TaxTMI 
TaxTMI 
1976 (12) TMI 84
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....as income from other sources by observing as under:- "Interest returned in the file of new HUF (Dividend) Rs.15,000 In making the reassessment of Shri S. Balasubramanian for the asst. yr. 1971-72 the ITO Added a sum of Rs.15,000 as income from other sources by observing as under:- "Other sources : Interest returned in the file of new HUF (2022) (Dividend) assessed here on a protective and precautionary basis without prejudice to the finding that this income should be really clubbed with that of the order HUF. 15,000. 3. On appeal before the AAC it was contended on behalf of the assessee-family that the above dividend income was received by a separate HUF consisting of Shri S. Balasubramanian, his wife and minor daughters, that as per the partial partition deed dt. 26th March, 1970 between Shri S. Balasubramanian and his minor son B. Srinivasan assets of the value of Rs.10 Lakhs were allotted to the HUF of Shri S. Balasubramanian, his wife and minor daughters, that the above sum of Rs.15,000 received as dividend did not belong to the assessee family, that a separate protective assessment assessing the above sum of Rs.15,000 in the hands of the new? HUF that the inclusion of the ....
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....hri S. Balasubramanian, his wife and unmarried daughters constituted a separate HUF in respect of the shares of the value of Rs.10 lakhs allotted to Shri S. Balasubramanian on partial partition of the shares of Gemini Pictures Circuit (Pvt.) Ltd. and Vasan Publications Ltd. He pointed out that under the Mitakshara Law it is not possible to have two separate units (HUF) with the same Kartha. He referred us to the deed of partition dt. 26th March, 1973 and submitted that the same brought about a severance in status of the undivided family, that after that date there was no HUF that there was partition by metes and bounds with reference to the shares in question and that with reference to the rest of assets the members continued to hold the same as tenants in common. He further urged that until there is complete and total partition in respect of all the properties of the family by metes and bounds the portion of the property that fell to the share of the other co-parcener should be deemed to belong to the HUF and under the Income-tax law it should be assessed in the hands of the HUF. He reiterated that in Hindu Law there cannot be two Hindu undivided families with reference to the sam....
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....or son, his wife and unmarried daughters. A partial partition is said to have been effected on 26th day of March, 1970 between Shri. S. Balasubramanian an his son Srinivasan, under which shares in Vasan Publications Pvt. Ltd. and Gemini Pictures Circuit (Pvt) Ltd. of the value of Rs.20 lakhs belonging to the said bigger HUF were partitioned between Shri. S. Balasubramanian and B. Srinivasan. Under Schedule A to the said deed Rs.10 lakhs worth of shares were allotted to Shri B. Srinivasan. In respect of this partial partition a claim was made by the members of the family before the ITO under s.171 of the IT Act, 1961 in the course of the assessment proceedings for the asst. yr. 1970-71. The ITO had passed the order on 28th Feb., 1972 under s. 171 accepting the claim of partial partition. The learned counsel Shri A.N. Rangaswamy had contended before us that the aforesaid registered deed of partition had effected a division in status of the family, that after that date there was no joint family in existence and that thereafter the properties are to be held by the members of the family as co-tenants only. In this connection he referred us to some of the clauses in the deed of partition....
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....indicate that the Rs.20 lakhs worth of shares which were divided under Schedule A and B went out of the fold of the bigger HUF. Further the legal effect of the order under s. 171 is also very clear, that is that as a result of the partial partition effected under the deed dt. 26th March, 1970 Shri. S. Balasubramanian and B. Srinivasan got each Rs. 10 Lakhs worth of shares. The learned Counsel Shri A.N. Rangaswami wanted us to construe the order passed by the ITO under s.171 as simple recording a finding that shares worth of Rs.10 lakhs were taken away by Srinivasan under the partial partition and that the balance of the Rs.10 Lakhs worth of shares continued with the bigger Hindu Undivided family. We are unable to accept this submission of the learned counsel. In the order passed by the ITO under s. 171 the ITO is bound to record a finding as to whether there was a partial partition of the joint family properties as claimed. The ITO has recorded a finding stating that he was satisfied that there was a partial partition as claimed. The partial partition that was recorded in the said deed of partition was with reference to the property that belonged to the family, viz. Rs. 20 lakhs wo....
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.... long as the status of the family continues undivided, the income of the remaining properties owned and possessed by the family forms the basis for the assessment for purposes of income-tax". In the instant case a claim of partial partition had been made by the members of the family before the ITO in the course of the assessment proceedings for the asst. yr. 1970-71. It was claimed that a partial partition of the Rs. 20 Lakhs worth of shares allotted to Srinivasan. The ITO has recorded in the order aforesaid passed under s.171 that he was satisfied that there was such a partial partition. If he was not so satisfied he should have rejected the assessee's claim. The said order accepting the partial partition as claimed has also become final, as pointed out earlier, In these circumstances the contention of the special counsel for the Revenue that there was no partial partition of the 20 lakhs worth of shares deserves to be and is hereby rejected. The legal effect that flows from the order passed under s. 171 is that the Rs.20 Lakhs worth of shares which belonged to the bigger HUF has been divided between Shri. S. Balasubramanian and B. Srinivasan. Thus the property namely Rs.20 Lakhs....
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.... cannot be recognised under the Indian IT Act. Since in the present case the main HUF as an assessable unit under the declaration made by the assessee cannot be recognised by the Income-tax Department". The Bombay High Court had repelled this contention of the Revenue in the succeeding paragraph as under:- "In our opinion there is no substance in any of the contentions raised by the learned counsel for the Revenue. It is true that a HUF, which consists of all persons lineally descended from a common ancestor and included their wives and unmarried daughters, an the Hindu coparcenery which is a narrower body within the joint family consisting of persons who acquire by birth an interest in the joint or coparcenery property, are creatures of law and cannot be created by Act of parties save in so far that by adoption a stranger may be introduced as a member thereof. It must, however, be remembered that a joint Hindu Family springs from a Hindu male and every Hindu male can be the stock of a fresh descent constituting a joint Hindu family springs into existence, this family goes on having its different branches and sub branches. Each branch starts with the male descendant of the common....
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....n Hindu family exists in the undivided state smaller groups constituting separate joint families cannot exist within the larger families that would amount to creating joint families by two or more members of the main family by their Act, cannot also be accepted. The branch family springing from the head of the branch is itself a HUF as conceived under the Hindu law. It is not a creation by Act of parties, but is the creation by law. It is not a creation by Act of parties, but is the creation by law. When it is said that we or more members of the family cannot come together to form a separate Hindu family as distinct from the main Hindu family, what is meant is, as explained by Bhashyam Ayyangar. J in the case referred to above: ".......so long as a family remains an undivided unit, two or more members thereof-whether they be members of different branches or of one and the same branch of the family can have no legal existence as a separate independent unit; but if they comprise all the members of a branch, or of a sub-branch, they can form a distinct and separate corporate unit within the larger corporate unit and hold property as such". At page 243 their Lordships dealt with the ....
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.... The passage in Mayne's Hindu law, 11th edition, page 347 cited before us by Shri A.N. Rangaswami for the Revenue was also considered by their Lordships in that case. At page 764 the following observations occur:- "Learned standing counsel contended that on the concession that the major HUF had not partitioned, Sardar Santokh Singh who was a member of the major HUF could not in law claim of being a member of another HUF. According to learned standing counsel within the fold of a major HUF there cannot exist a smaller Hindu undivided Family. This contention of the learned standing counsel is wholly contrary to law. It is unnecessary to refer to a catena of binding authorities as it would be sufficient if a small passage from a decision of the Supreme Court in the case of Bhagwan Dayal vs. Booti Devi (A.I.R. 1962 SC 287) is quoted. In paragraph 47 of the Judgement, it has been said: "In Mayne's Hindu law, 11th edition, the legal position has been neately stated thus at page 347 : 'So long as a family remains an undivided family, two or more members of its, whether they be members of different branches or of one and the same branch of the family, can have no legal existence as a sep....