TaxTMI 
TaxTMI 
1990 (9) TMI 7
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.... were divided among the members of the family. The respondent further claimed that the members of the tavazhi swelled to 14 and these members effected a division in status by a registered document dated February 21, 1963. She further alleged that the division of tavazhi into 14 shares was effected by a civil court decree in partition Suit No. O. S. 22 of 1961 in the Court of Kozhikode. It was pointed out on behalf of the respondent that the partition suit was decreed and the properties were allotted to the respective shareholders. The civil court had appointed a Commissioner to divide the property by metes and bounds in accordance with the shares of individual members. The respondent further claimed that since the status of the Hindu undivided family was disrupted on account of the decree of partition, the Hindu undivided family could not be assessed to income-tax, and instead the income derived by the individual members could be considered for assessment. The Income-tax Officer rejected the, respondent's claim and assessed the respondent as the head of the tavazhi for the assessment years 1967-68, 1968-69 and 1969-70, by his order dated March 16, 1970/March 27, 1970. The Income-t....
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...., the members' income could not be assessed as income of the Hindu undivided family. The Division Bench further held that since there had been a partition in the family and the tavazhi had ceased to be Hindu undivided family long before the accounting periods, the provisions of the Act could not be pressed into service for the purpose of taxing the income of the individual members of the family treating them as having the status of a Hindu undivided family with the aid of section 171 of the Act. The main question which falls for consideration is as to whether the partition as effected by the agreement dated February 21, 1963, and also the decree of the civil court amount to "partition" under the Explanation to section 171 of the Act and further whether the Income-tax Officer acted contrary to law in holding that, in spite of the partition as alleged by the respondent, the status of a Hindu undivided family was not disrupted and that that status continued for the purposes of assessment during the relevant assessment years. Under section 171, a Hindu family assessed as Hindu undivided family is deemed, for the purposes of the Act, to continue as Hindu undivided family except where p....
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....ust prove the disruption of the status of Hindu undivided family in accordance with the provisions of section 171, having special regard to the Explanation. The assessee must prove that partition effected by agreement or through a court's decree was followed by actual physical division of the property. In the absence of such proof, partition is not sufficient to disrupt the status of Hindu undivided family for the purpose of assessment of tax. Under the Hindu law, members of a joint family may agree to partition of the joint family property by a private settlement, agreement, arbitration or through court's decree. Members of the family may also agree to share the income from the property according to their respective shares. In all such eventualities, the joint status of the family may be disrupted but such disruption of family status is not recognised by the Legislature for purposes of income-tax. Section 171 of the Act and the Explanation to it, prescribe a special meaning to partition which is different from the general principles of Hindu law. It contains a deeming provision under which partition of the property of the Hindu undivided family is accepted only if there has been a....
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.... of assessment of tax ; instead, it has introduced certain conditions of its own to give effect to the partition under section 171 of the Act. The court held that, in order to claim disruption of the Hindu undivided family on the basis of partition, it is necessary to show that the partition had been effected physically by metes and bounds and, in the absence of any such proof, the property would continue to be treated as belonging to the HUF and its income would continue to be included in its total income treating the assessee as Hindu undivided family. The High Court referred to section 25A of the Indian Income-tax Act, 1922, and placed reliance on a number of decisions in holding that, in view of the decree of the civil court for partition, the Hindu undivided family status had been disrupted and, since there was no evidence on record to show that the Hindu undivided family had received any income in the accounting year, the income received by individual members of the joint family could not be treated to be the income of the Hindu undivided family. The High Court placed reliance on the Privy Council decision in Sundar Singh Majithia v. CIT [1942] 10 ITR 457 and a number of oth....