1. In this reference, which is under s. 27(1) of the W.T. Act 1957, we are concerned with Dr. K. J. Sheth; he having died at the stage of appeal before the Tribunal, the present respondent has been brought on record as his legal heir. Dr. Sheth was a member of a HUF comprising of himself, his wife, i.e., the present respondent and four children-one son and three daughters. He owned various equity shares. On January 15, 1959, he transferred 4,000 equity shares of Changdeo Sugar Mills Ltd., and 70 equity shares of Kolhapur Sugar Mills Ltd., owned by himself, to the HUF comprising of himself, his wife and minor children. Similarly, on December 11, 1959, the assessee 'transferred' 5,000 fully paid up and 5,000 partly paid equity shares in Great Eastern Shipping Co., to the HUF. In respect of this lot of 10,000 equity shares of the Great Eastern Shipping Company, the assessee made a declaration on a stamp paper of Rs. 3; a copy of the said declaration is to be found as annexure 'C' to the statement of case. In para. 1 of the said declaration the said K. J. Sheth referred to the fact of his being the karta of the joint family property belonging to the HUF consisting of himself, his wife, Anuradha, son and daughters, and in para. 3 the necessary declaration is contained, which is to the effect that as and from December 11, 1959, he is holding and continues to hold as part of the joint family property belonging to the said HUF the aforesaid 10,000 equity shares more particularly described in the schedule to the declaration. In his return for wealth-tax purposes, the assessee excluded from his net wealth the value of the above shares which, under the declaration, became the property of the HUF. The assessee's contention was that the value of these shares was not includible in his net wealth as they had ceased to be his individual property by reason of the fact that he had impressed them with the character of joint family property. The aggregate value of these shares was Rs. 2,25,831. The WTO refused to accept this contention and included the value in the net wealth of the assessee.
2. The assessee carried the matter in appeal to the AAC. A similar question had arisen for consideration in the earlier year and, following the decision of the Tribunal in that year, the AAC upheld the contention of the assessee and directed the exclusion of the amount of Rs. 2,25,831 from the net wealth of the assessee.
3. Aggrieved by this decision of the AAC, the WTO carried the matter in appeal to the Tribunal. As mentioned earlier, the assessee died at the stage of the second appeal and the widow, the present respondent to the reference, was brought on record as his legal representative. Before the Tribunal, the department rested its claim under s. 4(1)(a)(iii) of the W.T. Act. The material portion of the said section reads as follows:
'4. (1) In computing the net wealth of an individual, there shall be included, as belonging to him -
(a) the value of assets which on the valuation date are held - ...
(iii) by a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of the individual or his wife or minor child, or......'
4. The Tribunal considered the contention advanced on behalf of the department which was that by reason of the declaration and throwing into the hotchpot, there was a benefit secured to the wife and minor children as members of the joint family. According to the Tribunal, the words 'for the benefit' in the statutory provision above extracted indicate that there should be a transfer either to or for the benefit of the wife and the minor children. The words 'for the benefit of' would seem to indicate in the view of the Tribunal that the transfers which were sought to be brought within the net of the statutory provision were transfers through the medium of trust. According to the Tribunal, a trust could not be spelt out merely when property was thrown into the hotchpot impressed with the character of joint family property. Accordingly, the Tribunal dismissed the appeal and found in favour of the assessee. It is from this decision that the following question has been referred to us:
'Whether, on the facts and in the circumstances of the case, the shares of the value of Rs. 2,25,831 could be said to have been transferred by the assessee for his benefit or for the benefit of his wife or for the benefit of children so as to attract section 4(1)(a)(iii) of the Wealth-tax Act, 1957 ?'
5. In Goli Eswariah v. CGT : 76ITR675(SC) , it has been observed that the unilateral declaration of a Hindu coparcener, whereby he throws his self-acquired property into the common stock of joint family property, does not amount to a transfer so as to attract the provisions of the G.T. Act, 1958. It is true that the Supreme Court was considering the question whether there was any gift so as to attract the provisions of the G.T. Act, 1958. But it made the following observations in connection with the act of a Hindu coparcener in impressing his separate property with the character of joint family property; it referred to its earlier decision in M. K. Stremann v. CIT : 41ITR297(Mad) . In the later case, before the High Court, the revenue had contended that the act of the assessee in throwing his self-acquired property into the common stock amounted to a transfer of his assets to his minor children. The High Court had observed that when the separate property of a coparcener ceases to be his separate property and becomes impressed with the character of coparcenary property, there is no transfer of that property from the coparcener to the coparcenary; it becomes joint family property because the coparcener who owned it up till then as his separate property has, by the exercise of his volition, impressed it with the character of joint family or coparcenary property, to be held by him thereafter along with other members of the joint family; it is by his unilateral action that the property became joint family property; the transaction by which a property ceased to be the property of a coparcener and became impressed with the character of coparcenary property, does not itself amount to a transfer; no transfer need precede the change and no transfer ensues either. The Supreme Court in Goli Eswariah's case : 76ITR675(SC) expressed its agreement with the above view of the High Court.
6. We also find that a Division Bench of this court in Damodar Krishnaji Nirgude v. CIT : 46ITR1252(Bom) has taken a similar view whilst considering and applying the provisions contained in s. 16(3) of the 1922 Act. In the said case, the assessee possessed self-acquired property but no ancestral property and was being assessed as an individual in respect of the same. He had a wife and a minor son. Under a registered deed to which the wife and the minor son were also parties, the assessee gave up his individual right in his self-acquired property and declared that all his self-acquired property shall henceforth be the property of the joint family consisting of himself, his wife and his minor son. Under the very same deed, the property was further partitioned between himself, his wife and his minor son. After the execution of this deed, the assessee claimed that he should be assessed only in respect of the income from the properties allotted to him under the deed. The income-tax authorities included the income from the properties allotted to the wife and the minor son also in the assessee's income applying s. 16(3) of the 1922 Act on the ground that the transaction amounted to a transfer of assets to the wife and the minor son. On a reference to the High Court it was, inter alia, held that the throwing of his self-acquired property into the hotchpot of the family did not amount to any transfer of such property to the assessee's wife or son.
7. We may point out that sub-s. (1A) was added to s. 4 of the W.T. Act, 1957, with effect from April 11, 1972, by the Finance (No. 2) Act, 1971. By this amendment, the tax net was sought to be cast on transactions of the nature we are considering, effected after December 31, 1969. It was specifically provided that where the separate property of an individual is impressed with the character of joint family property or thrown into the common stock, then the individual shall be deemed to have transferred the converted property through the family to the members of the family for being held by them jointly. It was further provided that the converted property or any part thereof shall be deemed to be assets belonging to the individual and not to the family. There were other provisions, and it is clear that, by the amendment, the type of declaration which we have before us was sought to be brought within the provisions under consideration by adoption of legal fictions. The said provision introduced by the amendment does not apply in the assessment year we are considering. There is no question of any deemed transfer or application of legal fictions and all that we are concerned with is whether by the declaration made and by his act, can the assessee be said to have transferred the shares to the joint family and, further, whether such transfer could be regarded as a transfer made to or for the benefit of the wife and the minor children. It has been held by the Supreme Court in Goli Eswariah's case : 76ITR675(SC) and by our High Court in Damodar Krishnaji Nirgude's case : 46ITR1252(Bom) , that the act of impressing separate individual property as joint family property in the manner as was done by the assessee cannot be regarded as a transfer. If that is so, we must hold that the decision of the Tribunal was right and, accordingly, we answer the question referred to us as follows:
'In the negative and in favour of the assessee'.
8. The revenue will pay to the assessee the costs of the reference.