TMI Blog1975 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ere then not divided but left undivided. The tavazhi of the respondent obtained a 9/112 share in those forest lands. Since then, the tavazhi of the respondent used to be assessed as a Hindu undivided family in relation to the income from such forest lands. A suit, O. S. No. 22 of 1961, of the Sub-court, Kozhikode, for partition of the forest lands assigned to the tavazhi of the respondent was instituted. Thereafter, the members of the tavazhi executed a registered agreement dated February 21, 1963, dividing the forest lands. By this agreement, specific shares have been allotted to each member of the tavazhi of the respondent though there has been no division of the properties by metes and bounds. The division was, therefore, only a division in status and not a division of properties in definite portions. On the basis of this division in status, a claim was made that there has been a partition of the tavazhi when the assessment proceedings for the years 1967-68, 1968-69 and 1969-70 were taken out. The claim was that the tavazhi of the family had become partitioned with effect from the date of the agreement, February 21, 1963, and such a division having taken place long before the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed. (5) Where a finding of total or partial partition has been recorded by the Income-tax Officer under this section, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place; and the provisions of clause (b) of sub-section (4) shall, so far as may be, apply to the case. (6) Notwithstanding anything contained in this section, if the Income-tax Officer finds after completion of the assessment of a Hindu undivided family, that the family has already effected a partition, whether total or partial, the Income-tax Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed. (7) For the purposes of this section, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir income and section 14(1) of the Indian Income-tax Act, 1922, stood in the way of any asssessment being made "in respect of any sum which he receives as a member of a Hindu undivided family from the income of the Hindu undivided family". It was to get over this difficulty that by Act II of 1928, section 25A had been introduced into the Indian Income-tax Act, 1922. The reasons for the insertion of the section are stated by Sri R. Rajagopalachari in his Commentaries to the Law of lncome Tax in British India, Mysore Travancore, at page 190, thus: " If an undivided Hindu family which was assessed in one assessment year as an undivided family became divided before the next assessment year there was no means under the Act is it stood prior to insertion of this now section of assessing the income earned till then of the undivided family as such; for at the time of the new assessment the undivided family which was regarded for purposes of taxation till then as a single unit had ceased to exist, and could not be made an assessee then; and it would be impossible for the income-tax authorities to create a fictitious undivided family and try to serve a single notice upon all the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family property has been partitioned in definite portions, assessment may be made, notwithstanding section 14(1), on each individual or group in respect of his or its share of the profits made by the undivided family while holding all the members jointly and severally liable for the total tax. If, however, though the joint Hindu family has come to an end it be found that its property has not been partitioned in definite portions, then the family is to be deemed to continue -that is, to be an existent Hindu family upon which assessment can be made on its gains of the previous year." Section 29(1) of the Kerala Agricultural Income-tax Act, 1950, is a similar section. In fact, the only material distinction between sections 29(1) and 25A of the Indian Income-tax Act, 1922, is that the section in the Agricultural Income-tax Act, 1950, as amended by Act 12 of 1964, permitted an assessment being made under that section on a Hindu undivided family though such a Hindu undivided family had not hitherto been assessed as a Hindu undivided family. Barring this difference, in substance there is no difference between section 29(1) of the Agricultural Income-tax Act, 1950, and section 25A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncil a legal fiction must be limited to the purpose and object for which it had been enacted. Lord Asquith stated: " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, 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. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs: it does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." But it is equally true that a legal fiction artificially created should not be extended beyond its object. This was stated by the Supreme Court long years ago in State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory and in Bengal Immunity Company Ltd. v. State of Bihar and restated in Commissioner of Income-tax v. Amarchand N. Shroff and in Commissioner Income-tax v. Sakarlal Balabhai. The Full Bench decision of this court in Parameswaran Nambudiripad v. Inspecting Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had ceased to exist. The legal fiction resurrects the entity and makes an assessment on the family as such possible. In other words, the section enables by virtue of the legal fiction to assess an entity which had really ceased to exist treating it as in existence. But such assessment must be of the income earned or received by the real Hindu undivided family. This is what section 171 of the Act has provided. That section contemplates three eventualities; a division during the course of the accounting period, a division after the accounting period but before the assessment, and a division after the order of assessment passed after the accounting period. In the first case, it is stated that the income of the joint Hindu family till the date of the partition shall be assessed and the section further provides that the members of the family would be jointly and severally liable for the tax on the income so assessed. If the partition took place after the accounting period, the entire income for the accounting period will have to be assessed as the income of the Hindu undivided family though at the time of the assessment it was not really in existence. If, on the other hand, the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (Underlining is ours). In answer to the above contention counsel for the assessee brought to our notice the observation made by the same learned judge in the decision of the Supreme Court in Kalwa Devadattam v. Union of India, which runs as follows: Liability of the Hindu undivided family of Nagappa and his sons, therefore, arose not later than the close of each account year and account period for which the tax was assessed and it is not the case of the plaintiffs that the family estate was partitioned before the liability of the undivided family to pay tax arose. There is no dispute in the suit filed by the plaintiffs against the Union that the business carried on by Nagappa was the business of the joint family. It is on the footing that the business carried on by Nagappa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reat respect, this is clear from the section itself for when a division which means a division in definite portions or, in other words, division by metes and bounds had been recorded as envisaged by the section, the Hindu undivided family will not only have to be assessed on the income derived by the Hindu undivided family till the date of such division but assessments will have to be made on its members making them jointly and severally liable for the tax imposed on the Hindu undivided family. This was unnecessary if the object was merely to enable the income of the Hindu undivided family being assessed. The section has, therefore, not only filled up the lacuna but has gone further. This too has a purpose, for, once the properties had been divided in definite portions and by metes and bounds by the members of the family, an assessment made on the Hindu undivided family by virtue of the legal fiction by itself may not enable the tax recovery authorities to proceed against the properties taken by the members which had become their own. It is to obviate this defect that the section empowers a personal liability being imposed on the members for the tax on income derived by the Hindu u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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