Capital gains on HUF property depend on succession and deemed partition: inherited coparcenary share excluded, widow's notional share retained.

For capital gains computation on sale of Hindu undivided family property, the share of a deceased coparcener that devolves by succession on his heirs is no longer joint family property and must be excluded from the HUF asset base. However, a widow's notional share arising from a deemed partition under section 6 of the Hindu Succession Act is not separately excluded unless an actual partition and allotment occur, because the legal fiction is limited to determining the deceased coparcener's share and does not itself sever the remaining joint estate.

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Issues: (i) Whether, for computing capital gains on sale of joint family property, the share of the deceased coparcener devolving by succession on his heirs had to be excluded from the Hindu undivided family asset. (ii) Whether the share which could notionally be allotted to the widow on a deemed partition under section 6 of the Hindu Succession Act, 1956, could also be excluded in the absence of an actual partition.

Issue (i): Whether, for computing capital gains on sale of joint family property, the share of the deceased coparcener devolving by succession on his heirs had to be excluded from the Hindu undivided family asset.

Analysis: On the death of a male coparcener governed by section 6 of the Hindu Succession Act, 1956, the deceased's interest in coparcenary property devolves by succession on his heirs and ceases to remain joint family property to that extent. The capital gains charge under section 45 of the Income-tax Act, 1961, applies only to the transfer of the capital asset owned by the transferor. Where the property has, by operation of law, acquired a dual character, the portion that has vested in the heirs individually cannot be treated as property of the Hindu undivided family for assessment purposes.

Conclusion: The share referable to the deceased Nanubhai's interest devolving by succession on his heirs had to be excluded. This issue is answered in favour of the Revenue only to the extent of exclusion from the Hindu undivided family computation.

Issue (ii): Whether the share which could notionally be allotted to the widow on a deemed partition under section 6 of the Hindu Succession Act, 1956, could also be excluded in the absence of an actual partition.

Analysis: A female heir entitled to a share on a deemed partition does not, by that fiction alone, obtain a severed and separately allotted estate unless she actually claims partition and specific property is allotted to her. The legal fiction under section 6 is confined to determining the deceased coparcener's share and does not, by itself, disrupt the joint character of the remaining property or convert the widow's notional entitlement into separate ownership. Until actual partition, her interest continues to be part of the joint family property capable of division.

Conclusion: No exclusion could be made on account of the death of Maniben. This issue is answered against the assessee.

Final Conclusion: The reference was answered by holding that only the deceased coparcener's inherited share had to be excluded while computing capital gains, and the widow's notional share could not be excluded without actual partition.

Ratio Decidendi: For capital gains computation, property that has devolved by succession from a deceased coparcener is outside the Hindu undivided family's ownership, but a female heir's notional share under the doctrine of deemed partition remains part of the joint family property until actual partition and allotment.

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