# [1982] 3 S.C.R. 9

- **Citation:** [1982] 3 S.C.R. 9
- **Court:** Supreme Court of India
- **Decided:** 1982-01-12
- **Case number:** Civil Appeal Nos. 1370/74 and 1768 of 1975
- **Bench:** R. S. Pathak, Venkataramiah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1982-3-s-c-r-9-8563
- **Pages:** 29

## Headnote

Income Tax Act 1961, S. 171-Scope of,
Hindu Undivided Fam(ly-Ora/ panition in respect of immovable proparti~
Properties incapable of physical division in equal shares-Capable of division by
apPortionment and equali1alion by payment ofmCJney-."dere severa11ce of statusNor sufficient to record finding of partition-Whether entitles the inclusion of
income from an asset which has ceased to belong to the Joint family in the
assessment of joint Hindu family.
Hindu Law-Partition-What is-How brought about-Partition may be
total or partial.
The assessee, a Hindu Undivided Family was deriving income from
various sources ,-such as income from property, income from money-lending
business, income from speculaiion business and cloth bttsiness etc. There was a
partial partition in the family in the year 1951, which was accepted and acted
upon by the Income ta:t department, whereafter the doth business was treated as
the business of a ti.Cm consisting of most of the coparceners as partners. On
December 1, 1963 which fell within the assessment year 1964.65 there was another.
partial partition orally, as a result of which eighteen immovable properties were
divided amongst the ten members of the family: who held those properties as
tenants-in-common from that date. These eighteen immovable properties were
situated in different places and their valuation was about Rs. 7 lacs.
In the course of assessment proceedings; the assessee claimed that the
mem bcrs of the family had commenced to maintain separate accounts with regard
to the income from the eighteen immovable properties and to divide the nett
profits amongst themselves according to their respective shares at the end of the
year. When required by the Income-tax Officer to explain as to why the proper·
ties were not divided in definite portions as required by section 171 of the Income
Tax Act 1961, the assessee·stated that physical partition of the properties ainongst
the ten members was impossible and th" only way to partition those properties
was to define the respective shares and to enjoy the income from them separately.
In support of his contention that the properties did not admit of physical division
the assesse.e relied on an arbitration award. The Income-tax Officer did not'agrec
with the assessce's contention that it was not possible to divide the properties iU
definite portions. He rejected the claim of panial partition in respect of the
eighteen immovable properties and proceeded to assess the income derived therefrom in the hands of the assessee.
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SUPREME COUltT REPORTS
[1982) 3 S.C.R.
The assessec ft.led an appeal before the Appellate Assistant Commissioner.
During the pendency of the appeal the assessec appointed another arbitrator to
examine the possibility of physical division of each of the eighteen properties into
ten portions. The artitrator by his award stated that the properties were not
capable of physical division into ten shares by metes and bounds and that any
practical division was that of allocation of proportionate shares in an the eighteen
properties. The Appellate Assistant Commissioner held that the case of the
assessee that it was not possible to divide the properties physically as untenable
and dismissed the appeal.
In.further appeal to the Tribunal, the Tribunal held that the contention of
the assessec that if the properties had been divided into ten shares they would
have been either. destroyed or would have lost their values was not correct, and
that the claim of the assessee under section 171 of the Act that there was a partial
partition was to b.! rejected.
On an application by .the asscssee under section 256 ·(l) of the Act, the
Tribunal referred two questions to the High Court : (1) Whether the Tribunal was
right in holding that the properties in dispute were capable of division in definite
portions amongst the ten coparceners as contemplated in Explanation (a) (i) to
section 171 of the Act, and (2) whether the Tribunal

## Text

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KALLOOMAL TAPESWARI PRASAD (HUF), KANPUR
A
V,
THE C. L T., KANPUR
(AND VICE VERSA)
January 12, 1982
(R. S. PATHAK AND E. S, VENKATARAMIAH, JJ.]
Income Tax Act 1961, S. 171-Scope of,
Hindu Undivided Fam(ly-Ora/ panition in respect of immovable proparti~
Properties incapable of physical division in equal shares-Capable of division by
apPortionment and equali1alion by payment ofmCJney-."dere severa11ce of statusNor sufficient to record finding of partition-Whether entitles the inclusion of
income from an asset which has ceased to belong to the Joint family in the
assessment of joint Hindu family.
Hindu Law-Partition-What is-How brought about-Partition may be
total or partial.
The assessee, a Hindu Undivided Family was deriving income from
various sources ,-such as income from property, income from money-lending
business, income from speculaiion business and cloth bttsiness etc. There was a
partial partition in the family in the year 1951, which was accepted and acted
upon by the Income ta:t department, whereafter the doth business was treated as
the business of a ti.Cm consisting of most of the coparceners as partners. On
December 1, 1963 which fell within the assessment year 1964.65 there was another.
partial partition orally, as a result of which eighteen immovable properties were
divided amongst the ten members of the family: who held those properties as
tenants-in-common from that date. These eighteen immovable properties were
situated in different places and their valuation was about Rs. 7 lacs.
In the course of assessment proceedings; the assessee claimed that the
mem bcrs of the family had commenced to maintain separate accounts with regard
to the income from the eighteen immovable properties and to divide the nett
profits amongst themselves according to their respective shares at the end of the
year. When required by the Income-tax Officer to explain as to why the proper·
ties were not divided in definite portions as required by section 171 of the Income
Tax Act 1961, the assessee·stated that physical partition of the properties ainongst
the ten members was impossible and th" only way to partition those properties
was to define the respective shares and to enjoy the income from them separately.
In support of his contention that the properties did not admit of physical division
the assesse.e relied on an arbitration award. The Income-tax Officer did not'agrec
with the assessce's contention that it was not possible to divide the properties iU
definite portions. He rejected the claim of panial partition in respect of the
eighteen immovable properties and proceeded to assess the income derived therefrom in the hands of the assessee.
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SUPREME COUltT REPORTS
[1982) 3 S.C.R.
The assessec ft.led an appeal before the Appellate Assistant Commissioner.
During the pendency of the appeal the assessec appointed another arbitrator to
examine the possibility of physical division of each of the eighteen properties into
ten portions. The artitrator by his award stated that the properties were not
capable of physical division into ten shares by metes and bounds and that any
practical division was that of allocation of proportionate shares in an the eighteen
properties. The Appellate Assistant Commissioner held that the case of the
assessee that it was not possible to divide the properties physically as untenable
and dismissed the appeal.
In.further appeal to the Tribunal, the Tribunal held that the contention of
the assessec that if the properties had been divided into ten shares they would
have been either. destroyed or would have lost their values was not correct, and
that the claim of the assessee under section 171 of the Act that there was a partial
partition was to b.! rejected.
On an application by .the asscssee under section 256 ·(l) of the Act, the
Tribunal referred two questions to the High Court : (1) Whether the Tribunal was
right in holding that the properties in dispute were capable of division in definite
portions amongst the ten coparceners as contemplated in Explanation (a) (i) to
section 171 of the Act, and (2) whether the Tribunal was justified in holding that
the income from the properties in dispute which were accepted to have been
partitioned under the Hindu Law but with regard to which an order accepting the
claim of partial partition was not made was liable to be included in the computa·
tion of the assessee•s income '!
The High Court held : (I) that even though the eighteen properties could
not individually be divided into ten Shares without destroying their utility but
.after assessing the value of the properties they could be apportioned betwCen the
ten members and the difference in the allocations could be equalised by payment
of cash amounts by one to the other and in view of clause (a) (i) of the Explanation to section 171, mere severance of status was not sufficient for recording a fin·
ding of partition; and (2) that tbe income accruing from the eighteen immovable
properties after December 11, 1963 was oot liable to be included in the computation of the joint Hindu Family's income.
Dismissing the Assessee's appeal
and
allowing
the Department's
appeal:
HELD : 1. (i) The law relating to assessment of Hindu undivided family
underwent a change when the 1961 Act came into force. Section 171 of the Act
provided for the assessment after partition of a Hindu undivided family. [24-I)]
(ii) A finding to the effect that partition bas taken place has to be recorded under section 171 by the Income-tax Officer. He can record such a finding
only if the partition in questiOn satisfies the definition of the expression 'partition'
round in Explanation to section 171. A transaction can be recognised as a parti·
tion under section 171 only If, where the property admits of a physical division a
physical division of the property bas taken place. In such a case mere physical
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KALLOOMAL V. C.J.T.
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division of the income without a physical division of the property producing
income cannot be treated as a partition. Even where the property does not admit
of a physical division 1hen such division as the property admits of should take
place to satisfy the test of a partition under section 171. Mere proof of severance·
of status under Hindu Law is not sufficient to treat such a transaction as a parti·
tioo. If a transaction does·not satisfy the above additional conditions it cannoi
be treated as a ~artition under the Act, even though under Hindu Law there has
been a partition.total or partial. The consequence will be that the undivided
family will be continued to be assessed as such by reason of sub·section (1) of
section 171. [30.A-D]
(iii) It is common knowledge that in every partition under Hindu Law
unless the parties agree to enjoy the properties as tenants-in-common, the need
for division of the family properties by metes and bounds arises and in that pro ..
cess physical division of several items of property which admit of such physical
division does take place. It is not necessary to divide each item into the number
of shares to be allocated at a partition. If a large nuOJber of items of property
are there, they are usually apportioned on an equitable basis and if necessary by
asking the parties to make payments of money to equalise the shares. Such a
partition is also a kind of physical division of the properties and is contemplated
in the Explanation to section 171. [34-C-E]
In the instant case no attempt to divide the properties was made. The
case clearly falJs under sub.cJause (i) of cJausc (a) of the Explanation to section
171 of the Act but does not satisfy the requirement of that sub-clause as no physi~
cal division of the properties was made even though they could be conveniently so
divided. Sub-clause (if,. therefore does not apply to this case. [35-B]
2.
(i) The High Court having held that the assessee was not entitled to
to claim that a partial partition had taken place under section 171, fell into an,
error in holding that the income of the properties which were the subject-matter
of partial partition could not be included in the total income of the assessee by
relying upon the decisions which had been rendeRd on the basis of section 2SA
of the 1922 Act which bad been construed as not being applicable to partial
partition. [35-D]
(ii) The true effect of section 171 (1) is that property, which is the subject-matter of partial partition would continue to be treated as belonging to the
family and its income would continue to be included in its total income until such
a finding is recorded. [35-G]
.
(iii)
~uh-section (1) of section l 71 contains a 'deeming' prov1s1on. ft
says that a Hindu family hitherto assessed as undivided shall be deemed for the
~urpose of the Ac.t to continue to be a H,indu undivided fa'mily except where and
10 so far as a ~~ding of partiti~n h~s been recorded in respect of it under- section
171. The pa~ution referred to 10 the section can include a partial partition also
~1ther ~s regar~s the ~rson~ con~tituting the undiJ.ided fan:-Uy or the properties
~~l~~rng ,to ,1t or. bo~hl in .v1~w, of the provisions contained in the other subsecuons and the Explapation to the section. (29-F-GJ
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SUPREME COURT REPORTS
[1982] 3 S.C.R.
(iv) Whore there is no claim that a partition-total or partial-had taken
place made> or where it is made and disallowed a Hindu undivided family which
is hithefto being asseBsed as such will have to be assessed as such notwithstanding
the fact a partition bad in fact taken place as per Hindu law. A finding to the
effect that partition bad taken place has to be recorded under section 171 by the
Income-tax Officer. He can record such a finding only if the partition in ques·
tion satisfies the definition of the expression 'partition' found in Explanation to
section 171. The transaction can be recognised as a partition under section 171
only if where the properties admit of a· physical division, a physical division of
the property bas taken place. In such a case mere physical division of the income
without a_ physical division of the property producing income cannot be treated
as a partition. Even where the property does not, admit of a physical division
then such a division as the property admits of should take place to satisfy the
test of a partition under section 171. Mere proof of severance of status under
Hindu Law is not sufficient to treat such a transaction as a partition. If a transac·
tion does not satisfy the additional condition it cannot be treated as a partition
under the Act even though under Hindu Law there has been a partition total or
partial. The consequence will be that the undivided family will be continued to
be assessed as such by reason of sub-section (1) of section 171. [29 0.H, 30 A·D]
Govinddas & Ors. v. Income-tax Officer & Anr., [1976] 193 I.T.R. 123;
Charanda1 Haridas & Anr. v. Commissiomr of lncome·tax, Bombay North,
Kutch & Saurashlra, Ahmedabad & Anr., (1960] 39 I.T.R. 203; A. Kannan
Chetty v. Commissioner of lm:ome-tax, Madras, [1963] 50 I.T.R. 601; referre>d
to.
(v) As long as a finQing is not recorded under section 171 that a partia1
partition had taken place the Hindu undivided family should be decme>d for the
purposes of the Act to be the owner of the property which is the subject matter of
the partition and also the recipient of the income from such property. The
assessment should be made as such and the tax assessed can be recovered as
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provided in the Act. [36 F·G]
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3. Under section 25A of the 1922 Act, a Hindu undivide>d family which
had been assessed to tax could be treated as undivided and subjected to tax under
the Act in that status unless and until an order was made under ~ection 25A (1)
and if in the course of the assessment proceedings it is claimed by any of the
members of the Hindu undivided family that there has been total partition of the
family property resulting in physical division thereof as it was capable of, the
assessing authority should bold an enquiry and decide whether there has been
such a partition or not. If he held that such a partition had taken place, he
should proeeed to make an assessment of the total income of the family as if no
partition had taken place and then proceed to apportion the liability as stated in
see:tion 25A amongst the individual members of the family. If no claim was made
or if the claim where it was made was disallowed after the enquiry, the Hindu
undivided family would continue to be liable to be assessed as such.
[23 G·H, 24 A-CJ
H
4. Whm Parliament enacted section 171 it took note of tho decisions
which had taken the view that a partial partition did not fall within the scope of
section 25A. It exprcgly stated in se>etion 171 of the Act that the said provision
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KALLOOMAL •. C.l.T.
13
was applicable to both kinds of partitions-total or partial. It has also defined
partial partition as one which is partial as regards persons constituting the undi-
. Vided family or as regards the properties belonging to the undivided family or
both. It deals with aU kinds of partitions, the nature of which sometimos may
be difficult to predicate correctly. [31 D-E]
Sir Sunder Singh Majithia v. The Commissioner of Income-tax. C.P. & U.P.,
[1942] 10 I.T.R. 457, Gordhandas T. Manga/das v. C~mmlssloner of income-tax
Bombay, [1943] 11 I.T.R. 183, Waman Satwappa Kalghatgl v. Commi8'iontr of
incpme-tax [1946]14 I.T.R. 116, M.S.M.S. Meyyappa Chettiar v. Commissioner of
income-tax, Madras, [1950] 18 f.T.R. 586, Lakhmtchand Baljnath v. Comm/8'/0ntr
of income-tax West Bengal, [1959] 35 l.T.R. 416, Ka/wa Dnadatta and Or1. v.
Vnion of india and Ors., [1963] 49 l.T.R. [S.C.] 165, Additional income-tax
Officer, Cuddapah v. A. Thimmayya and Anr., [1965] 55 I.T.R. 666, Joint Family of
Vdayan Chit:iubhai etc.·v. Commisrioner of Income-tax, Gujarat, [1967] 63 I.T.R.
416, referred to.
5. Partition may be several kinds. It may be a total partition or a partial
partition. A partition can be caned partial both as regards persons and as
regards properties. The next kind of partition may be one where all the members
divide amongst themselves only some of the family properties and continue as
members of an undivided family owing the remainlog family properties. This is
called a partial partition as regards property. Even here the division of the property which is subject matter of partial partition may be groupwise also. In the
case of a partial partition a_s regards property, one thing noticeable is that after
such partition, the property which is subject-matte! of partition is held by the
members of the family as tenants-in-common and the rest of the family properties Continue to be held by them as members of the undivided family.
[31 F-H, 32 A-E]
6. After a partial partition as regards property, the property divided
is held by the members or the undivided
family_ as
divided
members
with all the incidents flowing therefrom and the pr.operty not so divided as
members of an undivided family. Section 171 (I) of the Act can, therefore
operate in such a case also because the family which has become divided
as regards the property which is the subject matter of partial partition is deemed
to continue as the owner of that property and the recepient of the income derived
from it except where and in so far.as a finding of partition has been given under
ocction 171. [32 F-G]
7. Partition can be brought about, (I) by a father during his life time
between himself and his sons by dividing properties equally amongst them, (2) by
agreement, or (3) by a suifor arbitration. A declaration of intention of a copar-.
cener to become divided brings about severance of status. [27 E]
8. A physical division of tho property which:,is the subject matter of
partition is not necessary to complete the process of partition in so Car as the item
of property is concerned under Hindu Law. Tho parties to the partition may
citjoy tho property in question as tenants-in-common. [27 GJ
Appo•i1r v. Rama Subba Aiy1J11 [1866] ll M.I.A, 75, referred to.
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SUPREME COURT REPORTS
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9. Hindu Law does not require thal the property must in every case be
partioned by metes and bounds or physically into different portions to complele a
partition. Disruption of status can be brought about and it is open to the parties
to enjoy their shares of property as tenants-in-common in any manner known to
law according to their desfre. (28-C]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1370/74
and 1768 of 1975.
From the judgment and order dated the 29th September, 1972
of the Allahabad High Court in Income-Tax Reference No. 47
of 1971.
S.T. Desai J.B. Dadachanji and K.J. John for the Appellant
in C.A. 13;0/74 and for Respondent in C.A. 1768/75.
V.S. Desai, Miss A. Subhashini, K. C. Dua and S. P. Nayar for
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the Respondent in CA. 1370/74 and for the Appellant in CA.
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The Judgment of the Court was delivered by
VENKATARAMIAH, J. These two appeals by certificate-one by
the assessee and the other by the Commissioner of Income-tax,
Kanpur are filed against the judgment and order dated September
29, 1972 of the High Court of Judicature at Allahabad in Income-tax
Reference No. 47 of 1971 under section 256(1) of the Income-tax.
Act, 1961 (hereinafter referred to as 'the Act') made by the Income·
tax Appellate Tribunal, Allahabad Bench, Allahabad (for short '1he
Tribunal'). The two questions which were referred by the Tribunal
for the opinion of the High Court were :
"(l) Whether on the facts and in the circumstances of the
case the Tribunal was right in holding that the properties in dispute were capable of division in definite
portions amongst the 10 coparceners as con temp lated
in Explanation (a) (i) to section 171 of the Incometax Act, 1961 and that even otherwise the. mere seve·
ranee of status was not sufficient to entitle the assessee
to succeed in. its claim for partial partition ?
(2) Whether on the facts and in the circumstances of the
case. the Tribunal was justified in holding th at the
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KALLOOMAL v. c.l.T. (Venkataramlah, J.)
income from the properties in dispute which were
accepted to have been partitioned under the Hindu Jaw
.but with regard to which an order accepting the claim
of partial p~rtitic;in was not made was liable to be
included in the
computation
of
the
assessee's
income?"
15
The assessee is a Hindu undivided family known as M/s.
Kalloomal Tapeshwari Prasad and the year of assessment is 1964·65.
The assessee is governed by the Mita ks hara school of law. The
following genealogical tree represents the relationship amongst the
A
B
members of the family :
C
I I
Chandoolal
(His wifo Rampiari
died on 17.9.63)
Phakki Lal
I I
Bishambhar Nath
(died issueless
in 1940-wife
1
predeceased him)
I I
I I
Sitaram
(wife·Kripa
Devi)
I I I
I I
I I I I I
I
I I
Gopalji
Ramji
I
Jagat
Narain
I
Roop
Narain
- I
Swamp
Narain
I
I
Sh yam
Bimal
Narain
Narain
During the relevant previous year, the family consisted of
Chandoolal, Sitaram and his wife Kripa Devi, Jagat Narain, Roop
Narain, Swamp Narain, Shyam Narain and Bimal Narain who were
the five sons of Chandoolal and Gopalji and Ramji, the two Sons
of Sitaram. The assessee (Hindu undivided family) was deriving
income from various sources such as income from property, income
from
money lending business, income from speculation. busi·
ness and cloth business etc. There was a partial partition in the
family in the year 1951 when a sum of Rs. 5,00,000 out of its total
capital of Rs. 12,85,423 was divided amongst the coparceners at the
rate of Rs. 41,666/10/8 amongst members of Chandoolal's branch
and at the rate of Rs. 83,333/5/4 among~ the members of Sitaram's
branch. Kripa Devi did not receive any share at that partition.
The said partial
partition was
accepted and acttd upon by
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SUPREME COURT REPORTS
fl 982] 3 S.C.R •.
the
Income-tax
Department where after
the
cloth business
was
treated as
the business of a
firm consisting of most
of the coparceners as
partners.
Again.
on
December II,
1963 which fell within the previous year relevant for the assessment year in question i.e. 1964-65, according to the assessee,
there was another partial partition orally as a result of which its
eighteen immovable properties were
divided amongst the ten
members of the family and that they held those properties as
tenants-in-common from that date.
It was claimed by the assessee
in the course of the assessment proceedings that the members of the
family had commenced to maintain separate accounts with regard
to the income from the
said
eighteen
properties
and
to
divide
the
net profits amongst themselves according to their
respective shares at the end of each year.
The eighteen immevable
properties were situated in different places and their valuation was
as follows :
S. No.
l.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Municipal number of
the property
75/2
76/162
76/169
47/110
47/26
48/203
55/124
55/361
55/37 J
. 70/87
71/150
71/89
71/112
63/61
51/68
51/73
86/37
1/301A
Value
1,78,875/-
27,000/-
45,000/-
13,500/·
20,700116,200/-
90,000/-
41,400/·
1,57,500/-
8, 100/-
3,600/-
19,800/-
7,425/-
17,100/-
14,400/-
20,520/-
45,000/-
. 7,26,120/·
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KALLOOMAL v. 0.1.T. (Vmkataramiah, J.)
17
When required·by the Income·tax Officer to explain as to why
the properties were not divided in definite portions as required by
section 17 l of the Act, the assessee stated that physical division of
the properties in question amongst the ten members was impossible
and the only possible way to partition those properties was to define
their respective shares and to enjoy the income from them separatly.
In support of the above claim the assessee relied upon a copy of an
award dated April 15, 1964 made by one S.B. Tandon which was
made into a decree in Suit No. 60 of 1964 on the file of the Court
of the First Civil Judge, Kanpur dated September 21, 1964. In
that award the arbitrator had stated that the properties did not
admit of physical division. The Income·tax Officer did not agree
with the asscssee's contention that it wa• not possible to divide the
properties in question :n definite portions. Accordingly he rejected
the claim of partial partition in respect · of the eighteen immovable
properties ,and proceeded to assess the income derived· therefrom in
the hands of the assessec. Against the order of the Income-tax
Officer, the assessec filed an appeal before the /\ppellate Assistant
Commissioner of Income·lax. During the pendency of that appeal
the assessee appointed another arbitrator by the name Lakhsman
Swaroop, a retired Chief Engineer to examine the posssibility
of a physical division of each of the
eighteen properties into
ten portions and if that was not possible to suggest any other mode
or modes to divide them into ten parts in accordance with the share
allotted to each of the parties to the partition. By his award dated
February 3, 1965, Lakshman Swarwp stated tl1at the aforesaid
properties were "not capable of physical division into ten shares by
metes and bounds and that any practical division is that of allocation of proportionate shares in all the 18 properties in question."
It may be mentioned here that out of the ten shares, six shares were
I/12th each and four shares were I/8th each. Chandoomal and his
five sons had been allotted l/ 12th each and Sitaram, his wife and
his two sons had been allotted l /4th each. Lakshman Swaroop was
also examined as
a witness
before the
Appellate Assistant
Com missioner by the assessee and cross-examined by the Incometax Officer. The Appellate Assistant Commissioner on a consideration of the material before him including the decree of the court
referred to above and the evidence of Lakshman Swaroop held that
the case of the assessec that it was not possible to divide the properties physically into ten shares referred to above was not tenable
and dismissed the appeal. The assessee, thereafter took up the
matter before the Tribunal in appeal. The Tribunal also was of the
view that the contention of the assessee that if the properties had
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SUPREME COURT REPORTS
[1982] 3 S.C.R.
been divided into ten shares, they would have· either been destroyed
or would have lost in value was not correct.
Accordingly tile claim
of the assessee under section 171 of the Act that there was a partial
partition was rejected. Thereupon on an application of the assessee
made under section 256(1) of the Act, the two questions set out
above were referred by the Tribunal to the High Court for its
opinion.
After hearing the parties, the High Court recorded its answer
to the first question in the affirmative and in favour of the Department and in reaching that conclusion, it observed thus :
"We have seen the evidence of the arbitrator as well
as the Chief Engineer, and it is apparent there from'
that even though the 18 properties could not individually be divided into I 0 shares without destroying
their utility but after assessing the value of the properties. they could l>e apportioned between the ten
members and the difference in the allocations could be
equalised by payment of cash amounts by one to the
other. In our opinion, it cannot, in such a situation,
be said that. these 18 properties were incapable of
physical division in 10 shares, and so, in view of clause
(a) (i) of the Explanation, mere severance of status was
not sufficient for recording a finding of partition."
The High Court answered the second question in favour of
the assessee holding that the income accruing from the eighteen
immovable properties after December 11, 1963 was however not
liable to be included in the computation of the joint Hindu family's
income.
In recording this answer, the
High Court
observed
thus:
"Sec. 171 of the 1961 Act in essence, is a re-actment ·
of Sec. 25A with the difference that it applies not only
to cases of toial partition but also to cases of partial
partition. There are some incidental changes as well,
e.g. sec. 171 applies also for purposes of levying and
collecting penalty, fine or interest and in addition
requires the Income-tax Officer to record a finding as
to the date on which total or partial partition took
place. The fact that sec. 171 applies to a partial
partition (meaning a partition which is partial as
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KALLOOMAL v. C.l.T. ( Venkararamiah, J.)
19
regards the persons or as regards the properties of the
family or both) as well shows that a findin11 of partial
partition can be recorded and on such a finding being
·recorded under sub-section (4) the total income of the
joint family in respect of the period upto the date of
partition is to be assessed .as if no partition had taken ·
place and each member of the family was to be liable,
notwithstanding anything contained in clause (2) of
sec. I 0, jointly and severally for the tax on the income
so assessed. Thus sec. 171, like sec.'25A, seeks to
nullify the effect of sec. 10 (2) under which a member
was not liable to be taxed on the income received as ·a
member of Hindu undivided family.· The
section
does not entitle the inclusion of income from an asset
which has ceased to belong to the joini family, in the
assessment of the joint Hindu family.
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is that the joint Hindu family stood disrupted in relation to the 18 immovable properties as a result of. the
oral partition dated 1 lth December, 1963. Thereafter
the income of these properties belonged to the individual members and not to the joint family. It could not
be included in the assessment of the family."
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Aggrieved by the answer to the first question, the assessee
has filed Civil Appeal No. 1370 of I 974 and aggrieved by the answer
to the second question, the Revenue has filed Civil Appeal No. 1768
of 1975.
It is necessary to refer to the history of the relevant provisions
in order to decide the questions raised before us.
Under the Indian
Income-tax Act, 19i2 (for short 'the 1922 Act') a Hindu undivided
family could be assessed on its income. Section 3 of the 1922 Act
laid down that where any Central Act enacted that income·tax
should be charged for any year at any rate or rates, tax at that rate
or those rates should be charged for t.hat year in ilccordance with
and subject to the provisions of that Act in respect of total income
of the previous year of every individual, Hindu undivided family
etc. But section 14 (I) of the 1922 Act provided that no tax was
pay~ble by an individual assessec in respect of any sum which he
received as a member of a Hindu undivided. family w4ere such sum
had been paid out of the income of 'the family.
Section 25-A was
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SUPREME COURT Rlll'ORTS
[ 1982] 3 S.C.R;
inserted in the 1922 Act in the year 1928 providing for the machi-
.nery for assessmdnt after partition of a Hindu undivided family.
That section immediately before the repeal of the 1922 Act read as
follows:
"25A. Assessment after partition of a Hindu undivided
family-(!) Where, at the time of making an assess·
ment under section 23, it is claimed by or on behalf of
any memper of a Hindu family hitherto assessed as
undivided that a partition has taken place among
the members of such 'family, the Income-tax Officer
shall make such inquiry there-into as he may think fit,
and, if he is satisfied that the joint family property
has been partitioned among the various members or
groups of members in definite portions he shall record
an order to that effect :
Provided that no such order shall be recorded
until notices of the inquiry have been served on all the
members of the family.
(2)
Where such an order has been passed, or
where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu
undivided family whose joint family property bas been
partitioned on or after the last day on which it carried
on such business, profession or vacation, the Incometax Officer shall make an assessment of the total income
received by or on behalf of the joint family as such, as
if no partition had taken place, and each member or
group of members shall, in addition to any income-tax
for which he or it may be separately liable and notwithstanding anything contained in sob-section (I) of
section 14, be liable for a share of tbe tax on the
income so assessed according to the portion of the
joint family property alloted to him or it; and the
Income-tax Officer shall make assessments accordingly
on the various members
and
groups of members
in accordance with the provisions of section 23 :
Provided that all ~he members and groups of members whose joint family property has been partitioned
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l:ALLOOM.l.L v. C.I T. (Venkataramiah, J.)
shall be liable jointly
has severally for the tax
assessed on the total income received by or on behalf
of the joint family as such.
(3)
Where such an order has not been passed in
respect of Hindu family hitherto assessed as undivided,
such family shall be deemed, for the purposes of this
Act, to continue to be a Hindu undivided family".
21
Section 25-A of the 1922 Act as it stood then (subsequent
modifications in it being immaterial for the purposes of this case)
came up for consideration by the Judicial Committee of the Privy
Council in Sir Sunder Singh Majithia v. The Commissioner of
Income-tax, C.P. and U.P.(') The Privy Council held that section
25-A[ of the 1922 Act provided that if it be found that the family
property bad been partitioned in definite portions, assessment might
be made, notwithstanding section 14(1) on each individual or group
in respect of bis or its share of the profits made by the
undivided
family, while
holding
all
the
members
jointly
and severally liable for the tax. It was further held that if, however,
though the joint Hindu family bad come to an end, it be found that
its property bad not been partitioned in definite portions then the
family was to be deemed to continue-that is, to be an existent
Hindu family upon which assessment could be made on its gains of
the previous year. But it was of. the view that section 25-A bad
nothing to say about any Hindu undivided family which continued
in existence never having been disrupted. Such a case was held to
fall outside sub-section (3) of sectiOn 25-A and in effect, it held that
the said section did not apply to cases of partial partition.
In (Jordhandas T. Manga/das v. Commissioner of Income-tax,
Bombay,(') Kania, J. (as be then was) who agreed with Beaument,
C.J. explained the scheme of section 25-A of the 1922 Act (as it
stood then) in his concurring judgment thus :
"It is material to bear in mind the scheme of the
Income-tax Act, in the first instance. Under sections 2
and 3 the different units stated therein are' liable to be
taxed as such. One of them is a joint Hindu family.
In order to avoid double taxation, Section 14 lays down
(I) [1942] 10 I.T.R. 457.
(2) [1943] 11 I.T.R. 183.
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SUPREME COURT REPORTS
(1982) 3 s.c.1
that when the individual member is being assessed,
his income as a member of a joint family ~should not
be assessed
again.
Then comes the stage, what
happens when a family, which has once been so
assessed, comes to a partition. To meet that contingency, Section 25-A has been enacted. In the section, as it existed before the amendment of 1939, in
terms the Income-tax Officer required proof, (i) that a
separation of the members of the joint family bad
taken place and (ii) that the joint family property had
been partitioned amongst the various members or
groups of members in definite portions. On being satisfied on those points he had to record an ·order to that
effect. The effect of such a recording was that the joint
family income would be assessed and recovered in
terms of sub-section (2).
In the absence of such order,
under sub-section (3) the joint family continued to be
assessed as before."
The same view was followed in Waman Satwappa · Kalghatgi
v. Commissioner of Income-tax(') and in M.S.M.S. Meyyappa
Chettiar v. Commissioner of Income-tax, Madras.(")
This Court had to consider the true meaning of section 25-A
of the 1922 Act in Lakhmichand Baijnath v. Commissioner of
Income-tax, West Bengal.(') Venkatarama Aiyar, J. speaking for
the Court observed in the above case thus :-
"Now, when a claim is made under section 25-A, the
points to be decided by the Income-tax Officer are
whether there bas been. a partition in the family, and
if so, what the definite portions are in which the division had been made among the members or groups of
members. The question as to what the income of the
family assessable to tax under section 23 (3) was would
be foreign to the scope of and enquiry . under section
25-A. That section was, it should be noted, intro·
duced by the Indian Income-tax (Amendment) Act,
1928 (3 of· 1928) · for removing a defect which the
(I) (1946] 14 l.T.R. 116.
(2) [1950] 18 I.T.R. 586.
(3) [1959] 35 I.T.R. 416.
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ltALLOOM~L v. C.l.T. (Venkataramiah, J.)
23
. working of the Act as enacted in 1922 had disclosed.
Under the provisions of the Act as they stood prior
to the amendment, when the assessee was an undivided
family, no assessment could be made thereon if at the
time of the assessment it had become divided, because
at that po(nt of time, there was no undivided family
in existence which could be taxed, though when the
income was received in the year of account the family
was joint. Nor could the individual membe.rs of the
family be taxed in respect of such income as the same
is exempt from tax under section 14 (1) of the Act.
The result of these provisions was that a joint family
which had become divided at the time of assessment
escaped tax altogether. To remove this defect, section 25-A enacted that until an order is made under
that section, the family should be deemed to continue
as an undivided family. When an order is made under
that section, the family sh.mid be deemed to continue
as an undivided family. When an order is made under
that section, its. effect is that while the tax payable
on the total income is apportioned among the divided
members or groups, all of them are liable for the tax
payable on the total income of the family.
What
that tax is would depend on the assessment of income
in proceedings taken under section 23, and an order
under section 25-A would have no effect on that
assessment.''
The above view was reiterated by this Court in Ka/wa Devadattam and Ors. v. Union of India and Ors.(') in Additional In.come-tax
Offi~er, Cuddapah v. Thimmayya and Anr.(') and in Joint family of
Udayan Chinubhai etc. v. Commissioner of Income-tax, Gujarat.(')
· The substance of all these decisions was that under section 25-A of
the 1922 Act a Hindu undivided family which had been assessed to
tax could be treated as undivided and subjected to tax under the-Act
in that status unless and \lntil an order was made under section 25-A
(!)and ifin the course of the assessment proceedings it is claimed
by any of the members of the Hindu undivided family th11t there
(I) [1963) 491.T.R. (SC} 165.
(2) [196S]'55 I.T.R. 666.
(3) [1967] 63 I.T.R. 416.
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SUPREME COURT REPORTS
( 1982] 3 s.c.R.
has been total partition of the family property resulting in physical division· thereof as it was capable of, the assessing authority
should hold an enquiry and decide whether there had been such a
partition or not. If he held that such a partition had taken place,
he should proceed to make an.assessment of the total income of the
family as if no partition had taken place and then proceed to apportion the liability as stated in section 25·A amongst the individual
members of the family. If no claim was made or if the claim where
it was made was disallowed after enquiry, the Hindu undivided
family would continue to be liable to be assessed as such.
This was
the legal position under the 1922 Act.
The law relating to assessment of Hindu undivided j family,
however, underwent a change when the Act came into force.
Section 171 of the Act which corresponds to section 25-A of the
1922 Act reads thus :
"171. (I) 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 tbereinto after giving notice of the inquiry
to all the members of the family.
·
(3) On the completion of the inquiry, the Income-tax
Officer shall record a finding as to whether there
has been a total or par\ial partition of the joint
family property, and, if there has been such a
partition, the date on which it has taken place.
(4) Where a finding of total or partial partition has
been recorded by the Income-tax Officer under
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kALLOOMAL· v,. C1l.'I'. ( Venkat«romlalr, i.)
this section; and th.e partition.