the properties should be taxed in the hands of the co-sharers ')eparately. On further appeaJ, the Appellate Tribunal held that notwithstanding that there was no unity of ownership amongst members governed by the Dayabhaga School of Hindu La\V in respect of family property and each member thereof lwd no definite share in it, such property, until partitioned, was assessable· to wealth ta

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