Section 171 limits HUF assessment to income earned while the family existed; prior disruption bars later taxation.

Section 171 of the Income-tax Act, 1961 creates a limited legal fiction for assessing income actually earned by a Hindu undivided family while it existed as such, and that fiction cannot be extended to tax income arising after the family had already been disrupted by severance of status before the accounting period commenced. The provision is confined to partitions occurring during or after the accounting period, or after assessment, and the parallel scheme in section 25A of the 1922 Act supports the same construction. On that basis, assessment of the erstwhile HUF for such income was not permissible.

---

---

Issues: Whether section 171 of the Income-tax Act, 1961 permits assessment of a Hindu undivided family for income of a period when the family had already been disrupted by a mere severance of status before the accounting year commenced.

Analysis: Section 171 creates a legal fiction only for the purpose of enabling assessment of income actually earned by the Hindu undivided family while it existed as such. The fiction is a machinery provision and cannot be extended beyond its object to treat the income of erstwhile members, derived after a prior partition in status, as the income of the family. The provision contemplates partition during the accounting period, after the accounting period, or after assessment, but not a disruption anterior to the commencement of the accounting period. The parallel provision in section 25A of the Income-tax Act, 1922 supports the same limited construction.

Conclusion: Section 171 does not authorise assessment of a Hindu undivided family on income that arose after the family had already ceased, by partition in status, before the relevant accounting period began. The assessment orders were rightly quashed and the appeal failed.

Ratio Decidendi: The legal fiction in section 171 of the Income-tax Act, 1961 is confined to taxing income of the Hindu undivided family actually earned while it existed, and cannot be extended to assess income of members where the family had already been disrupted before the accounting period commenced.

---