KALLOOMAL TAPESWARI PRASAD (HUF), KANPUR vs. THE C. I T., KANPUR

CIVIL APPEAL No. 1370/1974Supreme Court[1982] 3 S.C.R. 912 January 1982Bench: 2 JudgesAuthor: R.S. PATHAK, E.S. VENKATARAMIAH29 pages
AI SummaryDismissed

What were the facts?

The assessee, Kalloomal Tapswari Prasad (HUF), derived income from various sources. In 1951, a partial partition occurred, with the cloth business becoming a partnership. On December 1, 1963, within assessment year 1964-65, another oral partial partition took place, dividing eighteen immovable properties valued at approximately Rs. 7 lacs among ten family members. These members began maintaining separate accounts and dividing net profits. The Income-tax Officer rejected the claim of partial partition for these properties, stating physical division was possible and required by Section 171 of the Income Tax Act, 1961. The Appellate Assistant Commissioner and the Tribunal also dismissed the assessee's appeals, holding that the properties could have been physically divided and that mere severance of status was insufficient for recognizing a partition under Section 171.

What did the Supreme Court hold?

The Supreme Court held that for a partition to be recognized under Section 171 of the Income Tax Act, 1961, if the property admits of physical division, such a division must take place. Mere severance of status or division of income without physical division of the property is insufficient. Even where physical division is not feasible, such division as the property admits of (e.g., apportionment and equalization by payment of money) is required. The Court found that no attempt was made to physically divide the eighteen immovable properties, which could have been conveniently divided. Therefore, the claim of partial partition under Section 171 was rejected. The Court also held that as long as a finding of partition is not recorded under Section 171, the property subject to the claimed partial partition continues to be treated as belonging to the Hindu Undivided Family, and its income is includible in the total income of the family. The High Court's view that income from such properties could not be included was reversed. The assessee's appeal was dismissed, and the Department's appeal was allowed.

What were the issues?

1. Whether the Tribunal was right in holding that the eighteen immovable properties were capable of division in definite portions amongst the ten coparceners as contemplated in Explanation (a)(i) to Section 171 of the Income Tax Act, 1961? The assessee contended that physical partition was impossible and the only way to partition was to define shares and enjoy income separately, relying on an arbitration award. The revenue argued that physical division was possible and required by Section 171. 2. Whether the Tribunal was justified in holding that the income from the properties, accepted to have been partitioned under Hindu Law but without an order accepting the claim of partial partition, was liable to be included in the assessee's income? The assessee argued that income from partitioned properties should not be taxed in the hands of the HUF. The revenue contended that until a finding of partition is recorded under Section 171, the income remains taxable in the hands of the HUF.

Which sections of the Income-tax Act were involved?

Section 171

AI-generated summary — verify with the full judgment below

j • -.· r -+ 9 KALLOOMAL TAPESWARI PRASAD (HUF), KANPUR A V, THE C. L T., KANPUR (AND VICE VERSA)

January 12, 1982 (R. S. PATHAK AND E. S, VENKATARAMIAH, JJ.] Income Tax Act 1961, S. 171-Scope of, Hindu Undivided Fam(ly-Ora/ panition in respect of immovable proparti~­ Properties incapable of physical division in equal shares-Capable of division by apPortionment and equali1alion by payment ofmCJney-."dere severa11ce of status- Nor sufficient to record finding of partition-Whether entitles the inclusion of income from an asset which has ceased to belong to the Joint family in the assessment of joint Hindu family.

Hindu Law-Partition-What is-How brought about-Partition may be total or partial.

The assessee, a Hindu Undivided Family was deriving income from various sources ,-such as income from property, income from money-lending business, income from speculaiion business and cloth bttsiness etc. There was a partial partition in the family in the year 1951, which was accepted and acted upon by the Income ta:t department, whereafter the doth business was treated as the business of a ti.Cm consisting of most of the coparceners as partners. On December 1, 1963 whi

The order continues below.

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