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Issues: (i) Whether the assets of the Hindu undivided family except zamindari and house properties and Government securities of the value of Rs. 18,24,000 could be deemed to have been partitioned on June 30, 1948 and October 10, 1948; (ii) If the answer to issue (i) is in the negative, whether the income from the business set up and assets acquired in the case of individual members of the family after the above dates by utilising the family funds could be assessed in the hands of the Hindu undivided family.
Issue (i): Whether the assets of the Hindu undivided family except zamindari and house properties and Government securities of the value of Rs. 18,24,000 could be deemed to have been partitioned on June 30, 1948 and October 10, 1948.
Analysis: The question turned on whether there was an actual partition of the relevant assets in 1948. Although the shares in the aggregate values were worked out and accounting entries were made, the individual items were not in fact divided. Cash was not distributed among the members in specific shares, and the securities were not actually partitioned until later. A mere plan to partition, without actual division of the assets, was insufficient to treat the property as divided in 1948.
Conclusion: The issue is answered in the negative and against the assessee.
Issue (ii): If the answer to issue (i) is in the negative, whether the income from the business set up and assets acquired in the case of individual members of the family after the above dates by utilising the family funds could be assessed in the hands of the Hindu undivided family.
Analysis: The funds initially constituted joint family property, but they were intended to be divided and were later actually divided among the members. Once the assets ceased to be joint family property and became the separate property of the members, businesses started by them from such assets were no longer joint family businesses. Income arising from those separate businesses could not, therefore, be brought to tax in the hands of the Hindu undivided family.
Conclusion: The issue is answered in the negative and in favour of the assessee.
Final Conclusion: The reference was answered by rejecting the claim of deemed partition for the relevant assets, but holding that income from the separate businesses of the individual members was not assessable in the hands of the Hindu undivided family.
Ratio Decidendi: For income-tax purposes, joint family assets do not cease to be joint family property unless there is actual division of the assets, and income from businesses started by members from assets that have become their separate property cannot be assessed as income of the Hindu undivided family.
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