Family arrangement partition can be recognised for tax purposes when supported by existing rights and a declaratory decree.

A bona fide family arrangement dividing joint family property may be recognised as a valid partition under section 171 of the Income-tax Act when the evidence shows allotment of properties among family members, including representation of minors where appropriate. The death of the karta and the operation of sections 6 and 14(1) of the Hindu Succession Act do not, by themselves, extinguish the family status of the surviving members or invalidate the arrangement. A declaratory civil court decree affirming existing rights supports recognition of the partition, and the Revenue cannot ignore that decree absent proof of fraud.

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Issues: (i) Whether the joint family assets were validly partitioned in September 1974 by a family arrangement so as to warrant recognition of partition under section 171 of the Income-tax Act, 1961. (ii) Whether, on the death of the karta, the provisions of sections 6 and 14(1) of the Hindu Succession Act, 1956, and the civil court decree supported acceptance of the claim of partition.

Issue (i): Whether the joint family assets were validly partitioned in September 1974 by a family arrangement so as to warrant recognition of partition under section 171 of the Income-tax Act, 1961.

Analysis: The claim of partition was founded on a family arrangement brought about through relatives and a panchayat after the death of the karta. The evidence showed that the properties had been allotted among the family members and that the later civil suit was only for declaration of already existing rights. Under section 171, a partition can be recognised only where the statutory requirements are satisfied, but a bona fide family arrangement resulting in division of family properties may constitute a valid partition for income-tax purposes. The authorities below had proceeded on an incorrect assumption that the minors could not be represented and that no valid partition could arise from the family arrangement.

Conclusion: The partition in September 1974 was to be accepted and recognised under section 171; this issue was decided in favour of the assessee.

Issue (ii): Whether, on the death of the karta, the provisions of sections 6 and 14(1) of the Hindu Succession Act, 1956, and the civil court decree supported acceptance of the claim of partition.

Analysis: On the death of a male coparcener, section 6 creates a notional partition only for the limited purpose of ascertaining the deceased's share, while section 14(1) confers full ownership on the female heir in the property inherited by her. These provisions did not, by themselves, destroy the family status of the surviving members. The civil suit was declaratory in nature and the decree merely affirmed rights already possessed by the parties. The Revenue authorities could not disregard that decree or reopen the validity of the family arrangement absent proof of fraud. The combined effect of the statutory provisions and the decree supported the assessee's claim.

Conclusion: The statutory provisions and the declaratory decree supported recognition of the partition; this issue was also decided in favour of the assessee.

Final Conclusion: The claim of partition was accepted, the contrary findings of the lower authorities were vacated, and the assessee succeeded on the substantive controversy.

Ratio Decidendi: A bona fide family arrangement partitioning joint family property can be recognised under section 171 of the Income-tax Act where the partition is supported by the statutory consequences of section 6 of the Hindu Succession Act and a civil court decree declaring existing rights, and the Revenue cannot ignore such decree in the absence of fraud.

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