Partition receipts from Hindu undivided family property are not taxable as profits unless profits were separately ascertained and allotted.

On partition of a Hindu undivided family, a coparcener cannot be treated as receiving a separate share in profits unless the partition deed or surrounding facts show that profits were specifically ascertained and allotted as such. The estate is divided as a net residue as a whole, after debts, without any necessary separation between capital and income. A receipt taken from the allotted family property is therefore not taxable as profit merely because it arose from business assets or was brought into British India. The principle differs from partnership, where profit shares and undrawn profits are identifiable. The referred question was answered in the negative, in favour of the assessee.

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Issues: Whether the sum withdrawn by a coparcener from the assets allotted on partition of a Hindu undivided family could be treated as profits assessable to income tax when brought into British India.

Analysis: In a Hindu undivided family, no member can claim a definite share in any item of property or income before partition. On partition, what is divided is the net residue of the family estate as a composite whole after debts, without any necessary or artificial allocation between capital and profits. Unless the deed of partition or the surrounding facts show that profits were separately ascertained and allotted, a sum received on partition cannot be isolated as profit merely because it came out of property formerly used in business. The position differs from a partnership, where a partner has a defined share in profits and capital and undrawn profits may be separately identified.

Conclusion: The sum in question could not be treated as profit assessable under the relevant charging provision merely because it was brought into British India. The answer to the referred question was in the negative and in favour of the assessee.

Ratio Decidendi: On partition of a Hindu undivided family, a receipt from the allotted family estate is not taxable as profit unless profits are separately ascertained and shown to have been allotted as such.

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