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TMI Blog1984 (3) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... given to the other son, Shri Rameshchand Nahar and the balance of Rs. 10,000 was taken by the assessee's wife and their daughter jointly as members of what was described in the deed of partial partition, as 'smaller joint family'. On the very same day, another deed of declaration was executed by which another sum of Rs. 15,000 was divided out of which Rs. 5,000 was allotted to son, Shri Rameshchand Nahar, and the balance of Rs. 10,000 was allotted to the assessee, his wife and their son, Shri Lalitchand Nahar, to hold it as members of what is described as 'smaller joint family' as in the case of the earlier declaration. Yet another declaration of partial partition was executed on the same day, i.e., 1-11-1978, under which a sum of Rs. 30,000 was taken out of the joint family fold, again in cash, of which Rs. 15,000 was allotted to Shri B. Lalitchand Nahar, son of the assessee, and the balance of Rs. 15,000 was allotted to the assessee, his wife and their another son, Shri Rameshchand Nahar, as member of what was designated as 'smaller joint family.' The claim of the assessee was that these three sums of Rs. 20,000, Rs. 15,000 and Rs. 30,000, amounting to in all Rs. 65,000, was take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal against that order, the AAC practically agreed with the view of the IAC and dismissed the assessee's appeal by pointing out more particularly that since the group of persons was not used in the definition, the allocation of funds to various groups of persons will not entitle the appellant for an order under section 171. 4. From a brief resume of the facts, it will be clear that what was operating on the minds of the authorities below, was that allocation of funds to various groups of persons would not entitle the assessee to claim partial partition under section 171 and since in this case certain amount was allotted to a group of persons, that allotment disentitled the assessee from the recognition of the claim of partial partition. The endeavour of the learned counsel for the assessee before us was that under the Hindu law, such a claim of partial partition was not only practicable, entertainable, and in certain cases desirable, that there was nothing wrong or illegal in it, if the members of the family have inter se decided to allot certain properties on partition to a group of members to be enjoyed as a group, as tenants-in-common or even jointly. 5. The learned de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a joint family consists of brothers, they take equal shares on a partition. In section 322 of Principles of Hindu Law by S.T. Desai, 15th edition, it is pointed out that partition, according to the Mitakshara law, consists in a numerical division of the property ; in other words, it consists in defining the shares of the coparceners in the joint property ; an actual division of the property by metes and bounds is not necessary (even though under the income-tax law, under section 171, a physical division of property, by metes and bounds, is a must for the purpose of recognising a partial partition). Once the shares are defined, whether by an agreement between the parties or otherwise, the partition is said to be complete, under the Hindu law. After the shares are defined, the parties may divide the property or they may continue to live together and enjoy the property in common as before. Though this is permissible under the Hindu law, it is doubtful whether it is permissible under the income-tax law for the purpose of recognition of the partition. But whether they do the one or the other. It affects only the mode of enjoyment, but not the tenure of the property. The principle is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and insofar as a finding of partition has been given under section 171 in respect of the HUF. The section also provided that where, at the time of making an assessment under section 143 of the Act, it is claimed by or on behalf of any member of the Hindu family assessed as undivided that a partition, whether total or partial, has taken place among the members of such family, the ITO shall make an enquiry thereinto after giving notice of the enquiry to all the members of the family, and on the completion of the enquiry, the ITO shall record a finding as to whether there has been a total or partial partition of the joint family property, and if there has been such a partition, the date on which it has taken place. Then, it provided that where a finding of total or partial partition has been recorded by the ITO under this section, and the partition took place during the previous year, each member of the group of members shall, in addition to any tax for which he or it may be separately liable, be jointly and severally liable for the tax on the income so assessed. The scheme of this section 171 is that if a claim of partial or total partition of joint family had taken place, the ITO sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily owns several house properties, it is always possible to have a partition allotting certain properties jointly to certain members of the family. It is for those members of the family to whom the property was allotted on partition, to arrive at the terms of enjoyments of that property and merely because that agreement to enjoy that property would result in the creation of another unit of assessment, cannot militate against the claim of partial partition or jeopardise the claim in any manner. At least, this has no support in Hindu law. Since it is always left to the members of the joint family to divide the properties and to hold them in such a manner as they deem fit, be it individually or commonly or in groups, the mode of allotment, therefore, cannot be a reason to refuse the claim of partial partition or total partition. So long as there is, in fact, a physical, and in law, a total or partial partition and if certain properties are effectively taken out of the joint family fold and are divided among the members, what is to be seen for the purposes of section 171 is whether the property claimed to have been taken out of the joint family fold, has really been taken out of the jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtition. Similarly, sub-section (7) of section 171 lays down that for the purposes of section 171, the several liability of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial, which clearly signifies that allotment of property to group of members on partition, either partial or total, is certainly permissible, possible and contemplated. This objection of the revenue is, therefore, totally unsustainable. Again sub-section (9) of section 171 refers to groups of members, when it lays down that a partial partition which has taken place after 31-12-1978, would not be recognised. Thus, since this ground on which greatest stress was laid by the IAC and also by the ITO, is not available to the revenue to reject the claim of partial partition and since there is no finding recorded by the revenue that there is no physical division of the property and that the said sum of Rs. 65,000 had not gone out of the joint family fold, the claim made by the assessee has, in our opinion, been erroneously refused. Further, the departmental representative claimed that there cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 171. The principle laid down by the Supreme Court in this case was, therefore, that where there is no claim that a partition--total or partial--had taken place, or where it is made and disallowed, a HUF which is hitherto being assessed as such will have to be assessed as such notwithstanding the fact that a partition had in fact taken place as per Hindu law. This principle, far from helping the revenue's case, helps the assessee's case, because here there was a claim of partial partition made and we are of the view that such a partial partition had taken place with the consequence that the income attributable to that partitioned asset is not the income of the joint family any more and could not be included. The fiction enacted in section 171(1) that even if a partition had taken place, the family shall be deemed to continue to be the owner of the property and the recipient of the income derived from it, except where and insofar as a finding of partition has been given under section 171, does not apply to the facts of this case. Considering the above, we arc of the opinion that the claim of the assessee that there has been a partial partition as mentioned in the declarations of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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