Partitioned Hindu family property may still support a partnership; assessment rules cannot bar valid arrangements without factual findings.

Section 25-A of the Indian Income-tax Act, 1922 regulated assessment consequences where a Hindu family had ceased to exist as a joint unit or had been partitioned; it did not itself prohibit members from entering into a partnership in respect of property that had been validly separated or transferred. The contrary view was incorrect. The record, however, lacked findings on whether the assets were self-acquired, ancestral or joint family property, what rights the father held under the applicable custom, whether an effective partition or transfer occurred, and what arrangement preceded the 12 February 1933 deed. The matter therefore required remittal for fresh factual findings and reconsideration.

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Issues: (i) whether section 25-A of the Indian Income-tax Act, 1922 prohibited members of a Hindu undivided family, after partition of family property, from entering into a partnership in respect of that property; (ii) whether the negative answer given to the reference could stand without findings on the true character of the assets, the applicable customary law, and the actual arrangement between the parties.

Issue (i): whether section 25-A of the Indian Income-tax Act, 1922 prohibited members of a Hindu undivided family, after partition of family property, from entering into a partnership in respect of that property.

Analysis: Section 25-A is directed to the assessment difficulties that arise when a Hindu family hitherto assessed as undivided has ceased to exist as such and its property has or has not been partitioned in definite portions. It does not create any prohibition against members of an undivided Hindu family dealing with an asset, once separated or otherwise validly transferred, so as to constitute a partnership in relation to that asset. The section does not govern a family that continues in existence and merely acquires or parts with assets from year to year.

Conclusion: The section did not, by itself, bar the formation of a partnership in the manner suggested, and the contrary view was incorrect.

Issue (ii): whether the negative answer given to the reference could stand without findings on the true character of the assets, the applicable customary law, and the actual arrangement between the parties.

Analysis: The record did not contain the essential findings needed to determine whether the business assets, land and buildings were self-acquired, ancestral, or joint family property, what rights the father had under the family custom, whether any effective partition or transfer was made, and what agreement existed before the deed of 12 February 1933. Without such findings, the legal question could not be conclusively answered on hypothesis alone.

Conclusion: The reference had to be sent back for further findings and reconsideration; the High Court's negative answer could not stand as it was.

Final Conclusion: The appeal succeeded to the extent that the prior judgment was set aside and the reference was remitted for fresh disposal after the necessary factual inquiries.

Ratio Decidendi: Section 25-A of the Indian Income-tax Act, 1922 regulates assessment consequences after a Hindu family has been partitioned or has ceased to exist as a joint unit, and it does not prohibit a valid partnership or other arrangement concerning family property; however, such a question cannot be answered without findings on the character of the property, the governing custom, and the actual transaction.

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