Partition deeds and partnership recitals: self-acquired property may be distributed within a family, but profit-sharing alone does not create a partnership.

A partition deed can validly distribute an assessee's self-acquired properties among his wife and sons without first converting them into Hindu joint family property, and the recipients take their allotted shares as separate property. The deed therefore does not, by itself, require the income from those assets to be treated as HUF income. On the business side, a partnership arises only where there is an agreement to carry on business as partners and share profits in that character. A recital promising profit shares as an inducement to cooperate in the shop business did not create a partnership; the first genuine partnership was constituted later by the deed of 18 November 1959, so the business income before that date remained assessable as individual income.

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Issues: (i) Whether the partition deed executed on 8 December 1958 transformed the assessee's self-acquired properties into Hindu joint family property or merely effected a distribution of the properties among the assessee, his wife and sons; (ii) whether the recitals in the partition deed created a partnership in the business carried on in the shop, and from what date the business income was to be assessed.

Issue (i): Whether the partition deed executed on 8 December 1958 transformed the assessee's self-acquired properties into Hindu joint family property or merely effected a distribution of the properties among the assessee, his wife and sons.

Analysis: The properties had earlier stood as the exclusive properties of the assessee. The deed distributed those properties among the assessee, his wife and sons, and each allottee became entitled to the property received by him or her as separate property. Such a distribution did not require prior conversion of the assets into joint family property. A person may distribute his property among his wife and children even where the property is not coparcenary property.

Conclusion: The deed effected a valid distribution of the properties, and the income from the properties was not to be assessed as that of a Hindu undivided family merely because of the distribution.

Issue (ii): Whether the recitals in the partition deed created a partnership in the business carried on in the shop, and from what date the business income was to be assessed.

Analysis: A partnership requires an agreement to carry on business and to share profits as partners. The recital that the wife and two sons would receive shares in profits if they cooperated in the business was only an inducement or remunerative arrangement and did not evidence an agreement to share profits in the legal sense. The later partnership deed of 18 November 1959 showed the first genuine constitution of a partnership. The earlier recital could not by itself establish a partnership from 8 December 1958.

Conclusion: No partnership came into existence on 8 December 1958; the partnership arose only on 18 November 1959, and the business income for the relevant year up to 30 June 1959 remained assessable as the assessee's individual income.

Final Conclusion: The assessment had to be made on the basis of a property distribution on 8 December 1958 and a partnership formed only on 18 November 1959, with the business income for the relevant assessment year continuing to be treated as the assessee's individual income until the partnership actually began.

Ratio Decidendi: A partition deed may validly distribute self-acquired property among family members without first converting it into joint family property, and a partnership is not constituted by a mere arrangement to pay shares in profits unless there is an agreement to carry on business as partners and share profits as such.

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