TMI Blog1981 (7) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... partial partition in the sense of division only of a part of the HUF assets whilst maintaining or continuing the status of HUF in respect of the undivided assets. The view is taken that such a partial partition is not permissible in law and that it cannot be regarded as a valid partial partition by the ITO in exercise of his power under s. 171(3) of the I.T. Act, 1961 (hereinafter referred to as " the Act"). Section 171 of the Act, in so far as is material, reads as under: "171. (1) A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family, except where and in so far as a finding of partition has been given under this section in respect of the Hindu undivided family. (2) Where, at the-time of making an assessment under section 143 or section 144, it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, has taken place among the members of such family, the Income-tax Officer shall make an inquiry thereinto after giving notice of the inquiry to all the members of the family. (3) On the completion of the inquiry, the Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, recede to the background in case we concur with the view taken by the Madhya Pradesh High Court (saying so with respect) and hold against the assessee on the first point as we are inclined to do for reasons which we shall presently articulate. We will, all the same, deal with this question as well, because the ITO has recorded a finding against the assessee and refused to record the aforesaid transaction as a valid partial partition within the meaning of s. 171 on the ground that each of the minors was not allotted an equal share. It may be mentioned that the share allotted to each of the minors is very small and the transaction is unjust and unequal (in one of the two transactions each of the two minors has been allotted 39 and 38 shares out of a total number of 1,977 equity shares in a company). The AAC has reversed the ITO on this point and has taken the view that if regard be had to the allotment of the shares made in favour of the minors concerned on an earlier occasion, some two years back, it could not be said that the minors had not been allotted equal shares. The Tribunal has endorsed the view of the AAC, on this point without any elaborate discussion, almost ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that a partial partition at least in respect of properties of the joint family was not intended. In this background, the father's overriding power to effect a partition between himself and his sons without the consent of his sons, which power flows from the ancient texts, cannot, therefore, be ordinarily understood as conferring that power to effect also a partial partition in respect of the family properties. Even though partial partitions have been taking place for long time, the law relating to the same is practically judge-made law since the Hindu law texts do not contemplate cases of partial partition Raghavachariar's Hindu Law, 6th Edn., page 433. Since the ancient text, did not contemplate a partial partition in respect of property and, there. fore, did not provide for it, it is reasonable to assume that the father's overriding power to make a partition without the consent of his sons cannot be held to include a power to make a partial partition in respect of properties, at least on the basis of power flowing from the ancient texts. As earlier stated, no decided case recognising such a power in the father to effect a partial partition of the family properties without the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition in the sense of division of some of the properties whilst continuing the status of HUF in respect of other items of property originally belonging to the HUF came to be recognised only later on by evolution of custom and by judge-made law. 4. Such a partial partition was so recognised only if it was made by the consent of all the coparceners. In other words partial partition in respect of only some items of property whilst continuing the status of HUF in respect of the rest of the items of property could be effected only with the consent of all the coparceners. When there was a disruption of the status of the HUF only one or only some of the coparceners could not insist on a division of some items of the property without effecting division in respect of all the items of properties except by consent of all the coparceners. 5. In respect of a joint family consisting of a father and his sons the traditional Hindu law recognised the right of a father in his capacity as patria potestas to exercise his extraordinary power to disrupt the status of an HUF and to divide his sons inter se without their consent subject to the rider that " all " the assets of the HUF were subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade law, we cannot read into the extraordinary power which has been recognised only to a limited extent, something more than what has been recognised. Merely because the power of a Hindu father to effect a partition of an HUF in exercise of his extraordinary power as patria potestas has been recognised in respect of a total partition, we are not prepared to say that it follows as a corollary that such powers extend to effecting of a partial partition in respect of some items of property whilst continuing the status of HUF in respect of other items. It cannot and does not follow as a necessary corollary. Extraordinary powers by the very nature of such powers must be strictly construed and interpreted. If we do otherwise, we will be enlarging the powers. It cannot be done by way of interpretation of the existing law. Besides, there are cogent, valid and strong reasons for taking the view that it would be hazardous to recognise by implication a power to effect a partial partition or to spell out a power to effect partial partition merely because the ancient Hindu law recognises the extraordinary powers of a father in respect of total disruption of an HUF and division of all the items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r self-interest and are capable of taking an informed and intelligent decision, law authenticates agreement by necessary implication. In the case of an HUF consisting of a father and minor sons such reunion by implication is inconceivable. It is inconceivable because after the disruption of the status of the HUF, reunion can take place only by consent of all the erstwhile coparceners. And consent on behalf of minors will have to be given by the father to himself on behalf of the minors. Be it realised that the aforesaid extraordinary power has been conferred on the father presumably on the ground that the father would not be ordinarily expected to act against the interest of his minor sons. But then this power is recognised to the limited extent of bringing about a disruption of the joint status in respect of all items of properties. When the father does so and brings about a disruption, the reunion in respect of some of the properties can be brought about only by consent between the father and the son. And-when the consent required is that of a minor, who can give consent on his behalf ? How can the father give consent to himself in his dual capacity ? It is not inconceivable that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the father in exercise of his power as patria potestas can effect apparently unequal partition ? What are the consequences if he does so ? Having regard to the view we take on the first point the assessee must fail in any event. And the dimension of the matter as regards unequal distribution may lose its relevance. However, since the question has been debated fully and raises a question of considerable importance we propose to deal with this aspect as well. The source of the power of the father to effect partition in respect of a joint family 'consisting of himself and his minor son is to be located in ancient Hindu law (and nowhere else) which has recognised the right only subject to a rider, namely, that he gives equal shares to his minor sons. This is evident from the following passages extracted from authoritative text books quoted in [1979] 116 ITR 577 (Gopaldas case) at p. 582 " Gupte's Hindu Law, 2nd Edn. at p. 259: 'The power of the father to sever the sons inter se is a survival of the patria potestas and may be exercised by him without the consent of his sons'...' again, in all cases, this power must be exercised by him bona fide and in accordance with law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t necessary to do so as the questions raised herein are capable of being resolved without expressing any final opinion on this aspect of course, having regard to the view that we are taking, namely, that it is a condition precedent to the exercise of the power and there is an inherent risk that the interest of the minor may be endangered, there are weighty reasons for holding that the transaction should be treated as void. If it were to be treated as voidable, what would happen in a given case where the father after effecting a partial partition in exercise of his extraordinary power as patria potestas, alienates the properties, and the very properties disappear ? In that event, the minor on attaining majority will only have a notional right to have the transaction declared as void, for he cannot claim readjustment from his father who does not possess the property any more. The court would, therefore, be tempted to take the view that in such circumstances the transaction is void. No doubt in M.S.M.M. Meyyappa Chettiar v. CIT [1950] 18 ITR 586 (Mad), the view has been taken that such a transaction is voidable at the instance of the minor on his attaining majority and that it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mad), wherein the view has been taken that the unequal partition can be challenged by the minor and not by the ITO, who need not act as a self-appointed guardian of the minor. The following passage from p. 610 of the report is placed in focus in this context: " For these reasons, I hold that the revenue authority has no right to constitute itself as the self-appointed guardian of minor coparceners and, in that assumed rule, avoid a partition arrangement effected by their father in the exercise of his powers under the Hindu law, on the ground of an inequality in the partition and the resultant prejudice to the interests of the minors." We are, however, unable to agree with this proposition. In our opinion, it is a very essential dimension of the duty cast on him by the statute which confers powers with a definite design and purpose. He cannot, therefore, be said to be an outsider or stranger or an on-looker who is not concerned with the validity of the transaction. To do so would be to hold that the ITO must wait till the minor attains majority, say after 15 years, by which time the power conferred by the relevant provision in respect of the reopening of the assessment would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share the minor would have been entitled to 25 per cent. of the property. But in the instant case, he gets only 2 per cent. of the property. He got only 39 out of 1,977 shares. Even the learned counsel for the assessee could not contend that this particular transaction presents equal distribution as enjoined by shastrik law with regard to partial partition, assuming that partial partition were permissible under the traditional Hindu law or judge-made law as it was evolved by custom or by usage. The argument urged by the learned counsel that the validity of this transaction must be tested with reference to some event which happened years back has merely to be stated to be rejected. One test would be sufficient to express the hollowness of the argument. Supposing there was no partial partition in the past, would this transaction have been considered to be a valid transaction ? The answer is clearly " no ". Does it then become a valid transaction because in the past the minor had been treated more favourably ? Having regard to the true interpretation of s. 171 each transaction has to be judged separately and the ITO has to record his finding in respect of that particular transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------- It will be seen that the two transactions with which we are concerned, viz., transactions dated December 24, 1973, and December 29, 1973, are patently unequal, taken individually. Even if the cumulative effect of the block of transactions were to be considered, the partition is unequal, because the mother has stated that she has not obtained any share for herself in the partition. Apart from the reasons already discussed, there is another reason why the transactions of the previous year (1971) cannot be taken into account. It is not the quantity of the shares which matters but the value of the shares which really matters. If more shares were allotted to the minors in the past, say when the value Was Rs. 100 per share and less shares were allotted in the course of the impugned transaction, say when the value of the shares was Rs. 1,000 per share, can any one rationally reach the conclusion that the partition is equal because the number of shares distributed is equal ? Distribution in terms of money would be grossly unequal though in terms of number of shares it may be equal. And from this angle the assessee has not produced any material on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. If he finds that there is no valid partition of the HUF he cannot say that it is valid by treating the transaction as family arrangement. Invalid partition cannot be validated by giving the transaction a different name. Besides, there is neither authority nor principle to support the proposition that a Hindu father can unilaterally bring about a family arrangement binding on his sons. Or that such authority extends to the length of empowering him to allot a patently unequal (in the sense of being small) share to his sons. The Tribunal was, therefore, justified in negativing this contention. For the sake of record we may mention that the following decisions were cited before us in support of the propositions indicated hereinbelow but we do not propose to discuss these decisions at length because the basis of our decision is not affected thereby: -------------------------------------------------------------------------------------------------------------------------------------------- Citation Proposition emerging from the decision ------------------------------------------------------------------------------------------------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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