Full Judgment Text
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PETITIONER:
APOORVA SHANTILAL SHAH
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX GUJARAT I, AHMEDABAD
DATE OF JUDGMENT03/03/1983
BENCH:
SEN, AMARENDRA NATH (J)
BENCH:
SEN, AMARENDRA NATH (J)
BHAGWATI, P.N.
CITATION:
1983 AIR 409 1983 SCR (2) 492
1983 SCC (2) 155 1983 SCALE (1)181
ACT:
Partial partition-IV/other the father in exercise of
his right as "patria potestas" or otherwise can effect a
partial partition between himself and his minor sons of
joint family properties of a Hindu Joint Family governed by
the Mitakshara School of Hindu Law-Income Tax Act, 1961,
Section 171.
HEADNOTE:
The assessee is a Hind undivided Family consisting of
four members, namely, Sri Apoorva Shantilal Shah, his wife
Smt. Karuna and their minor sons Chintan and Tejal. During
the assessment pertaining to the assessment year 1975-76.
Shri Apoorva as a Karta of the H.U.F. made an application to
the Income Tax officer for recognising partial partition
under S. 171 of the Income Tax 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 24.12.1973 in respect of 200 shares of Gujarat Steel
Tubes Ltd. and the other on 29.12.1973 in respect of 1?77
shares of the same Company. The Income Tax officer refused
to record them for three reasons, namely (i) the partitions
have not been made at the instance of the minor sons; (ii)
after making certain allocations in favour of the two minor
sons. he remaining shares were not allotted in their
entirety to tho remaining third coparcener, normally Apoorva
separately or Apoorva and Smt. Karuna jointly describing
them as U P. and (iii) the distribution of shares had not
been made equally either amongst the three members including
the two minor sons or amongst the four members of the U.P,
as Apoorva s wife Karuna also became entitled to an equal
share on partition between the father and sons. The appeal
preferred before the-Assistant Appellate Commissioner was
accepted. The further appeal, by Revenue to the Income Tax
Appellate Tribunal was allowed since the Tribunal was of the
opinion that the partial partitions in the instant case,
beings outside the framework at the Hindu Law could not be
recognised as valid for the purposes of Section 171 of the
Income Tax Act. All the questions refferd to in the
reference under Section 256 (1) to the High Court were
answered against the assessee. The High Court held that
under Hindu Law the father has no power or authority to
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effect any partial partition of joint family properties
between himself and this minor sons. Hence the appeal by
special leave.
Allowing the appeal, the Court
493
^
HELD: 1.1. Partial Partition of the shares belonging to
the Hindu A undivided Family cannot be said to be bad either
under the Hindu Law or under the Indian Income Tax Act. [514
H, 515 A]
1.2. Partial partition of properties brought about by
the father between himself and his minor sons is valid and
binding under the Hindu Law. This right of the father to
effect a partial partition of joint family properties
between himself and his minor sons, whether in exercise of
his superior right as father or in exercise of the right as
patria potestas has necessarily to be exercised bonafide by
the father and is subject to the right of the sons to
challenge the partition, if the partition is not fair and
just. [511 C-E]
1.3. 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. [509 D-E]
1.4. The stand taken by the High Court to the effect
that the proportion laid down by judicial decisions to the
effect that partial partition of a joint Hindu family qua
some joint family properties or qua some members of the
joint family is permissible and valid in law, will apply
only when partial partition is effected with the consent of
the members of joint family and cannot be extended to a case
when partial partition is sought to be brought by father in
exercise of his superior rights as father or his right as
patria potestas is incorrect. [509 F-H]
If the father in exercise of his superior right or of
his right as patria potestas in entitled lo bring about a
complete disruption of the joint family and to effect a
complete partition of joint family properties of a Hindu
joint family consisting of himself and his minor sons even
against The wishes of the minors and if partial partition be
permissible with the consent of sons when they have all
become major, the power or authority of the father to effect
the partition of properties cannot be limited only to a case
where the partition is total. 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 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 Dot act bonafide in the matter
when he effects partition of 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 part
thereof, if the partition had been effected by the father to
the detriment of the minor sons and to the prejudice of
their interest. [510 A-H]
Charandas Haridas v. Commissioner of Income Tax, Bombay
(1960) 39 I.T.R. 202 (S.C.) Kalloomal Tapeswari Prasad (HUF)
v. Commissioner of Income J. J Tax. Kanpur (1982)133 I.T.R.
690 (S.C.) followed:
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494
1.5. The provisions of the Income Tax Act, 1961 before
the amendment by Finance Act (No. 2 of 1980) also clearly
recognise partial partition. The definition of partial
partition in Explanation (b) makes it clear that partial
partition as regards the persons constituting the Hindu
undivided family or as regards proper ties belonging to the
Hindu Undivided family, or both, is recognised. [514 P-G]
2.1. A partial partition of any joint family property
by the father between himself and his sons does not become
invalid on the ground that there has been Do equal
distribution amongst the co-sharers It is expected that the
father who seeks to bring about a partial partition of joint
family properties will act bonafide in the interest of the
joint family and its members bearing in mind in particular
the interest of the minor sons. If, however, any such
partial revision causes any prejudice to any of the minor
sons and if any minor son feels aggrieved by any such
partial partition, he can always challenge the validity of
such partial partition in an appropriate proceeding and the
validity of such partial partition will necessarily have to
be adjudicated upon in the proceeding on a proper
consideration of all the facts and circumstances of the case
till such partial partition has been held to be invalid by
any competent court, the partial partition must he held to
be valid. [515 D-F]
2.2. It is not open to the Income-tax Authorities to
consider a partial partition to be invalid on the ground
that shares have not been equally divided and to refuse to
recognise the same. It is undoubtedly open to the Income-tax
officer before recognizing the partition to come to a
conclusion on proper enquiry whether the partition is
genuine or not. If the Income-tax officer on enquiry comes
to a finding that the partition is sham or fictitious, he
will be perfectly within his right to refuse to recognise
the same. [515 F-G]
2.3. In the instant case, there is no finding that the
partial partition is sham or fictitious or that the partial
partition is not a genuine one and has not been acted upon.
As there is no finding that the partial partition is sham or
fictitious or not a genuine one, on enquiries made by the
Income-tax officer, and as the partial partition is
otherwise valid under the Hindu Law, the partial partition
has necessarily to be recognised under the provisions of S.
171 of the Income-Tax Act and the assessment must be
necessarily made on the basis that there is partial
partition of the said shares. [515 H,. 516 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 35 of
1982
Appeal by Special leave from the Judgment and order
dated the 9th July, 1981 of the Gujarat High Court in Income
Tax Reference No. 28 of 1980.
P,H. Parekh, Harish Salva and Gatutam Philip for the
Appellant.
495
S C. Manchanda Anil Dev Singh and Miss A. Subhashini
for the Respondent.
The Judgment of the Court was delivered by
AMARENDRA NATH SEN, J. The principal question for
decision 5 in this appeal by Special Leave is whether the
father in exercise of his right as Patria Potestas or
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otherwise can effect a partial partition between himself and
his minor sons of joint family properties of a Hindu joint
family governed by the Mitakshara School of Hindu Law.
The assessee, a Hindu undivided family (hereinafter
referred to as H.U.F.), which consists of four members,
namely,(l) Shri Apoorva Shantilal Shah, 2) his wife Smt.
Karuna and their minor sons (3) Chintan and 4) Tejal, is the
appellant before us. The members of the H.U.F. are governed
by the Mitakshara School of Hindu Law. The D assessment year
in question is the year 1975-76. During the assessment
pertaining to the assessment year under consideration, Shri
Apoorva who is the father of the minor sons and husband of
Smt. Karuna and the Karta of the H.U.F. made an application
to the Income Tax officer for recognising partial partition
under S. 171 of the Income Tax Act, 1961 (hereinafter
referred to as the Act), claiming that two partial
partitions bad taken place amongst the members of the said
family, one on 24.12.1973 in respect of 200 shares of
Gujarat Steel Tubes Ltd. and the other on 29.12.1973 in
respect of 1777 shares of the same company.
On enquiry the Income-Tax officer (hereinafter for the
sake of brevity referred to as I.T.O.) found that the
partial partitions had been embodied in memoranda of
agreements of partition. The I.T O. however, refused to
record that there had been a partial partition of joint
family properties, as he was of the view that 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 H.U.F. The I.T.O.
further held that the said partitions did not purport to
have been made at the distance of the minor children, as
this course would require the approval of the Court but the
same had been purported to
496
have been made at the instance of Shri Apoorva. The I.T.O.
hinted in the order that the distribution of the shares had
not been made equally either amongst the three members
including the two minor sons or amongst the four members of
the H.U.P., as Apoorva’s wife Karuna also became entitled to
an equal share on partition between the father and the sons.
Against the order of the I.T.O. the assessee H.U.F.
presented an appeal before the Appellate Assistant
Commissioner (hereinafter referred to as A.A.C. for the sake
of brevity). The A.A.C. allowed the appeal and held that
there had been genuine partial partitions between the
coparceners in respect of the said shares. The A.A.C. held
that it was not necessary to obtain court’s sanction even in
a case where some of the parties to the partition were
minors. As regards the print that the distribution of
shareholding had not been made on equal basis, the A..A.C.,
taking into consideration some earlier partitions, came to
the’ conclusion that the distribution had been equally made.
The A.A.C. further observed that even if the distribution
had not been made on equal basis that would not affect the
validity-of the partitions in question and the minor sons,
if they felt aggrieved in this regard, could on attainment
of majority seek to avoid the said partitions.
Aggrieved by the order of the A.A.C., the Revenue went
up in appeal to the Income-Tax Appellate Tribunal (referred
to as tribunal hereinafter for the sake of brevity) to
challenge the A.A.C’s recognition of the said partitions.
The Tribunal held for reasons recorded in the order that
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partial partitions in the instant case were outside the
framework of the Hindu Law and as such they could not be
recognised as valid for the purposes of S. 171 of the Act.
In that view of the matter the Tribunal set aside the
A.A.C’s order and restored the order of the I.T.O.
Under S. 256 (1) of the Act, the Tribunal referred the
following question to the High Court:-
(1) Whether on the facts and in the circumstances
of the-case, the Tribunal was right in holding that
Shri Apoorva Shanti1al could not himself have given
consent on behalf of his minor sons to the partitions
proposed by him in his individual capacity as father ?
497
(2) Whether on the facts and in the circumstances
of A 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 recognized as valid for
the purpose - of section 171 of the Income-tax Act,
1961 ?
(4) Whether on the facts and 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
partitions 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 minors sons after he had exercised
his patria potestas ?
(6) Whether the Income-tax Department ;9 competent
to challenge the exercise of patria potestas by a Hindu
father in respect of coparcenery property, making a
partial 1 partition ?
For reasons recorded in the judgment the High Court
answered all the questions in the affirmative and against
the assessee. The High Court in its judgment has held that
the father under the Hindu Law has no power or authority to
effect any partial partition of Joint family properties
between himself and his minor sons. The High Court has
observed that apart from the decision of the Madhya Pradesh
High Court in the case of Commissioner of Income-tax v. Seth
Gopaldas H.U.F (1) there was no decision of any court on the
point. The High Court also considered other decisions and
books and C’ treatises on Hindu Law. The High Court held
that on a consideration of the authorities, the following
propositions were established :-
1. From the stand point of ancient Hindu Law, what
was recognised was only a partition in respect of all
the
498
properties of the H.U.F., upon disruption of the status
of H.U.F. regardless of whether the properties were
actually divided by metes and bounds or whether these
were there after (after disruption of joint status)
held as tenants-in common.
2. Partial partition in the sense of division in
respect of part of the assets while continuing the
status of HUF in respect of rest of the assets was not
known to the ancient Hindu Law and was not recognised
by ancient Hindu Law
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3. Partial Partition in the sense of division of
some of the properties whilst continuing the status of
HUF in respect of other items of property originally
belonging to the HUP came to be recognised only later
on by evolution of custom and by judge-made law.
4. Such a partial partition was so recognised only
if it was made by consent of all the coparceners. In
other words, partial partitions in respect of only some
items of property whilst continuing the status of HUF
in respect of rest of the items of property could be
effected only with the consent of all the coparceners.
When there was a disruption of the status of the HUF
only one or more of the coparceners could not insist
for division of some items of the property without
effecting division in respect of all the items of
properties except by consent of all the coparceners.
5. Tn respect of a joint family consisting of a
father and his sons, the traditional Hindu Law
recognised the right of a father in his capacity as
patria protestas to exercise his extraordinary power to
disrupt the status of HUF and to divide his sons inter
se without their consent subject to the rider that
’all’ assets of the HUF were subjected to partition. .
6. The aforesaid extra ordinary power is subject
to the qualification that he gives to his sons an equal
share and division is not unfair (vide Gupte’s Hindu
Law 2nd Edn., Page 259). "The Power of the father to
sever the sons inter se is a survival of the patria
potestas and may be exercised
499
by him without the consent of his sons’.. "Again, in
all A cases his power must be exercised by him bonafide
and in accordance with law; the division must not be
unfair and the allotment must be equal. He must give
his sons equal share with himself "
7. There is nothing in (I) either ancient Hindu
Law or (2) customary or judge-made law which authorises
the father in exercise of his extraordinary power to
effect a partial partition of HUF consisting of himself
and his minor sons by dividing some items of properties
whilst continuing the joint status in respect of the
rest of the properties. C
The High Court observed:-
"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
that whilst there is no express provision in so many
words, either in the ancient Hindu texts or Judge-made
law, that the power of a Hindu father to effect
partition of a HUF consisting of him self and his sons
including minor sons in exercise of his power as patria
protestas extends even to partition in respect of only
some items of property it is required to be inferred by
implication. In other words, it is argued that though
there is no express reference to the power to effect
that partial partition in the sense of division of some
items of property while continuing the status of HUF in
respect of the rest and though such power is not
recognised in terms, it follows as a necessary
corollary."
The High Court noted that this contention has been
negatived by the Madhya Pradesh High Court in the case of
Gopaldas (supra) and the High Court for reasons recorded in
"the judgment rejected this contention. The High Court
further held that the transaction in question was in any
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event invalid in the facts and in the circumstances of this
case.
Aggrieved by the judgment of the High Court, the
assessee with special leave granted by this Court has
preferred this appeal.
500
In this appeal before us, two main contentions have
been urged on behalf of the appellant. The first contention
urged is that the High Court went wrong in holding that the
father cannot effect any valid partial partition between
himself and his minor sons of joint family property
belonging to Hindu undivided family consisting of himself,
his wife and minor sons who are governed by the Mitakashra
School of Hindu Law. The other contention raised is that the
High Court erred in coming to the conclusion that in the
facts and circumstances of this case, the partial partitions
were invalid.
Mr. Desai learned counsel appearing on behalf of the
appellant has advanced the following arguments.
1. According to the Mitaksbara School of Hindu Law, the
father has a power to divide ancestral property among his
sons and the partition made by him is binding on his sons
provided that the power is exercised bonafide and in
accordance with law which regulates and restricts it in the
interests of his sons. This power on the part of the father
is recognised in text books on Hindu Law and has been
accepted in a number of decisions beginning with the case of
Kondaswami v. Doraisamy Ayyar.(1)
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 the Edn.).
Para 323 of Mulla’s Hindu Law, 11th Edn. at page 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 a 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
501
of that power. But a grandfather has no power to bring
A about a separation among the grandsons. The right of
a father to sever sons inter se is a part of the patria
potestas still recognised by the Hindu Law."
Para 458 of Mayne’s Hindu Law and Usage, 11th Edn. at
p.559 and 560 reads as follows:-
"Partition may be either total or partial. A
partition may be partial either as regards the persons
making it or the property divided.
It is open to the members of a joint family to
sever in interest in respect of a part of the joint
estate while retaining their status of a joint family
and holding the rest as the properties of an undivided
family.
Any one coparcener may separate from the others.
but no coparcener except the father or grandfathers,
can compel the others to become separate amongst
themselves. A father may separate from all or from some
of his sons, remaining joint with the other sons or
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leaving them to continue a joint family with each
other. A separation between coparceners, for instance,
between two brothers, does neither necessarily nor even
ordinarily involve a separation between either of the
coparceners and his own sons "
3. So extensive and wide is this patriarchal power of
the father that it has been recognised even in cases where
all the sons were minors or an only son was a lunatic.
Reference is made to the decision of the Bombay High Court
in the case of Bapu Hambira Patil v. Shankar Bahu Patil, (1)
and to the decision of the Madras High Court in the case of
Venkataswara Pattar v. K. Mankayammal.(2)
4. S. 171 of the Income-tax Act, 1971 and S. 25A of
the earlier Acc have been all along accepted as machinery
provisions and not charging sections. In the earlier Act
though there was no express reference to partial partitions,
the preferable view expressed in deci-
502
sions under that Act was that if there was a partial
partition of an asset of the family or an asset of the
family was divided and a partnership was constituted and the
family continued joint as regards other properties, the
assessment on the basis of undivided Hindu family would be
confined to the income of the properties so remaining
undivided and the income of the property partitioned would
be excluded from the computation of the income for
assessment. It was only income received from the properties
not partitioned that would be considered to be the income of
the joint family. Reliance has been placed on the decision
in the case of Charandas Haridas v. C.l.T. Bombay. (1)
5. This power of the father has been described as his
"superior power" or "peculiar power" or "patria 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 a 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. Ram Subba Aiyan,(2) when it speaks of partial
partition of the joint family by agreement of the coparcener
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 operation in
case of exercise of the lesser right of division of only
some of the family properties.
Mr. Manchanda learned counsel appearing on behalf of
the department, has advanced the following arguments:
503
1. Under ancient Hindu Law, partial partition was
unknown. Severence of status disrupted the family. The joint
family need not necessarily have any property. If it bas
property, then its separation is only an incidence of the
severence of status.
2. Partial partition is judge made law and the earliest
case where this was mooted was in 1846 in the case of Rewun
Prashad v. Radha Beeby.(l) This was followed in Appovier’s
case (supra) and then in certain decisions of Indian Courts.
Reference is also made to paragraph 458 of Mayne’s Book on
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Hindu Law and Usage for contending that agreement between
the parties is a sine qua non.
3. The powers of patria potestas are confined mainly to
the power to sever the status of the joint family as-a
whole. Judge. made law which has recognised partial
partition has attempted to extend the ancient, feudal
archaic patriarchal powers of patria potestas to joint
families so as to include the power of partial partition
with the consent of the parties. There could be no
justification for now extending it, particularly as the
legislature itself, as per the Finance Act (2) 1980 w.e.f.
1,4.80 has de-recognised partial partition altogether. Sub-
section (9) has been added to S. 171 of the Act and by this
provision partial partition of a HUF effected after 31.12.78
will be de-recognised for income-tax purposes and this sub-
section has been incorporated with the object of curbing the
creation of multiple HUF by making partial partitions. Where
a HUF is taxed in the status of HUF it will continue to be
taxed as such unless there has been a total partition of the
family properties by metes and bounds and an order to that
effect is recorded by I.T.O.
4. The powers of patria potestas of a father have
always been understood to be restricted and limited to a
complete and whole partition. This power can only be
exercised with regard to the entire property, provided the
property is divided equally and fairly by the father.
We may observe that in course of the hearing, reference
was made to a number of decisions of various courts by the
learned counsel for the parties.
504
We shall now proceed to consider the decisions which
appear to us to leave a material bearing on the question
involved in the appeal. We shall first refer to the decision
of this Court in the case of Charandas Haridas (supra). This
decision which appears to have 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 a Hindu undivided
family 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 Hindu undivided family. 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 which was the beginning of afresh accounting
year. On 11th September, 1946 Charandas Haridas acting for
himself and his minor sons and Shantaben executed a
memorandum of partial partition in which the above facts
were recited, the document purporting to be a record of what
had taken place orally earlier. In the assessment year 1947-
48 and 1948-49, Charandas Haridas claimed that the income
should no longer be treated as income of Hindu undivided
family but as separate income of the divided members. The
Income-tax officer declined to treat the income as any but
of the Hindu undivided family, and assessed the income as
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before. An appeal to the Appellate Assistant Commissioner
was unsuccessful and the matter was taken to the Income-tax
Appellate Tribunal. The Tribunal held that by the document
in question, the division, if any, was of the income and not
of the assets from which the income was derived inasmuch as
"the agreements of the managing agency with the managed com-
panies did not undergo any chaoge whatever as a result of
the alleged partition." The Tribunal, therefore, held that
the arrangement to share the receipts from this source of
income was not binding on
505
the department, if the assets themselves continued to remain
joint. A It further held that the document was "a farce",
and did not save the family from assessment as Hindu
undivided family. The following question as directed by the
High Court on the application of Charandas Haridas was
referred to the High Court.:
"Whether there were materials to justify the
finding of the Tribunal that the income in the share of
the com mission agency of the mills was the income of
the Hindu undivided family ?"
The High Court held that though the finding given by
the Appellate Tribunal could not be construed as a finding
that the document was not genuine, the method adopted by the
family to partition the assets was insufficient to bring
about the results intended by it. According to the High
Court the Tribunal was right in holding that the document
was ineffective and though the income might have been
purported to be divided and might, in fact, have been so
divided, the source of income still remained undivided as
belonging to the Hindu undivided family. The High Court
accordingly answered the question in the affirmative holding
that there were materials before the Tribunal to enable the
Tribunal to reach the conclusion that in so far as these
income-bearing assets were concerned, they still belonged to
the Hindu undivided family. The assessee Charandas Haridas
filed an appeal in this Court with special leave granted by
this Court. This Court-allowed the appeal. At page 207, this
Court referred to the following observations of the Privy
Council in Appovier v. Rama Subba Aiyan (supra).
"Nothing can express mere 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."
Thereafter this Court proceeded to hold at page 208:-
506
"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 a
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 or as the
income of the separated members enjoying separate
shares by partition. The fact of a partition in the
Hindu Law may have no effect upon the position of
partner, in so far as the law of partnership is
concerned, but it has full effect upon the family in so
far as the Hindu Law is concerned. Just as the fact of
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a karta becoming a partner does not introduce the
member of the undivided family into the partnership,
the division of the family does not change the position
of the partner vis-a-vis the other partner or partners.
The Income-tax law before the partition takes note,
factually, of the position of the karta, and assessee
not him qua partner but as representing the Hindu
undivided family. In doing so, the Income-tax law looks
not to the provisions of the Partner ship Act, but to
the provisions of Hindu Law. When once the family has
disrupted, the position under the partnership continues
as before, but the position under - the Hindu Law
changes. There is then no Hindu undivided family as a
unit of assessment in point of fact, and the income
which accrues cannot be said to be of a Hindu undivided
family. There is nothing in the Indian Income-tax law
or the law of partnership which prevents the members of
a Hindu joint family from dividing any asset. Such
division must, of course, be effective so as to bind
the members; but Hindu law does not further require
that property must in every case be partitioned by
metes and bounds, if separate enjoyment can otherwise
be secured according to the shares of the members. For
an asset of this kind, there was no other mode of
partition open to the parties if they wished to retain
the property and yet held it not jointly but in
severalty, and the law does contemplate that a person
should do the impossible. Indeed, the result would have
been the same, even if the dividing members had said in
so many words that they had partitioned
507
the assets, because in so far as the firms were
concerned, A the step would have been wholly
inconsequential."
This Court further observed at p. 209:-
"No doubt, there were many modes of partition
which might have been adopted; but the question remains
that if the family desired to partition these assets
only and no more, could they have acted in some other
manner to achieve the same result ? No answer to the
question was attempted; It is, therefore, manifest that
the family 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.
Commissioner of Income-tax, Kanpur(l), this Court observed
at p. 702:-
"Under 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 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
descendents. 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
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be partial either as to persons or as to properties or
as to both. When there is partial partition as to
property, the family ceases to be undivided as regards
properties in respect of which such partition has taken
place but continues to be undivided with regard to the
508
remaining family property. After such partial partition
the right of inheritance and alienation differ
according as to property in question belongs to the
members in their divided or undivided capacity.
Partition can be brought about, (1) by a father during
his life time between himself and his sons by dividing
equally amongst them, (2) by agreement, or (3) by a
suit or arbitration."
These two decisions of this Court clearly state that
partial Partition under Hindu Law is permissible.
We may mention that in the case of Moti Lal Shyam
Sunder v. Commissioner of Income-tax, U.P.(l) a division
Bench of the Allahabad High Court also recognised the
validity of partial partition. R.S. Pathak, J. (as his
Lordship then was) who spoke for the Bench held for reasons
stated in the judgment that the tribunal was in error in
holding that there was no valid partial partition in law on
1st July, 1961.
It may be noted that in the case of Charandas Haridas
(supra) decided by this Court and in the case of Motilal
Sham Sunder (supra) decided by the Allahabad High Court to
which we have just referred, all the sons were minor.
We have earlier quoted the relevant passages on the
subject from Mulla’s Hindu Law and from Mayne’s Hindu Law
and Usage. We may now qoute the following observations
appearing at p. 18 in ’Mitacshare and Daya-Bhaga-Two
Treatises on the Hindu Law of Inheritance translated by H.T.
Colebrooke, Esq.,’ in Ch. I, sec. II (2):-
"When a father wishes to make a partition, he may
at his pleasure separate his children from himself,
whether one. two or more sons".
In ’History of Dharamshastra’ by Shri P.V. Kane (second
Edition, 1973) Vol. III at p. 592, it has been stated:-
"The Manager is called Karta in modern times
though the smritis and digests employ words like
Kutumbin (Yaj II. 45), Grhin, Grhapali, Prabhupa Kat.
543) and not Karta. He has special powers of
disposition (by mortgage,
509
sale or gift) of family property in a season of
distress (for debts), for the purposes and benefit of
the family (maintenance, education and marriages of
members and other dependents) and particularly for
religious purposes (Sradhas 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 course of the hearing of the appeal.
The various commentaries on Hindu Law by the various
learned 1 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
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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 recongnised in
ancient Hindu Law.
It is, however, well settled by judicial decisions that
partial partition of a joint Hindu family qua some joint
family properties or qua some members of the joint family is
permissible and valid in law. The High Court appears to have
accepted this position but the High Court then proceeds to
hold that the proposition laid down by judicial decisions
with regard to partial partition will apply only when
partial partition is effected with the consent of the
members of the joint family and cannot be extended to a case
where partial partition is sought to be brought about by
father in exercise of his superior rights as father or his
right, as patria potestas. On an anxious and careful
consideration of the matter we are unable to agree with the
view expressed by the High Court.
510
If the father in execise of his superior right or of
his right. as patria potestas is entitled to bring about a
complete disruption of the joint family and to effect a
complete partition of joint family properties of a Hindu
family consisting of himself and his minor sons even against
the wishes of the minors and if partial partition be
permissible with the consent of sons when they have all
become major, we see no reason to limit the power or
authority of tho father to effect the partition only to a
case where the partition is total. The superior right or the
right of patria potestas which a father enjoys is always
expected to be exercised in the best interest of the members
of the family and more particularly his minor sons. The
father, undoubtedly, enjoys the right to bring about a
complete disruption of the joint family consisting of
himself and his minor sons and to effect a complete
partition of The joint family properties even against the
will of the minor sons. It is also now recognised that
partial partition of joint family properties is permissible.
When father can bring about a complete partition of joint
family properties between himself and his minor sons even
against the will of the minor sons and when partial
partition under the Hindu Law is now accepted and recognised
as valid by judicial decisions, we fail to appreciate on
what logical grounds it can be said that the father who can
bring about a complete partition of the joint family
properties between himself and his minor sons will not be
entitled to effect a partial partition of joint family
properties between himself and his minor sons if the father
in the interest of the joint family and its members feels
that partial partition of the properties 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 partition of 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 d proper guardian may impeach the validity of the
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partition brought about by the father either in entirety of
the joint family properties or only in respect of part
thereof, if the partition had been effected by the father to
the detriment of the minor sons and to the prejudice of
their interests.
511
We may point out that in the case of Charandas Haridas
to which we have earlier referred and in which this Court
recognised the validity of partial partition brought about
by the father of some joint family properties, the sons were
all minors. Also in the case of Motilal Shamsunder earlier
quoted, where the Allahabad High Court recognised the
validity of partial partition brought about by the father
between himself and his sons, all the sons were minors.
The decision of this Court in the case of Charandas
Haridas and the observations of this Court in the case of
Kalloomal Tapeswari Prasad (supra) which we have earlier
quoted, in our opinion, clinch the decision of the question.
We must, therefore, hold that partial partition of
properties brought about by the father between himself and
his minor sons cannot be said to be invalid under the Hindu
Law and must be held to be valid and binding. We wish to
make it clear that this right of the father to effect a
partial partition of joint family properties between himself
and his minor sons, whether in exercise of his superior
right as father or in exercise of the right as patria
potestas has necessarily to be exercised bona fide by the
father and is subject to the right of the sons to challenge
the partition if the partition is not fair and just.
S. 171 of the Income-tax Act, 1971 provides as follows:
(1) A Hindu family hitherto assessed as undivided
shall be deemed for the purposes of this Act to
continue to be a Hindu undivided family, except where
and in as far as a finding of partition has been given
under this section in respect of the Hindu undivided
family.
(2) Where, at the time of making an assessment
under sec. 143 or section 144, it is claimed by or on
behalf of any member of Hindu family assessed as
undivided that a partition, whether total or partial,
has taken place among the members of such family, the
Income Income-tax officer shall make an enquiry
thereinto after giving notice of the enquiry to all the
members of the family.
512
(3) On the completion of the enquiry, the Income
tax officer shall record a finding as to whether there
has been a total or partial partition of the joint
family property, and, if there has been such a
partition the date on which it has taken place.
(4) Where a finding of total or partial partition
has been recorded by 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
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of the previous year, the total income of the previous
year of the joint family shall be assessed at 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
officer shall proceed to recover the tax from every
person who was a member of the family before the
partition, and every such person shall be jointly and
severally liable for the tax on the income so assessed:
(7) For the purposes of this section, the several
liability of any member or group of members thereunder
shall be computed according to the portion of the joint
family property allotted to him or it at the partition,
whether total or partial.
513
(8) The provisions of this section shall, so far
as may be apply in relation to the levy and collection
of any penalty, interest, fine or other sum in respect
of any period up to the date of the partition, whether
total or partial of a Hindu undivided family as they
apply in relation to the levy and collection of tax in
respect of any such period.
... ... ... ... ...
... ... ... ... ...
... ... ... ... ...
Explanation: In this section.-
(a) "partition" means-
(i) where the property admits of a physical
division, a physical division of the
property, but a physical division of the
income without a physical division of the
property producing the income shall not be
deemed to be a partition; or
(ii) where the property does not admit of a
physical division then such division as the
property admits of, but a mere sevence of
status shall not be deemed to be a partition;
(b) "partial partition" means a partition which
is partial as regards the persons
constituting the Hindu undivided family, or
the properties belonging to the Hindu
undivided family, or both.
It may be noted that the following further provision
was included in the said section as sub-section (9) by the
Finance (No. 2) Act, 1980 w. e. f. 1st April, 1980 :- G
(9) Notwithstanding anything contained in the
foregoing provisions of this section, where a partial
partition has taken place after the 31st day of
December, 1978 among the members of a Hindu undivided
family hitherto assessed as undivided:-
514
(a) no claim that such partial partition has
taken place shall be inquired into under sub-
section (2) and no finding shall be recorded
under sub-section (3) that such partial
partition had taken place and any finding
recorded under sub-section (3) to that effect
whether before or after the 18th day of June,
1980 being the date of introduction of the
Finance (No 2) Bill 1980, shall be null and
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void;
(b) such family shall continue to be liable to be
assessed under this Act as if no such partial
partition 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-section (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 Income-tax Act, as they
stood at the material time, clearly recognise partial
partition. The definition of partial partition in
explanation (b) makes it clear that partial partition as
regards the persons constituting the Hindu undivided family
or as regards properties belonging to the Hindu undivided
family, or both, is recognised.
In the present case, the partial partition of the
shares belonging to the Hindu undivided family cannot,
therefore, be said to
515
be bad either under the Hindu Law or under the Indian Income
tax Act. We must, therefore, hold that the High Court went
wrong in deciding that partial partition of the joint family
properties of the Hindu joint family by the father was
invalid and could not be recognised under the Income-tax
Act. The subsequent amendment of section 171 by the
inclusion of sub-section (9) does not require any
consideration as the said, sub-section was not in existence
in the relevant assessment year and is only operative from
1st April, 1980.
The other question which falls for determination is
whether the partition can be said to be bad at the time of
the partition there was no equal division of the shares by
the father amongst himself and his minor sons and a part of
the share holding had not been distributed to the father or
to the father and mother jointly. We may point out that the
A.A.C. has found that at the time of division of the shares,
the shares had been distributed equally taking into
consideration the shares which had earlier been distributed
amongst the parties. In our opinion, a partial partition of
any joint family property by the father between himself and
his sons does not become invalid on the ground that there
has been no equal distribution amongst the co-sharers. It is
expected that the father who seeks to bring about a partial
partition of joint family properties will act bonafide in
the interest of the joint family and 13 its members, bearing
in mind in particular the interests of the minor sons. If
however, any such partial partition causes any prejudice to
any of the minor sons and if any minor son feels aggrieved
by any such partial partition, he can always challenge the
validity of such partial partition in an appropriate
proceeding and the validity of such partition will
necessarily have to be adjudicated upon in the proceeding on
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a proper consideration of all the facts and circumstances of
the case. Till such partial partition has been held to be
invalid by any competent court, the partial partition must
be held to be valid. It is not open to the Income-tax
Authorities to consider a partial partition to be invalid on
tho ground that shares have not been equally divided and to
refuse to recognise the same. It is undoubtedly open to the
Income-tax officer before recognising the partition to come
to a conclusion on proper enquiry whether tho partition is
genuine or not. If the Income-tax officer on enquiry comes
to a finding that the partition is sham or fictious, he will
be perfectly within his right to refuse to recognise the
same. In the instant case, there is no finding that the
partial partition is sham or
516
fictitious or that the partial partition is not a genuine
one and has not been acted upon. As there is no finding that
the partial partition is sham or fictitious or not a genuine
one, on enquiries made by the Income-tax officer, and as the
partial partition is otherwise valid under the Hindu Law,
the partial partition has necessarily to be recognised under
the provisions of S. 171 of the Income-tax Act and the
assessment must be necessarily made on the basis that there
is Partial partition of the said shares.
In the result, the appeal succeeds. The judgment and
order of the High Court are hereby set aside. The partial
partition is held to be valid and the Income-tax Officer is
directed to recognise the same and to proceed to make the
assessment on the basis that there has been a partial
partition of the said shares between the parties. In the
facts and circumstances of this case, we do not propose to
make any order as to costs.
S.R. Appeal allowed.
517