Section 25A does not bar partitioned family property from being placed in partnership; factual findings remain essential.

Section 25A of the Indian Income Tax Act, 1922 was directed to cases where a Hindu undivided family had ceased to exist at the time of assessment; it did not, by itself, bar members of a continuing family from partitioning property and then entering into a partnership in relation to the property so partitioned. The validity of the partnership arrangement and whether the immovable assets were genuinely brought into the business depended on factual findings about the nature of the property, the father's title, family custom, the shares actually given, and the manner of transfer or partition. The High Court's answer was set aside and the matter remitted for further findings.

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Issues: (i) Whether the arrangement evidenced by the partnership instrument was a genuine transaction capable of supporting registration and whether, on the facts, the immovable assets of the business were effectively brought into the partnership; (ii) Whether Section 25A of the Indian Income Tax Act, 1922 prevented members of a Hindu undivided family from entering into a partnership in respect of property partitioned among them and whether the reference could be answered without findings on the relevant facts and custom.

Issue (i): Whether the arrangement evidenced by the partnership instrument was a genuine transaction capable of supporting registration and whether, on the facts, the immovable assets of the business were effectively brought into the partnership.

Analysis: The instrument did not merely contemplate movables or a bare business arrangement; it treated the land, buildings and the right to use them as essential constituents of the factory and as part of the terms on which the business was to be carried on. The question whether the document was intended to have real effect or was a pretence was a question of fact, but the materials before the Commissioner did not include the necessary findings on the true character of the property, the father's title, the family custom, or the manner in which any shares were given.

Conclusion: The transaction could not be conclusively characterized on the material found, and the issue required further factual determination.

Issue (ii): Whether Section 25A of the Indian Income Tax Act, 1922 prevented members of a Hindu undivided family from entering into a partnership in respect of property partitioned among them and whether the reference could be answered without findings on the relevant facts and custom.

Analysis: Section 25A was directed to the assessment difficulty arising when a Hindu undivided family had ceased to exist by the time of assessment, not to a family that continued in existence but had parted with some property. It did not prohibit a partition of property followed by a partnership in relation to the property so partitioned. However, the legal effect depended on findings as to whether the property was self-acquired, ancestral or joint family property, what the family custom was, what shares were in fact given, and whether any transfer or partition was effectively brought about.

Conclusion: Section 25A did not by itself support a negative answer, and the reference could not be finally answered without the requisite findings of fact.

Final Conclusion: The High Court's answer was set aside and the matter was sent back for further findings so that the legal question could be determined on a proper factual basis.

Ratio Decidendi: Section 25A of the Indian Income Tax Act, 1922 applies only where a Hindu undivided family has ceased to exist by the time of assessment, and it does not prohibit a continuing family from partitioning property and thereafter dealing with it according to the legal effect of the facts found.

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