TaxTMI 
TaxTMI 
1983 (3) TMI 1
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....inor sons and husband of Smt. Karuna and the karta of the HUF, made an application to the ITO for recognising a partial partition, under s. 171 of the I.T. Act, 1961 (hereinafter referred to as " the Act claiming that two partial partitions had taken place amongst the members of the said family, one on December 24, 1973, in respect of 200 shares of Gujarat Steel Tubes Ltd. and the other on December 29, 1973, in respect of 1,777 shares of the same company. On enquiry the Income-tax Officer (hereinafter for the sake of brevity referred to as " the ITO ") found that the partial partitions had been embodied in memoranda of agreements of , partition. The ITO, however, refused to record that there had been a partial partition of the joint family properties, as be was of the view that the partial partitions in question could not be recognised inasmuch as the remaining shares, after making certain allocations in favour of the two minor sons were not allotted in their entirety to the remaining third coparcener, namely, Shri Apoorva separately or to Shri Apoorva and his wife, Karuna, jointly, describing them as members of the HUF. The ITO further held that the said partitions did not purp....
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.... Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the partial partitions were outside the framework of Hindu law ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the partial partitions could not be recognised as valid for the purpose of section 171 of the Income-tax Act, 1961 ? (4) Whether, on, the facts and in the circumstances of the case, the Tribunal was right in holding that partial partitions made by a Hindu father in exercise of his patria potestas cannot be recorded as a valid partition under section 171 of the Income-tax Act, 1961 ? (5) Whether, on the facts and in the Circumstances of the case, the Tribunal was right in holding that the partial partition did not amount to a family arrangement in which the father acted as a natural guardian of the two minor son, after he had exercised his patria potestas ? (6) Whether the Income-tax Department is competent to challenge the exercise of patria potestas by a Hindu father in respect of coparcenary property, making a partial partition ? For reasons recorded in the judgment the High Court answered all the ques....
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....their consent subject to the rider that 'all' assets of the HUF were subjected to partition. 6. The aforesaid extraordinary power is subject to the qualification that he gives to his sons an equal share and the division is not unfair (vide Gupte's Hindu Law, 2nd Edn., page 239)." The power of the father to sever the sons inter se is a survival of the patria potestas and may be exercised by him without the consent of his sons' ... 'Again, in all cases, his power must be exercised by him bona fide and in accordance with law; the division must not be unfair and the allotments must be equal. He must give his sons equal shares with himself'. 7. There is nothing in (1) either ancient Hindu law, or (2) customary or judge-made law which authorises the father in exercise of his extra , ordinary power to effect a partial partition of HUF consisting of himself and his minor sons dividing some items of properties whilst continuing the joint status in respect of the rest of the properties." The High Court observed (at p. 165) : " The validity of the aforesaid propositions is incapable of being disputed and has not been disputed. What has been contended on behalf of the assessee is t....
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....Doraisami Ayyar [1880] ILR 2 Mad 318. 2. A father in any such case of ancestral property has the power to separate from all or from even some of his sons remaining joint with the other sons or leaving them to continue as a joint family with each other. The consent of the sons is not necessary for the exercise of that power whether they are majors or minors. In this connection reference is made to para. 323 of Hindu law by D. F. Mulla and para. 458 at p. 559 of Mayne's Hindu Law (11 th Edn.). Para. 323 of Mulla's Hindu Law,11 th Edn., at pp. 443 and 444, reads as follows: "The father of a joint family has the power to divide the family property at any moment during his life, provided he gives his sons equal shares with himself, and if he does so, the effect in law is not only separation of the father from the sons, but a separation of the sons inter se. The consent of the sons is not necessary for the exercise of that power. But a grandfather has no power to bring about a separation among the grandsons. The right of a father to sever the sons inter se is part of the patria potestas still recognised by the Hindu law. " Para. 458 of Mayne's Hindu Law and Usage, 11th Edn., at ....
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....potestas ". There is neither principle nor authority for the proposition that the exercise of this independent and extensive power of the father, even in the context of minor sons, could not take into its purview the lesser power to partition only some of the family properties without disrupting the status of the members of the joint family as regards other properties even when it is genuine exercise of the lesser power. At no time was there recognised any limitation or inhibition on the power of the father, though of course the partition effected by him had to be fair and equitable. There is no text of Hindu-law which prohibits partial partition whether as to person or as to property. 6. The decision of the Privy Council in the case of Appovier v. Rama Subba Aiyan [1866] 11 MIA 75, when it speaks of partial partition of the joint family by agreement of the coparcener, it cannot possibly be read as restricting the patriarchal and superior power of the father to effect division of the entire joint family properties and to exclude its operation in case of exercise of the lesser right of division of only some of the family properties. Mr. Manchanda, learned counsel appearing on ....
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....peal. We shall first refer to the decision of this court in the case of Charandas Haridas [1960] 39 ITR 202. This decision which appears to have a clear bearing on the question and which considers an earlier decision of the Privy Council, does not appear to have been cited before the High Court. The material facts of this case may be briefly noted: Charandas Haridas was the karta of an HUF consisting of his wife, Shantaben, three sons and himself. He was a partner in six managing agency firms in six mills. In previous years the income received by him as partner in these managing agencies was being assessed as the income of the HUF. On December 11, 1945, Charandas Haridas acting for his three minor sons and himself and Shantaben, his wife, entered into an oral agreement for partial partition. By that agreement Charandas Haridas gave one pie share to his daughter, Pratibha, in the managing agency commission from two of the six managing agencies held by the family. The balance together with the other shares in the other managing agencies was divided in five equal shares between Charandas Haridas, his wife and sons. This agreement was to come into effect from 1st January, 1946, whic....
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....cerned, they still belonged to the HUF. The assessee, Charandas Haridas, filed an appeal in this court with special leave granted by this court. This court allowed the appeal. At p. 207, this court referred to the following observations of the Privy Council in Appovier v. Rama Subba Aiyan [1866] 11 MIA 75. " 'Nothing can express more definitely a conversion of the tenancy, and with that conversion a change of the status of the family quoad this property. The produce is no longer to be brought to the common chest, as representing the income of an undivided property, but the proceeds are to be enjoyed in six distinct equal shares by the members of the family, who are thenceforth to become entitled to those definite shares.'" There after this court proceeded to hold at p. 208 : " In our opinion, here there are three different branches of law to notice. There is the law of partnership, which takes no account of Hindu undivided family. There is also the Hindu law which permits partition of the family and also a partial partition binding upon the family. There is then the income-tax law, under which a particular income may be treated as the income of the Hindu undivided family o....
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....ly took the fullest measure possible for dividing the joint interest into separate interests. There is no suggestion here that this division was a mere pretence ; nor has the Appellate Tribunal given such a finding. The document was fully effective between the members of the family, and there was actually no Hindu undivided family in respect of these particular assets. " In the case of Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690, this court observed at p. 702: "Under the Hindu law partition may be either total or partial. A partial partition may be as regards persons who are members of the family or as regards properties which belong to it. Where there has been a partition, it is presumed that it was a total one both as to the parties and property but when there is a partition between brothers, there is no presumption that there has been partition between one of them and his descendants. It is, however, open to a party who alleges that the partition has been partial either as to persons or as to property, to establish it. The decision on that question depends on proof of what the parties intended whether they intended the partition to be partial either as to pe....
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....larly for religious purposes (Sraddhas and the like). The father has the same powers as manager and certain other special powers, which no other coparcener has. The father can separate his sons from himself and also among themselves if he so desires, even if they do not desire to separate (Yaj. II., 114). " There are observations more or less to the similar effect in the other commentaries on Hindu law by other learned authors. We do not, therefore, consider it necessary to refer to the comments of the other learned authors placed before us in the course of hearing of the appeal. The various commentaries on the Hindu law by the various learned authors go to indicate that ancient Hindu Law speaks of complete severance of joint family and partition of joint family properties and does not mention partial partition either with regard to the joint family properties or with regard to some of the members of the joint family. The right of the father to bring about the disruption of the joint family properties in exercise of his superior right as father or of his rights as patria potestas is recognised in ancient Hindu Law. It is, however, well settled by judicial decisions that th....
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....ther in the interest of the joint family and its members feels that a partial partition of the proper ties Will be in the best interest of the joint family and its members including the minor sons. Even if the test of consent is to apply, the father as the natural guardian of the minor sons will normally be in a position to give such consent and it cannot be said as a matter of universal application that in all such cases of partition, partial or otherwise, there is bound to be a conflict of interest between the father and his sons. If the father does not act bona fide in the matter when he effects a partition of the joint family properties between himself and his minor sons, whether wholly or partially, the sons on attaining majority may challenge the partition and ask for appropriate reliefs including a proper partition. In appropriate cases, even during minority, the minor sons through a proper guardian may impeach the validity of the partition brought about by the father, either in entirety of the joint family properties, or only in respect of a part thereof, if the partition had been effected by the father to the detriment of the minor sons and to the prejudice of their intere....
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....ng of total or partial partition has been recorded by the Income-tax Officer under this section, and the partition took place during the previous year, (a) the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and (b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed. (5) Where a finding of total or partial partition has been recorded by the Income-tax Officer under this section, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place; and the provisions of clause (b) of sub-section (4) shall, so far as may be, apply to the case. (6) Notwithstanding anything contained in this section, if the Income-tax Officer finds, after completion of the assessment of a Hindu undivided family that the family has already effected a partition, whether total or partial, the Income-tax Of....
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....rtition had taken place (c) each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under this Act by the family in respect of any period whether before or after such partial partition ; (d) the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition; and the provisions of this Act shall apply accordingly." This sub-s. (9) was not in existence at the relevant time and has no retrospective operation and it is of no material consequence in deciding the present case. The aforesaid provisions of the I.T. Act, as they stood at the material time, clearly recognise partial partition. The definition of partial partition in Expln. (b) makes it clear that partial partition as regards the persons constituting the HUF or as regards properties belonging to the HUF, or both, is recognised. In the present case, the partial partition of the shares belonging to the HUF cannot, therefore, be said to be bad either und....