Partial partition of HUF assets recognised where actual division and accounting records showed division by metes and bounds.

Actual division of Hindu undivided family assets in two firms by metes and bounds, reflected in both the family accounts and the firms' books, supported recognition of a partial partition under section 171 of the Income-tax Act, 1961. Because the members thereafter agreed to share profits and losses equally, the controversy was treated as primarily factual rather than one of abstract legal prohibition. On those findings, the partial partition could not be denied recognition and was held valid, with the referred question answered in favour of the assessee.

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Issues: Whether the alleged partial partition of the Hindu undivided family was valid and liable to be recognised under section 171 of the Income-tax Act, 1961.

Analysis: The assets standing to the credit of the Hindu undivided family in the two firms were divided between the members by metes and bounds, and the division was reflected both in the family accounts and in the books of the firms. After the division, the members agreed to share profits and losses from the firms in equal shares. On these findings, the controversy was treated as predominantly factual, and once actual division of the family assets was established, the partial partition could not be denied recognition.

Conclusion: The partial partition was valid and had to be accepted; the answer to the referred question was in the affirmative and in favour of the assessee.

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