Notional partition under Hindu succession law does not by itself create an income-tax partition for HUF property gains

A notional partition under Explanation 1 to section 6 of the Hindu Succession Act is confined to determining the deceased coparcener's share and does not, by itself, create an actual partition of Hindu undivided family property for income-tax purposes. Recognition of partition under section 171 of the Income-tax Act depends on statutory requirements being satisfied, including division by metes and bounds where the property is capable of such division. In the absence of a legally recognised partition after the karta's death, the property remained HUF property and capital gains were to be computed on the full sale consideration, without excluding the deceased's share.

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Issues: Whether, on the death of a coparcener in a Hindu undivided family, Explanation 1 to section 6 of the Hindu Succession Act brings about a deemed partition so as to exclude the deceased's share while computing capital gains, and whether mere severance of status is sufficient to treat the property as partitioned under the Income-tax Act.

Analysis: Explanation 1 to section 6 deems the deceased coparcener's share to be the share that would have been allotted on a notional partition immediately before death, but that fiction is confined to determining the deceased's interest and the consequential shares of heirs. It does not by itself bring about an actual disruption of the Hindu undivided family or an ipso facto partition of coparcenary property on the death of a male coparcener. For income-tax purposes, section 171 of the Income-tax Act requires the statutory conditions for recognition of partition to be satisfied, including physical division where the property admits of such division. In the absence of any partition by metes and bounds or other legally recognised division after the karta's death, the property continued to belong to the Hindu undivided family and the sale was rightly treated as a sale of the entire family property.

Conclusion: The deceased karta's share could not be excluded while computing capital gains, and the answer to the referred question is in the negative, in favour of the Revenue and against the assessee.

Final Conclusion: The reference was answered by holding that Explanation 1 to section 6 of the Hindu Succession Act does not, by itself, create a partition for income-tax purposes, and the capital gains had to be computed on the full sale consideration of the Hindu undivided family property.

Ratio Decidendi: A notional partition under Explanation 1 to section 6 of the Hindu Succession Act is confined to ascertaining the deceased coparcener's share and does not amount to an actual partition of a Hindu undivided family for the purposes of section 171 of the Income-tax Act, 1961, unless the statutory requirements for partition are satisfied.

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