1991 (7) TMI 162 - AT - Income Tax

Memorandum of partition must be registered to be valid as evidence of partition

ASSISTANT COMMISSIONER OF INCOME TAX. Versus A. JAWAHAR PALANIAPPAN.

The Tribunal held that the memorandum of complete partition affirming the oral partition of assets required registration under the Registration Act. Since ... - Issues Involved:1. Validity of the claim of total partition by the assessee.2. Treatment of life insurance premia paid from family funds.3. Requirement of registration for the 'Memorandum of complete partition affirming the oral partition of assets.'Detailed Analysis:1. Validity of the Claim of Total Partition by the AssesseeThe assessee, an HUF, claimed that there had been a partition of the family consisting of Jawahar Palaniappan and his minor son, evidenced by a 'Memorandum of complete partition affirming the oral partition of assets effected on 31st Aug., 1982.' The Assessing Officer (AO) rejected this claim, arguing that the memorandum was essentially a deed of partition and required registration under the Registration Act, 1908. The AO's decision was based on the provisions of ss. 17 and 49 of the Registration Act and annotations from the Civil Court Manual.The CIT(A) accepted the assessee's claim, stating that the memorandum merely recorded an oral partition that had taken place earlier in the day and did not require registration. The CIT(A) directed that the income-tax and wealth-tax assessments be modified accordingly.Upon appeal, the Tribunal held that the memorandum was not merely a note but an integral part of the partition process and required registration. Since it was not registered, it could not be received as evidence of the partition. Thus, the Tribunal set aside the CIT(A)'s order and restored the AO's decision, concluding that the family continued as an HUF for tax purposes.2. Treatment of Life Insurance Premia Paid from Family FundsThe AO argued that the life insurance premia paid from 1975 to 1982, amounting to Rs. 1,47,402, were family assets and had not been partitioned. Therefore, the partition was partial and could not be recognized under s. 171(9) of the IT Act, 1961. The CIT(A) disagreed, stating that the premia were not treated as HUF assets in the balance sheet and were intended for Jawahar Palaniappan's use only.The Tribunal found that the premia were debited to the family's capital account and treated as household expenses. The Tribunal noted that the surrender value of the policies, not the total premia paid, should be considered, and this value was insignificant compared to the total family assets of Rs. 51 lakhs. Hence, the omission of such an insignificant asset did not invalidate the claim of total partition.3. Requirement of Registration for the 'Memorandum of Complete Partition Affirming the Oral Partition of Assets'The AO and the Department contended that the memorandum, which included immovable properties, required registration under s. 17(b) of the Registration Act, 1908. The CIT(A) held that the memorandum was merely a record of an oral partition and did not require registration.The Tribunal examined the legal principles concerning the registration of documents under Hindu Law and the Registration Act. It concluded that the memorandum was not a mere note but an essential part of the partition process and required registration. The lack of registration rendered it inadmissible as evidence of the partition. The Tribunal emphasized that the title of the document is not conclusive and that the factum of a prior partition must be established by independent evidence, which was lacking in this case. The Tribunal found that the memorandum was executed on the same day as the alleged oral partition, leaving no time interval to evaluate the conduct of the parties.ConclusionThe Tribunal allowed the Departmental appeals, setting aside the CIT(A)'s orders and restoring the AO's decisions. The Tribunal held that the memorandum required registration and, being unregistered, could not be received as evidence of the partition. The family continued to be assessed as an HUF for tax purposes.