TMI Blog1964 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... tituted a Hindu undivided family. They carried on business in mining in the name and style of Krishnappa and Sons. The family was disrupted in 1946, and all its properties were divided among the members of the family. The business of Krishnappa and Sons was taken over by a firm of which the partners were Krishnappa and his two sons. A private limited company styled " Krishnappa Asbestos and Barytes (Private) Ltd. " took over the business of the firm on May 21, 1947, for Rs. 2,04,000. Thimmayya obtained employment under the company as mines superintendent at a monthly salary of Rs. 400 and Venkatanarsu as general manager at a monthly salary of Rs. 500. Proceedings for assessment of tax due by the Hindu undivided family for the years 1941-42, 1942-43, 1944-45, 1945-46 and 1946-47 were pending at the time when the Hindu undivided family was disrupted. On May 20, 1946, Venkatanarsu claimed before the Additional Income-tax Officer, Cuddapah, that the property of the Hindu undivided family had been partitioned among the members in definite portions. For reasons which do not appear from the record, this claim was not disposed of till June 30, 1952. In the meanwhile, assessments for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under section 25A (2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-section (2) of section 25A. Against the order of the High Court, with certificate of fitness, these two appeals have been preferred by the Income-tax Officer, Cuddapah. Under the Indian Income-tax Act, 1922, as it originally stood, a Hindu undivided family was regarded by section 3 as a unit of assessment, but no machinery was set up for levying tax or for enforcing liability to tax on the members of the family, if before the order of assessment the family was divided. Absence of this machinery was more acutely felt because of section 14(1), which provided that tax shall not be payable by an assessee in respect of any sum which he received as a member of a Hindu undivided family. Income received by a Hindu undivided family could not therefore be assessed and collected from the members of the family, if at the time of making the assessment the family was divided. To rectify what was obviously a lacuna, the legislature incorporated section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. " The section makes two substantive provisions---(i) that a Hindu undivided family which has been assessed to tax shall be deemed, for the purposes of the Act, to continue to be treated as undivided and therefore liable to be taxed in that status unless an order is passed in respect of that family recording partition of its property as contemplated by sub-section (1) ; and (ii) if at the time of making an assessment it is claimed by or on behalf of the members of the family that the property of the joint family has been partitioned among the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, resulting in such physical division of the estate as it is capable of being made, the Income-tax Officer shall hold an inquiry, and if he is satisfied that the partition had taken place, he shall record an order to that effect. Where an order has been passed, the Income-tax Officer must still make an assessment of the total income received by or on behalf of the undivided family as if no partition had taken place, and shall thereafter apportion the income-tax assessed on the total income received by the family and assess each membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment of the income of the Hindu undivided family, as if no partition had taken place and then to apportion the total tax liability and to add to the separate income of the members or groups of members the tax proportionate to the portion of the joint family property allotted to such members or groups of members and to make under section 23 assessment on the members accordingly. If no claim for recording partition is made, or if a claim is made and it is disallowed or the claim is not considered by the Income-tax Officer, the assessment of the Hindu undivided family which has hitherto been assessed as undivided will continue to be made as if the Hindu undivided family has received the income and is liable to be assessed. Failure to make an order on the claim made does not affect the jurisdiction of the Income-tax Officer to make an assessment of the Hindu family which had hitherto been assessed as undivided. The Income-tax Officer may assess the income of the Hindu family hitherto assessed as undivided notwithstanding partition, if no claim in that behalf has been made to him or if he is not satisfied about the truth of the claim that the joint family property has been pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the property of the Hindu undivided family : it cannot be enforced against the members of the family personally. The Income-tax Officer has sought by resorting to section 46(5) to attach the remuneration earned by Thimmayya and Venkatanarsu as employees of Krishnappa Asbestos Barytes (Private) Ltd : this he was incompetent to do. So long as the assessment is made of income of the Hindu undivided family, liability to satisfy the tax must be restricted to the estate of the family : after an order of partition is recorded and assessment is made under sub-section (2) of section 25A but not till then, the proviso to that sub-section will operate. The Solicitor--General contended that the second paragraph of sub-section (2), which is in the form of a proviso, is in substance a substantive provision imposing joint and several liability for tax assessed on the total income received by or on behalf of the joint family against all members of the family. The contention is that by the proviso the legislature intended that in respect of the income of a Hindu undivided family, once partition is effected, whether the partition is recorded or not under sub-section (1), all members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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