Substance over form in HUF partition claims: registered family arrangement upheld despite contrary tax treatment and revenue mutation delay.

A valid partition under section 171 of the Income-tax Act, 1961 was required to be tested by the substance and intended result of the transaction, not by labels alone. A registered document dated 16-12-1969, though described as a gift deed, earmarked shares in joint immovable property for family members and was supported by surrounding facts and statements. Prior acceptance of an earlier partition under section 25A of the 1922 Act, together with the absence of revenue mutation and continued HUF assessment for some time, did not defeat the partition claim. On that factual matrix, the partition had to be accepted and the contrary view of the lower authorities was unsustainable.

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Issues: Whether the assessee had effected a valid partition of the Hindu undivided family property so as to require acceptance of the claim under section 171 of the Income-tax Act, 1961.

Analysis: The earlier partition between the brothers had already been accepted under section 25A of the Indian Income-tax Act, 1922. The later registered document of 16-12-1969, though described as a gift deed, earmarked shares in the joint immovable properties for the wives and sons and was supported by the surrounding facts and statements of the family members. The absence of a contemporaneous revenue mutation, the continued assessment of rental income in the HUF status for some years, and the manner in which the income was later credited did not negate the partition claim. The true test was the substance and intended result of the transaction, and the document had to be read as a whole in the light of all surrounding circumstances.

Conclusion: The claim of partition was valid and had to be accepted under section 171; the rejection by the lower authorities was unsustainable and the assessee succeeded.

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