Partial partition of family interests prevents subsequent commission income from being taxed as Hindu undivided family income.

A genuine partial partition of family interests in managing agency commissions severed the Hindu undivided family's joint status in relation to those assets. Hindu law allows partition of family property without physical division by metes and bounds where separate enjoyment according to shares is secured, and unchanged contractual arrangements did not prevent the tax character of the family from changing. Once the family ceased to exist as a unit for those commission-bearing interests, the resulting income could not continue to be assessed in the hands of the Hindu undivided family. The assessment treating that income as HUF income was unsustainable.

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Issues: Whether, after a genuine partial partition of family interests in managing agency commission, the income from those interests could still be assessed as the income of the Hindu undivided family.

Analysis: The operative question was whether the family had effectively disrupted its joint status in relation to the commission-bearing interests. The partition was found to be real and binding between the members, and not a sham. Hindu law permits partition of family assets and does not insist on physical division by metes and bounds where separate enjoyment can otherwise be secured according to shares. The fact that the managing agency arrangements remained unchanged under partnership law did not prevent the family status from changing for income-tax purposes. Once the family ceased to exist as a unit in respect of those assets, the Department could not continue to treat the resulting income as that of a Hindu undivided family.

Conclusion: The income from the commission agencies was not assessable as the income of the Hindu undivided family; the finding that there were materials to support such assessment was unsustainable.

Ratio Decidendi: Where a partial partition of family interests is genuine and effectively severs the joint status in respect of the relevant assets, the income thereafter accruing from those assets cannot be assessed as the income of the Hindu undivided family merely because the underlying contractual arrangements remain unchanged.

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