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TMI Blog2002 (12) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... firm (hereinafter referred to as "the assessee") consisting of five partners, namely, B.S. Anandan, B.S. Arunagiri, B.S. Narayanan, B.S. Velayutham and B.S. Guruswamy, all sharing profit or loss at 20 per cent. each in the partnership firm. All the partners were members of the erstwhile Hindu undivided family of B.S. Sundaravadivel Mudaliar. The Hindu undivided family deposited the family funds in the assessee-firm a sum of Rs. 1,80,000 as a deposit. There was a partial partition in the family in March, 1979, in respect of the deposit of Rs. 1,80,000 and the same was divided among the members and each coparcener was allotted a sum of Rs. 36,000 and the sums were held in deposits in separate folios in the assessee-firm and interest was credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een paid to the joint family and therefore the provisions of section 40(b) of the Act have no application. The Commissioner of Income-tax (Appeals) allowed the appeals preferred by the assessee for various assessment years in question. The Revenue challenged the orders of the Commissioner of Income-tax (Appeals) before the Appellate Tribunal and the Appellate Tribunal, following its earlier order rendered for the assessment years 1981-82, etc., held that the interest payments made by the firm were not liable to be disallowed under section 40(b) of the Act on the score that the interest payments were made by the firm to the Hindu undivided family and therefore such payments would not attract the disallowance under section 40(b) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only for the purpose of assessment of the joint family as if no partition had taken place, but the partial partition effected would continue to govern the parties and, hence, the firm had paid the interest payments only to the individual partners attracting the provisions of section 40(b) of the Act. Learned senior standing counsel submitted that the way in which the assessee maintained the accounts, particularly the interest folio accounts clearly shows that the assessee-firm has paid the interest to the divided members and, therefore, the interest was factually paid to the members of the family and not to the joint family attracting the provisions of section 40(b) of the Act. Learned counsel submitted that the effect of declaring the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to other three persons, it is admitted that they were married and therefore when a property was allotted to the joint family at the time of partition, it must be held that the property was held by them as members of the Hindu undivided family. We have carefully considered the submissions of Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue, and Mr. V.D. Gopal, learned counsel for the assessee. We are of the view, a reading of section 171(9) of the Act clearly shows that a partial partition effected in a Hindu undivided family after December 31, 1978, is held to be null and void and clause (b) of sub-section (9) of section 171 provides that the joint family shall continue to be assessed under the Act as if no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystal dear language used in the sub-section that partial partition taking place after the cut-off date is not to be inquired into and if inquired the findings would be null and void. Such a family is to be assessed under the Act as if no partial partition has taken place." The Supreme Court has held that the effect of section 171(9) of the Act is to treat a partial partition taking place on or after January 1, 1979, as null and void for the purpose of the Income-tax Act and it is not confined only for the purpose of making assessment on the joint family. We are also unable to accept the submission of learned counsel for the Revenue that when the partial partition has been declared null and void, it should be limited only for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um v. Hirabai Khandappa Magdum [1981] 129 ITR 440 wherein the Supreme Court noticed the earlier decision in CIT v. S. Teja Singh [1959] 35 ITR 408. In Gurupad Khandappa Magdum's case [1981] 129 ITR 440, the Supreme Court has quoted with approval the following observation of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 (HL): "If you are bidden to treat an imaginary state of affairs as real, you must also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it; and if the statute says that you must imagine a certain state of affairs, it cannot be interpreted to mean that having done so, you must cau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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