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Issues: (i) Whether the impartible estate ceased to exist after the Hindu Succession Act, 1956, so that section 27(ii) of the Income-tax Act, 1961, could not apply; (ii) whether the properties comprised in the impartible estate belonged to the Hindu joint family; and (iii) whether the partition deed dated 10 April 1962 effecting division among the coparceners was valid so as to exclude the income from the allotted properties from the assessee's total income.
Issue (i): Whether the impartible estate ceased to exist after the Hindu Succession Act, 1956, so that section 27(ii) of the Income-tax Act, 1961, could not apply.
Analysis: Section 27(ii) creates a statutory fiction for the purposes of sections 22 to 26 by deeming the holder of an impartible estate to be the individual owner of the properties comprised in the estate. The Hindu Succession Act, 1956 was held to regulate succession on and from its commencement, but not to destroy the pre-existing character of an impartible estate or the joint family character of its property. The saving provisions and the scheme of the Act did not justify the conclusion that all impartible estates stood abolished for income-tax purposes. The fiction in section 27(ii) therefore continued to govern the properties in question.
Conclusion: The answer was against the assessee and in favour of the Revenue.
Issue (ii): Whether the properties comprised in the impartible estate belonged to the Hindu joint family.
Analysis: The estate, though impartible and subject to primogeniture, was treated under Hindu law as property of the joint family. The statutory fiction in section 27(ii) operated only for the purposes of computing income from house property, but it reinforced the position that the holder was to be regarded as the individual owner for tax computation while the underlying family character of the estate was not destroyed by the Hindu Succession Act, 1956. The relevant properties, so far as covered by section 27(ii), retained their character as joint family properties notwithstanding the holder's separate assessment history.
Conclusion: The answer was against the assessee and in favour of the Revenue.
Issue (iii): Whether the partition deed dated 10 April 1962 effecting division among the coparceners was valid so as to exclude the income from the allotted properties from the assessee's total income.
Analysis: Since the properties falling within section 27(ii) were governed by the statutory fiction treating the holder as the individual owner, the claimed partition could not be accepted as valid for excluding the income from those properties. The Court held that the Tribunal erred in treating the partition as effective for the properties covered by section 27(ii). The assessee's later attempt to raise additional factual contentions was left to the Tribunal, but those matters were outside the referred questions and did not affect the present answers.
Conclusion: The answer was against the assessee and in favour of the Revenue.
Final Conclusion: The reference was answered in favour of the Revenue on all referred questions to the extent they concerned properties covered by section 27(ii) of the Income-tax Act, 1961, and the Tribunal's contrary view was set aside on those issues.
Ratio Decidendi: For income-tax purposes, the statutory fiction deeming the holder of an impartible estate to be the individual owner of the properties comprised in it prevails, and the Hindu Succession Act, 1956 does not by itself extinguish the estate's character or validate a partition that defeats that fiction.
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