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PETITIONER: KALLOOMAL TAPESWARI PRASAD (HUF), KANPUR

       Vs.

RESPONDENT: THE C. I. T., KANPUR(AND VICE VERSA)

DATE OF JUDGMENT12/01/1982

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) PATHAK, R.S.

CITATION:  1982 AIR  760            1982 SCR  (3)   9  1982 SCC  (1) 447        1982 SCALE  (1)11  CITATOR INFO :  R          1983 SC 409  (13,22)  R          1991 SC2035  (6,7)

ACT:      Income Tax Act 1961, S. 171-Scope of.      Hindu Undivided  Family-Oral partition  in  respect  of immovable  properties-Properties   incapable   of   physical division   in    equal   shares-Capable   of   division   by apportionment and  equalisation  by  payment  of  money-Mere severance of  status-Not 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.

HEADNOTE:      The assessee,  a Hindu  Undivided Family  was  deriving income from  various sources  such as  income from property, income from  money-lending business, income from speculation business  and  cloth  business  etc.  There  was  a  partial partition in the family in the year 1951, which was accepted and acted  upon by the Income tax department, whereafter the cloth business  was  treated  as  the  business  of  a  firm consisting of  most  of  the  coparceners  as  partners.  On December 1, 1963 which fell within the assessment year 1964- 65 there  was another  partial partition orally, as a result of which  eighteen immovable properties were divided amongst the ten  members of the family, who held those properties as tenants-in-common from  that date.  These eighteen immovable properties were  situated  in  different  places  and  their valuation was about Rs. 7 lacs.      In the  course of  assessment proceedings; the assessee claimed that  the members  of the  family had  commenced  to maintain separate  accounts with  regard to  the income from the eighteen  immovable properties  and to  divide the  nett profits amongst  themselves according  to  their  respective shares at  the end of the year. When required by the Income- tax Officer  to explain  as to  why the  properties were not divided in  definite portions  as required by section 171 of the Income  Tax Act  1961, the assessee stated that physical partition of  the properties  amongst the  ten  members  was

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impossible and  the only  way to  partition those properties was to  define the respective shares and to enjoy the income from them  separately. In support of his contention that the properties did  not admit  of physical division the assessee relied on  an arbitration  award. The Income-tax Officer did not agree  with the  assessee’s contention  that it  was not possible to  divide the  properties in definite portions. He rejected the  claim of  partial partition  in respect of the eighteen immovable  properties and  proceeded to  assess the income derived therefrom in the hands of the assessee. 10      The assessee  filed  an  appeal  before  the  Appellate Assistant Commissioner.  During the  pendency of  the appeal the assessee  appointed another  arbitrator to  examine  the possibility of  physical division  of each  of the  eighteen properties into  ten portions.  The arbitrator  by his award stated that  the properties  were not  capable  of  physical division into  ten shares  by metes  and bounds and that any practical division  was that  of allocation of proportionate shares  in   all  the  eighteen  properties.  The  Appellate Assistant Commissioner  held that  the case  of the assessee that it was not possible to divide the properties physically as untenable and dismissed the appeal.      In further  appeal to  the Tribunal,  the Tribunal held that the  contention of  the assessee that if the properties had been divided into ten shares they would have been either destroyed or  would have  lost their values was not correct, and that  the claim of the assessee under section 171 of the Act that there was a partial partition was to be rejected.      On an application by the assessee under section 256 (1) of the  Act, the Tribunal referred two questions to the High Court :  (1) Whether  the Tribunal was right in holding that the properties  in  dispute  were  capable  of  division  in definite   portions   amongst   the   ten   coparceners   as contemplated in  Explanation (a)  (i) to  section 171 of the Act, and  (2) whether  the Tribunal was justified in holding that the  income from  the properties  in dispute which were accepted to  have been  partitioned under  the Hindu Law but with regard to which an order accepting the claim of partial partition was  not made  was liable  to be  included in  the computation of the assessee’s income ?      The High Court held : (1) that even though the eighteen properties could not individually be divided into ten shares without destroying  their utility  but after  assessing  the value of  the properties  they could  be apportioned between the ten  members and the difference in the allocations could be equalised  by payment of cash amounts by one to the other and in  view of clause (a) (i) of the Explanation to section 171,  mere  severance  of  status  was  not  sufficient  for recording a  finding of  partition; and  (2) that the income accruing  from   the  eighteen  immovable  properties  after December 11,  1963 was  not liable  to be  included  in  the computation of the joint Hindu Family’s income.      Dismissing  the  Assessee’s  appeal  and  allowing  the Department’s appeal : ^      HELD :  1. (i)  The law relating to assessment of Hindu undivided family  underwent a  change when the 1961 Act came into  force.  Section  171  of  the  Act  provided  for  the assessment after partition of a Hindu undivided family. [24- D]      (ii) A  finding to  the effect that partition has taken place has to be recorded under section 171 by the Income-tax Officer. He  can record such a finding only if the partition in question  satisfies  the  definition  of  the  expression

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’partition’  found   in  Explanation   to  section   171.  A transaction can  be recognised  as a partition under section 171 only  if,  where  the  property  admits  of  a  physical division a  physical division  of  the  property  has  taken place. In such a case mere physical 11 division of  the income  without a  physical division of the property producing  income cannot be treated as a partition. Even where  the  property  does  not  admit  of  a  physical division then such division as the property admits of should take place  to satisfy the test of a partition under section 171. Mere  proof of  severance of  status under Hindu Law is not sufficient  to treat  such a transaction as a partition. If a  transaction does  not  satisfy  the  above  additional conditions it  cannot be  treated as  a partition  under the Act, even though under Hindu Law there has been a partition- total or partial. The consequence will be that the undivided family will be continued to be assessed as such by reason of sub-section (1) of section 171. [30-A-D]      (iii) It  is common  knowledge that  in every partition under Hindu  Law unless  the  parties  agree  to  enjoy  the properties as  tenants-in-common, the  need for  division of the family properties by metes and bounds arises and in that process physical division of several items of property which admit of  such physical  division does take place. It is not necessary to  divide each  item into the number of shares to be allocated  at a  partition. If a large number of items of property are  there, they  are  usually  apportioned  on  an equitable basis  and if  necessary by  asking the parties to make payments  of money  to  equalise  the  shares.  Such  a partition is  also  a  kind  of  physical  division  of  the properties and is contemplated in the Explanation to section 171. [34-C-E]      In the instant case no attempt to divide the properties was made.  The case  clearly falls  under sub-clause  (i) of clause (a)  of the Explanation to section 171 of the Act but does not  satisfy the  requirement of  that sub-clause as no physical division  of the  properties was  made even  though they could  be  conveniently  so  divided.  Sub-clause  (ii) therefore does not apply to this case. [35-B]      2. (i) The High Court having held that the assessee was not entitled  to claim  that a  partial partition  had taken place under  section 171, fell into an error in holding that the income  of the  properties which were the subject-matter of partial  partition could  not be  included in  the  total income of  the assessee  by relying upon the decisions which had been  rendered on  the basis  of section 25A of the 1922 Act which  had been  construed as  not being  applicable  to partial partition. [35-D]      (ii) The  true  effect  of  section  171  (1)  is  that property, which  is the  subject-matter of partial partition would continue  to be treated as belonging to the family and its income would continue to be included in its total income until such a finding is recorded. [35-G]      (iii)  Sub-section   (1)  of  section  171  contains  a ’deeming’ provision.  It says  that a  Hindu family hitherto assessed as undivided shall be deemed for the purpose of the Act to  continue to be a Hindu undivided family except where and in so far as a finding of partition has been recorded in respect of  it under  section 171. The partition referred to in the  section can  include a partial partition also either as regards  the persons constituting the undivided family or the properties  belonging to  it or  both, in  view  of  the provisions  contained  in  the  other  subsections  and  the Explanation to the section. [29-F-G]

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12      (iv) Where  there is no claim that a partition-total or partial-had taken  place  made  or  where  it  is  made  and disallowed a  Hindu undivided family which is hitherto being assessed  as   such  will   have  to  be  assessed  as  such notwithstanding the fact a partition had in fact taken place as per Hindu law. A finding to the effect that partition had taken place  has to  be recorded  under section  171 by  the Income-tax Officer. He can record such a finding only if the partition  in  question  satisfies  the  definition  of  the expression ’partition’  found in Explanation to section 171. The transaction  can be  recognised  as  a  partition  under section 171 only if where the properties admit of a physical division, a  physical division  of the  property  has  taken place. In  such a  case mere physical division of the income without a physical division of the property producing income cannot be  treated as  a partition.  Even where the property does not,  admit of a physical division then such a division as the  property admits  of should take place to satisfy the test of  a  partition  under  section  171.  Mere  proof  of severance of  status under  Hindu Law  is not  sufficient to treat such  a transaction  as a  partition. If a transaction does not  satisfy the  additional  condition  it  cannot  be treated as a partition under the Act even though under Hindu Law there  has  been  a  partition  total  or  partial.  The consequence will  be  that  the  undivided  family  will  be continued to  be assessed  as such  by reason of sub-section (1) of section 171. [29 G-H,30 A-D]      Govinddas &  Ors. v.  Income-tax Officer & Anr., [1976] 193 I.T.R.  123; Charandas Haridas & Anr. v. Commissioner of Income-tax, Bombay  North, Kutch  & Saurashtra,  Ahmedabad & Anr., [1960] 39 I.T.R. 203; A. Kannan Chetty v. Commissioner of Income-tax, Madras, [1963] 50 I.T.R. 601; referred to.      (v) As  long as a finding is not recorded under section 171 that  a partial  partition had  taken  place  the  Hindu undivided family  should be  deemed for  the purposes of the Act to  be the  owner of  the property  which is the subject matter of the partition and also the recipient of the income from such  property. The  assessment should  be made as such and the  tax assessed  can be  recovered as  provided in the Act. [36 F-G]      3. Under section 25A of the 1922 Act, a Hindu undivided family which  had been  assessed to  tax could be treated as undivided and  subjected to tax under the Act in that status unless and until an order was made under section 25A (1) and if in the course of the assessment proceedings it is claimed by any  of the  members of  the Hindu  undivided family that there has  been  total  partition  of  the  family  property resulting in physical division thereof as it was capable of, the assessing  authority should  hold an  enquiry and decide whether there  has been  such a partition or not. If he held that such  a partition had taken place, he should proceed to make an  assessment of  the total income of the family as if no partition  had taken  place and then proceed to apportion the  liability   as  stated   in  section  25A  amongst  the individual members of the family. If no claim was made or if the claim  where  it  was  made  was  disallowed  after  the enquiry, the  Hindu undivided  family would  continue to  be liable to be assessed as such.                                             [23 G-H, 24 A-C]      4. When  Parliament enacted section 171 it took note of the decisions  which had  taken  the  view  that  a  partial partition did  not fall  within the scope of section 25A. It expressly stated  in section  171 of  the Act  that the said provision

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13 was applicable to both kinds of partitions-total or partial. It has  also defined  partial  partition  as  one  which  is partial as regards persons constituting the undivided family or as  regards the  properties belonging  to  the  undivided family or  both. It  deals with all kinds of partitions, the nature of  which sometimes  may be  difficult  to  predicate correctly. [31 D-E]      Sir  Sunder  Singh  Majithia  v.  The  Commissioner  of Income-tax. C.P. & U.P., [1942] 10 I.T.R. 457, Gordhandas T. Mangaldas v.  Commissioner of  Income-tax Bombay,  [1943] 11 I.T.R. 183,  Waman Satwappa  Kalghatgi  v.  Commissioner  of Income-tax [1946]  14 I.T.R. 116, M.S.M.S. Meyyappa Chettiar v. Commissioner of Income-tax, Madras, [1950] 18 I.T.R. 586, Lakhmtchand Baijnath  v.  Commissioner  of  Income-tax  West Bengal, [1959]  35 I.T.R.  416, Kalwa  Devadatta and Ors. v. Vnion of  India and  Ors.,  [1963]  49  I.T.R.  [S.C.]  165, Additional Income-tax  Officer, Cuddapah v. A. Thimmayya and Anr., [1965] 55 I.T.R. 666, Joint Family of Vdayan Chinubhai etc. v.  Commissioner  of  Income-tax,  Gujarat,  [1967]  63 I.T.R. 416, referred to.      5. Partition  may be  several kinds.  It may be a total partition or  a partial partition. A partition can be called partial both  as regards  persons and as regards properties. The next  kind of partition may be one where all the members divide amongst themselves only some of the family properties and continue  as members  of an  undivided family  owing the remaining  family  properties.  This  is  called  a  partial partition as regards property. Even here the division of the property which is subject matter of partial partition may be groupwise also.  In the  case  of  a  partial  partition  as regards property,  one thing  noticeable is  that after such partition, the property which is subject-matter of partition is held  by the  members of  the family as tenants-in-common and the rest of the family properties continue to be held by them as members of the undivided family.                                             [31 F-H, 32 A-E]      6. After  a partial  partition as regards property, the property divided  is held  by the  members of  the undivided family as  divided members  with all  the incidents  flowing therefrom and  the property  not so divided as members of an undivided family.  Section 171 (1) of the Act can, therefore operate in  such a  case also  because the  family which has become divided  as regards the property which is the subject matter of  partial partition  is deemed  to continue  as the owner of  that property  and the  recipient  of  the  income derived from  it except  where and in so far as a finding of partition has been given under section 171. [32 F-G]      7. Partition  can be  brought about,  (1) by  a  father during his  life  time  between  himself  and  his  sons  by dividing properties  equally amongst them, (2) by agreement, or (3)  by a suit or arbitration. A declaration of intention of a  coparcener to become divided brings about severance of status. [27 E      8. A  physical division  of the  property which  is the subject matter of partition is not necessary to complete the process of  partition in  so far  as the item of property is concerned under  Hindu Law. The parties to the partition may enjoy the property in question as tenants-in-common. [27 G      Appovier v.  Rama Subba  Aiyan  [1866]  11  M.I.A,  75, referred to. 14      9. Hindu Law does not require that the property must in every case  be partitioned by metes and bounds or physically into different  portions to complete a partition. Disruption

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of status can be brought about and it is open to the parties to enjoy  their shares  of property  as tenants-in-common in any manner known to law according to their desire.[28-C]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1370/74 and 1768 of 1975.      From the  judgment and  order dated the 29th September, 1972 of the Allahabad High Court in Income-Tax Reference No. 47 of 1971.      S.T. Desai  J.B.  Dadachanji  and  K.J.  John  for  the Appellant  in  C.A.  1370/74  and  for  Respondent  in  C.A. 1768/75.      V.S. Desai, Miss A. Subhashini, K.C. Dua and S.P. Nayar for the  Respondent in  CA. 1370/74 and for the Appellant in CA. 1768/75.      The Judgment of the Court was delivered by      VENKATARAMIAH, J.  These two appeals by certificate-one by the assessee and the other by the Commissioner of Income- tax, Kanpur  are filed  against the judgment and order dated September 29,  1972 of  the  High  Court  of  Judicature  at Allahabad in  Income-tax Reference  No.  47  of  1971  under section 256(1)  of the  Income-tax  Act,  1961  (hereinafter referred to  as ’the  Act’) made by the Income tax Appellate Tribunal.  Allahabad   Bench,  Allahabad   (for  short  ’the Tribunal’). The  two questions  which were  referred by  the Tribunal for the opinion of the High Court were:      "(1) Whether on  the facts  and in the circumstances of           the case  the Tribunal  was right  in holding that           the properties in dispute were capable of division           in definite portions amongst the 10 coparceners as           contemplated in Explanation (a) (i) to section 171           of  the   Income  tax  Act,  1961  and  that  even           otherwise the  mere severance  of status  was  not           sufficient to  entitle the  assessee to succeed in           its claim for partial partition ?      (2)  Whether on  the facts  and in the circumstances of           the case  the Tribunal  was justified  in  holding           that the 15           income from  the properties  in dispute which were           accepted to  have been partitioned under the Hindu           law but  with regard  to which  an order accepting           the claim  of partial  partition was  not made was           liable to  be included  in the  computation of the           assessee’s income ?"      The assessee  is a Hindu undivided family known as M/s. Kalloomal Tapeshwari  Prasad and  the year  of assessment is 1964.65. The  assessee is  governed by the Mitakshara school of law.  The  following  genealogical  tree  represents  the relationship amongst the members of the family:                         Phakki Lal      ________________________________________________      |                        |                      |      |                        |                      |      Chandoolal          Bishambhar Nath        Sitaram      (His Wife Rampiari  (dies issueless        (wife-kripa      died on 17.9.63)    on 1940-wife                  Devi)           |                                            |           |                                            |           |                                            |           |                                  ______________           |                                  |            |

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         |                                  |            |           |                             Gopalji        Ramji      ___________________________________________      |         |         |         |         |      Jagat    Roop     Swarup    Shyam     Bimal      Narian   Narain   Narain    Narian    Narian      During the relevant previous year, the family consisted of Chandoolal,  Sitaram  and  his  wife  Kripa  Devi,  Jagat Narain, Roop  Narain, Swarup  Narain, Shyam Narain and Bimal Narain who  were the five sons of Chandoolal and Gopalji and Ramji,  the   two  Sons  of  Sitaram.  The  assessee  (Hindu undivided family)  was deriving  income from various sources such as  income from  property, income  from  money  lending business,  income   from  speculation   business  and  cloth business etc. There was a partial partition in the family in the year  1951 when  a sum  of Rs. 5,00,000 out of its total capital of Rs. 12,85,423 was divided amongst the coparceners at  the   rate  of   Rs.  41,666110/8   amongst  members  of Chandoolal’s branch  and  at  the  rate  of  Rs.  83,333/5/4 amongst the  members of Sitaram’s branch. Kripa Devi did not receive any  share  at  that  partition.  The  said  partial partition was accepted and acted upon by 16 the Income-tax Department where after the cloth business was treated as  the business of a firm consisting of most of the coparceners as  partners. Again  on December  11, 1963 which fell within  the previous  year relevant  for the assessment year in  question i.e.  1964-65, according  to the assessee, there was  another partial  partition orally  as a result of which its eighteen immovable properties were divided amongst the ten  members of  the family  and that  they  held  those properties as  tenants-in-common  from  that  date.  It  was claimed by  the assessee  in the  course of  the  assessment proceedings that  the members of the family had commenced to maintain separate  accounts with  regard to  the income from the said  eighteen properties  and to divide the net profits amongst themselves  according to  their respective shares at the end of each year. The eighteen immovable properties were situated in  different places  and their  valuation  was  as follows: S. No.         Municipal number of                Value                  the property 1.                75/2                           1,78,875/- 2.                76/162                           27,000/- 3.                76/169                           45,000/- 4.                47/110                           13,500/- 5.                47/26                            20,700/- 6.                48/203                           16,200/- 7.                55/124                           90,000/- 8.                55/36} 9.                55/37}                           41,400/- 10.               70/87                          1,57,500/- 11.               71/150                            8,100/- 12.               71/89                             3,600/- 13.               71/112                           19,800/- 14.               63/61                             7,425/- 15.               51/68                            17,100/- 16.               s 51/73                            14,400/- 17.               86/37                            20,520/- 18.               1/301A                           45,000/-                                                  ----------                                                   7,26,120/-                                                   ---------- 17

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    When required  by the  Income-tax Officer to explain as to why  the properties were not divided in definite portions as required  by section  171 of the Act, the assessee stated that physical division of the properties in question amongst the ten  members was impossible and the only possible way to partition those  properties was  to define  their respective shares and  to enjoy  the income  from them  separately.  In support of  the above  claim the assessee relied upon a copy of an  award dated  April 15,  1964 made  by one S.B. Tandon which was  made into  a decree in Suit No. 60 of 1964 on the file of  the Court  of the  First Civil  Judge, Kanpur dated September 21,  1964. In that award the arbitrator had stated that the  properties did not admit of physical division. The Income-tax  Officer   did  not  agree  with  the  assessee’s contention that it was not possible to divide the properties in question  in definite  portions. Accordingly  he rejected the claim  of partial  partition in  respect of the eighteen immovable properties  and proceeded  to  assess  the  income derived therefrom  in the hands of the assessee. Against the order of  the Income-tax  Officer,  the  assessee  filed  an appeal  before   the  Appellate  Assistant  Commissioner  of Income-tax. During  the pendency of that appeal the assessee appointed another arbitrator by the name Lakhsman Swaroop, a retired Chief  Engineer to  examine  the  possibility  of  a physical division  of each  of the  eighteen properties into ten portions  and if  that was  not possible  to suggest any other mode  or modes  to  divide  them  into  ten  parts  in accordance with the share allotted to each of the parties to the partition. By his award dated February 3, 1965, Lakshman Swaroop stated  that  the  aforesaid  properties  were  "not capable of  physical division  into ten  shares by metes and bounds and that any practical division is that of allocation of  proportionate   shares  in  all  the  18  properties  in question." It  may be  mentioned here  that out  of the  ten shares, six  shares were  1/12th each  and four  shares were 1/8th each.  Chandoomal and  his five sons had been allotted 1/12th each  and Sitaram  his wife and his two sons had been allotted 1/4th each. Lakshman Swaroop was also examined as a witness before  the Appellate  Assistant Commissioner by the assessee and  cross-examined by  the Income tax Officer. The Appellate Assistant  Commissioner on  a consideration of the material before  him  including  the  decree  of  the  court referred to  above and the evidence of Lakshman Swaroop held that the  case of  the assessee  that it was not possible to divide the properties physically into ten shares referred to above  was   not  tenable  and  dismissed  the  appeal.  The assessee, thereafter  took up the matter before the Tribunal in appeal.  The Tribunal  also was  of  the  view  that  the contention of the assessee that if the properties had 18 been divided  into ten  shares, they  would have either been destroyed or  would have  lost in  value  was  not  correct. Accordingly the  claim of  the assessee under section 171 of the Act  that there  was a  partial partition  was rejected. Thereupon on  an application  of  the  assessee  made  under section 256(1)  of the  Act, the two questions set out above were referred  by the  Tribunal to  the High  Court for  its opinion.      After hearing  the parties, the High Court recorded its answer to  the first  question in  the  affirmative  and  in favour of the Department and in reaching that conclusion, it observed thus:           "We have  seen the  evidence of  the arbitrator as      well as  the Chief  Engineer, and  it is apparent there      from that  even though  the  18  properties  could  not

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    individually  be   divided  into   10  shares   without      destroying their  utility but after assessing the value      of the  properties, they  could be  apportioned between      the ten  members and  the difference in the allocations      could be equalised by payment of cash amounts by one to      the other.  In  our  opinion,  it  cannot,  in  such  a      situation,  be  said  that  these  18  properties  were      incapable of physical division in 10 shares, and so, in      view  of  clause  (a)  (i)  of  the  Explanation,  mere      severance of  status was not sufficient for recording a      finding of partition."      The High  Court answered  the second question in favour of the  assessee holding  that the  income accruing from the eighteen immovable  properties after  December 11,  1963 was however not  liable to be included in the computation of the joint Hindu  family’s income.  In recording this answer, the High Court observed thus:           "Sec. 171  of the  1961 Act  in essence,  is a re-           actment of  Sec. 25A  with the  difference that it           applies not  only to  cases of total partition but           also to cases of partial partition. There are some           incidental changes  as well, e.g. sec. 171 applies           also  for   purposes  of  levying  and  collecting           penalty, fine or interest and in addition requires           the Income-tax  Officer to  record a finding as to           the date  on which total or partial partition took           place. The fact that sec. 171 applies to a partial           partition (meaning a partition which is partial as 19           regards the  persons or  as regards the properties           of the  family or  both)  as  well  shows  that  a           finding of  partial partition  can be recorded and           on such a finding being recorded under sub-section           (4) the  total  income  of  the  joint  family  in           respect of  the period  upto the date of partition           is to  be assessed  as if  no partition  had taken           place and  each member  of the  family was  to  be           liable,  notwithstanding   anything  contained  in           clause (2)  of sec.  10, jointly and severally for           the tax  on the income so assessed. Thus sec. 171,           like sec. 25A, seeks to nullify the effect of sec.           10 (2)  under which  a member was not liable to be           taxed on  the income received as a member of Hindu           undivided family. The section does not entitle the           inclusion of income from an asset which has ceased           to belong  to the  joint family, in the assessment           of the joint Hindu family.                In the  present case,  on the  findings,  the           position is  that the  joint  Hindu  family  stood           disrupted  in   relation  to   the  18   immovable           properties as a result of the oral partition dated           11th December,  1963.  Thereafter  the  income  of           these  properties   belonged  to   the  individual           members and  not to the joint family. It could not           be included in the assessment of the family."      Aggrieved by  the answer  to the  first  question,  the assessee has  filed  Civil  Appeal  No.  1370  of  1974  and aggrieved by  the answer to the second question, the Revenue has filed Civil Appeal No. 1768 of 197.      It is necessary to refer to the history of the relevant provisions in  order to  decide the  questions raised before us. Under  the Indian  Income-tax Act,  1922 (for short ’the 1922 Act’) a Hindu undivided family could be assessed on its income. Section  3 of  the 1922 Act laid down that where any Central Act  enacted that  income-tax should  be charged for

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any year  at any  rate or  rates, tax  at that rate or those rates should be charged for that year in accordance with and subject to  the provisions  of that  Act in respect of total income of  the previous  year  of  every  individual,  Hindu undivided family  etc. But  section 14  (1) of  the 1922 Act provided that  no tax  was payable by an individual assessee in respect  of any  sum which  he received  as a member of a Hindu undivided  family where  such sum had been paid out of the income of the family. Section 25-A was 20 inserted in  the 1922 Act in the year 1928 providing for the machinery  for   assessment  after   partition  of  a  Hindu undivided family. That section immediately before the repeal of the 1922 Act read as follows:           "25A.  Assessment   after  partition  of  a  Hindu           undivided family-(1)  Where, at the time of making           an assessment  under section  23, it is claimed by           or on  behalf of  any member  of  a  Hindu  family           hitherto assessed  as undivided  that a  partition           has taken  place among the members of such family,           the Income-tax  Officer shall  make  such  inquiry           there-into as  he may  think fit,  and, if  he  is           satisfied that  the joint family property has been           partitioned among the various members or groups of           members in  definite portions  he shall  record an           order to that effect:                Provided that no such order shall be recorded           until notices  of the  inquiry have been served on           all the members of the family.                (2) Where  such an  order has been passed, or           where any  person has  succeeded  to  a  business,           profession or  vocation formerly  carried on  by a           Hindu undivided family whose joint family property           has been  partitioned on  or after the last day on           which it  carried on  such business, profession or           vacation, the  Income-tax Officer  shall  make  an           assessment of  the total  income received by or on           behalf of  the joint  family as  such,  as  if  no           partition had  taken place,  and  each  member  or           group of members shall, in addition to any income-           tax for  which he  or it  may be separately liable           and notwithstanding  anything  contained  in  sub-           section (1)  of section  14, be liable for a share           of the  tax on the income so assessed according to           the portion  of the joint family property allotted           to him  or it;  and the  Income-tax Officer  shall           make  assessments   accordingly  on   the  various           members and  groups of  members in accordance with           the provisions of section 23:                Provided that  all the  members and groups of           members  whose  joint  family  property  has  been           partitioned 21           shall be  liable jointly has severally for the tax           assessed on  the total  income received  by or  on           behalf of the joint family as such.                (3) Where  such an  order has not been passed           in respect  of Hindu  family hitherto  assessed as           undivided, such  family shall  be deemed,  for the           purposes of  this Act,  to continue  to be a Hindu           undivided family".      Section  25-A   of  the  1922  Act  as  it  stood  then (subsequent modifications  in it  being immaterial  for  the purposes of  this case)  came up  for consideration  by  the Judicial Committee  of the Privy Council in Sir Sunder Singh

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Majithia v.  The Commissioner  of Income-tax, C.P. and U.P.. The Privy  Council held  that section  25-A of  the 1922 Act provided that  if it  be found  that the family property had been partitioned  in definite  portions, assessment might be made, notwithstanding  section 14(1)  on each  individual or group in  respect of his or its share of the profits made by the undivided  family, while holding all the members jointly and severally  liable for  the tax. It was further held that if, however,  though the  joint Hindu  family had come to an end, it  be found that its property had not been partitioned in definite  portions then  the family  was to  be deemed to continue-that is,  to be an existent Hindu family upon which assessment could  be made on its gains of the previous year. But it  was of the view that section 25-A had nothing to say about  any   Hindu  undivided   family  which  continued  in existence never  having been disrupted. Such a case was held to fall  outside sub-section  (3) of  section  25-A  and  in effect, it held that the said section did not apply to cases of partial partition.      In Gordhandas  T. Mangaldas  v. Commissioner of Income- tax, Bombay,  Kania, J.  (as he  then was)  who agreed  with Beaument, C.J.  explained the  scheme of section 25-A of the 1922 Act (as it stood then) in his concurring judgment thus:                "It is material to bear in mind the scheme of           the Income-tax  Act, in  the first instance. Under           sections  2  and  3  the  different  units  stated           therein are  liable to  be taxed  as such.  One of           them is  a joint  Hindu family.  In order to avoid           double taxation, Section 14 lays down 22           that when the individual member is being assessed,           his income  as member of a joint family should not           be assessed  again. Then  comes  the  stage,  what           happens when  a family,  which has  once  been  so           assessed, comes  to  a  partition.  To  meet  that           contingency, Section 25-A has been enacted. In the           section, as  it existed  before the  amendment  of           1939, in  terms the  Income-tax  Officer  required           proof, (i) that a separation of the members of the           joint family  had taken  place and  (ii) that  the           joint family property had been partitioned amongst           the  various  members  or  groups  of  members  in           definite portions.  On being  satisfied  on  those           points he  had to  record an order to that effect.           The effect  of such a recording was that the joint           family income  would be  assessed and recovered in           terms of  sub-section (2).  In the absence of such           order, under  sub-section  (3)  the  joint  family           continued to be assessed as before."      The same  view was followed in Waman Satwappa Kalghatgi v. Commissioner  of  Income-tax  and  in  M.S.M.S.  Meyyappa Chettiar v. Commissioner of Income-tax, Madras.      This Court  had to consider the true meaning of section 25-A of the 1922 Act in Lakhmichand Baijnath v. Commissioner of Income-tax,  West Bengal.  Venkatarama Aiyar, J. speaking for the Court observed in the above case thus:-                "Now, when  a claim is made under section 25-           A, the  points to  be decided  by  the  Income-tax           Officer are  whether there has been a partition in           the family,  and if so, what the definite portions           are in  which the division had been made among the           members or  groups of  members. The question as to           what the  income of  the family  assessable to tax           under section  23 (3)  was would be foreign to the           scope of  and enquiry  under  section  25-A.  That

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         section was, it should be noted, introduced by the           Indian Income-tax  (Amendment)  Act,  1928  (3  of           1928) for removing a defect which the 23           working  of   the  Act  as  enacted  in  1922  had           disclosed. Under the provisions of the Act as they           stood prior  to the  amendment, when  the assessee           was an  undivided family,  no assessment  could be           made thereon  if at  the time of the assessment it           had become divided, because at that point of time,           there was  no undivided  family in existence which           could  be   taxed,  though  when  the  income  was           received in  the year  of account  the family  was           joint. Nor  could the  individual members  of  the           family be  taxed in  respect of such income as the           same is  exempt from  tax under  section 14 (1) of           the Act. The result of these provisions was that a           joint family  which had become divided at the time           of assessment  escaped tax  altogether. To  remove           this defect,  section 25-A  enacted that  until an           order is  made  under  that  section,  the  family           should be  deemed  to  continue  as  an  undivided           family. When  an order is made under that section,           the family  should be  deemed to  continue  as  an           undivided family. When an order is made under that           section, its  effect is that while the tax payable           on the  total  income  is  apportioned  among  the           divided members  or groups, all of them are liable           for the  tax payable  on the  total income  of the           family. What  that tax  is  would  depend  on  the           assessment of  income in  proceedings taken  under           section 23,  and an order under section 25-A would           have no effect on that assessment."      The above  view was  reiterated by  this Court in Kalwa Devadattam and Ors. v. Union of India and Ors. in Additional Income-tax Officer,  Cuddapah v.  Thimmayya and  Anr. and in Joint family  of Udayan  Chinubhai etc.  v. Commissioner  of Income-tax, Gujarat.  The substance  of all  these decisions was that  under  section  25-A  of  the  1922  Act  a  Hindu undivided family  which had  been assessed  to tax  could be treated as  undivided and  subjected to tax under the Act in that status unless and until an order was made under section 25-A (1)  and if in the course of the assessment proceedings it is  claimed by  any of the members of the Hindu undivided family that there 24 has been total partition of the family property resulting in physical  division   thereof  as  it  was  capable  of,  the assessing  authority  should  hold  an  enquiry  and  decide whether there  had been  such a partition or not. If he held that such  a partition had taken place, he should proceed to make an  assessment of  the total income of the family as if no partition  had taken  place and then proceed to apportion the  liability   as  stated  in  section  25-A  amongst  the individual members of the family. If no claim was made or if the claim  where it  was made  was disallowed after enquiry, the Hindu undivided family would continue to be liable to be assessed as such. This was the legal position under the 1922 Act.      The law  relating  to  assessment  of  Hindu  undivided family, however,  underwent a  change when the Act came into force. Section  171 of  the Act which corresponds to section 25-A of the 1922 Act reads thus:      "171.(1)  A Hindu family hitherto assessed as undivided                shall be  deemed for the purposes of this Act

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              to continue  to be  a Hindu undivided family,                except where  and in  so 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 section  143  or  section  144,  it  is                claimed by  or on  behalf of  any member of a                Hindu family  assessed as  undivided  that  a                partition,  whether  total  or  partial,  has                taken place among the members of such family,                the Income-tax  Officer shall make an inquiry                thereinto after  giving notice of the inquiry                to all the members of the family.           (3)  On the completion of the inquiry, 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  the Income-tax Officer                under 25                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 any  thing 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 has 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 and 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.           (8)  The provisions  of this section shall, so far                as may  be, apply in relation to the levy and                collection of

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26                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  admit  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 admits                          of a  physical division  then  such                          division as the property admits of,                          but  a  mere  severance  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."      Section 4(1)  of the  Act which  levies the  charge  of income-tax states  that where  any Central  Act enacts  that income-tax shall  be charged  for any assessment year at any rate or  rates, income-tax at that rate or those rates shall be charged  for that year in accordance with, and subject to the provisions of, the Act in respect of the total income of the previous  year or previous years, as the case may be, of every person.  The expression ’person’ is defined in section 2(31) of  the Act  as including  within its  meaning a Hindu undivided family.  In order  to avoid double taxation of the same income under the Act, any sum received by an individual as a  member of  a Hindu undivided family where such sum has been paid  out of  the income  of the  family is required by section 10  (2) of  the Act  not to be included in computing the total  income of  a previous  year of  any person.  This requirement, however,  is subject  to section  64 (2) of the Act with effect from April 1, 1971. Then follows section 171 of the Act which 27 provides for  the assessment  after  partition  of  a  Hindu undivided family.      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 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 persons or as to properties or as to both. When  there is  partial partition  as to property, the family ceases  to be  undivided  so  far  as  properties  in respect  of   which  such  partition  has  taken  place  but continues to  be undivided  with  regard  to  the  remaining

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family property. After such partial partition, the rights of inheritance  and   alienation  differ   accordingly  as  the property in question belongs to the members in their divided or undivided capacity. Partition can be brought about (1) by a father during his lifetime between himself and his sons by dividing properties  equally amongst  them, (2) by agreement or (3)  by a suit or arbitration. A declaration of intention of a  coparcener to become divided brings about severance of status. As observed by the Privy Council in Appovier v. Rama Subba Aivan"  when the  members of an undivided family agree among themselves  with regard to a particular property, that it shall thenceforth be the subject of ownership, in certain defined shares, then the character of undivided property and joint enjoyment  is taken  away from  the subject-matter  so agreed to  be dealt  with, and  in the  estate  each  member thenceforth a definite and certain share, which he may claim the right to receive and to enjoy in severalty, although the property itself  has not been actually severed and divided". A physical  division of  the property  which is the subject- matter of partition is not necessary to complete the process of partition in so far as that item of property is concerned under Hindu  law. The parties to the partition may enjoy the property in  question as  tenants in  common. In Approvier’s case (supra)  the Privy  Council further  laid down that "if there be a conversion of the joint tenancy of an 28 undivided family  into a tenancy in common of the members of that  undivided  family,  the  undivided  family  becomes  a divided family  with reference  to the  property that is the subject of  that agreement,  and that  is  a  separation  in interest and  in right, although not immediately followed by de facto actual division of the subject-matter. This may, at any time, be claimed by virtue of the separate right."      It is  thus clear  that Hindu law does not require that the property  must in every case be partitioned by mates and bounds or  physically into  different portions to complete a partition. Disruption  of status can be brought about by any of the modes referred to above and it is open to the parties to enjoy their share of property as tenants-in-common in any manner known  to law  according to  their  desire.  But  the income-tax law  introduces certain  conditions of its own to give effect to the partition under section 171 of the Act.      Section 171 of the Act applies to a case where there is a Hindu  undivided family  which had  been assessed  as such under the  Act until  a claim  is made  under section 171(2) that there  has been a partition-total or partial in it. The partition contemplated  under section  171 of the Act may be either total or partial. Here there is a departure made from section 25A of the 1922 Act which was concerned with a total partition only.  In sub-sections  (2)  to  (5)  and  (8)  of section 171 of the Act, the word ’partition’ is qualified by words ’total  or partial’. The Explanation to section 171 of the Act  to which  we shall  revert again  also defines  the expression ’partial  partition’ as meaning 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.  Subsection (2)  of section  171 provides that  where at  the time  of making  an  assessment under section 143 or section 144 of the Act it is claimed by or on  behalf of  any member  of a  Hindu  undivided  family assessed as  undivided that  a partition,  whether total  or partial, has  taken place  among the members of such family, the Income-tax  Officer shall  make an inquiry into the said claim after  giving notice to all the members of the family. On the  completion of the inquiry, the Income-tax Officer is

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required by  sub-section (3)  of section  171  to  record  a finding as  to whether  the claim  of  partition,  total  or partial is  true or  not  and  if  there  has  been  such  a partition, the date on which it has taken place. Sub-section (4) of  section 171  states that  when a finding of total or partial partition has been 29 recorded by  the Income-tax  Officer and  the partition  had taken place during the previous year the total income of the joint family  in respect  of the  period upto  the  date  of partition shall  be assessed  as if  no partition  had taken place and  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 to the tax on the income so assessed Where the finding recorded is that the partition had taken  place after  the expiry of the previous year then the joint family has to be assessed under sub-section (5) of section 171  as if  no partition had taken place and the tax shall be  recoverable mutatis mutandis as provided in clause (b) of  sub-section (4)  thereof. The several liability of a member or  a  group  of  the  undivided  family  has  to  be determined under sub-section (7) of section 171 according to the share  of family  property allotted  to him  or  to  the group, as  the case  may be.  Sub-section (8) of section 171 extends the  above rules of assessment and liability to levy and collection  of any  penalty, interest, fine etc. payable by the family upto the date of partition. Sub-section (6) of section 171  which contains  a non  obstante clause empowers the Income-tax  Officer to recover the tax due from a family from every member of the family before the partition even if he finds  after the completion of assessment that the family has undergone  a partition  already. The true effect of this provision is  discussed in  Govinddas &  Ors. v.  Income-tax Officer & Anr.      Now we  come to  sub-section (1)  of section 171 of the Act which  contains a  ’deeming’ provision.  It says  that a Hindu family  hitherto assessed as undivided shall be deemed for the  purposes of  the Act  to continue  to  be  a  Hindu undivided family  except where and in so far as a finding of partition has  been recorded  in respect of it under section 171. Partition  referred to  here can  obviously  include  a partial  partition   also  either  as  regards  the  persons constituting  the   undivided  family   or  the   properties belonging to it or both, in view of the provisions contained in the  other sub-sections in and the Explanation to section 171. Where  there is  no claim  that  a  partition-total  or partial had  taken place  made  or  where  it  is  made  and disallowed a  Hindu undivided family which is hitherto being assessed  as   such  will   have  to  be  assessed  as  such notwithstanding the fact a partition had in fact taken place 30 as per Hindu law. A finding to the effect that partition had taken place  has to  be recorded  under section  171 by  the Income-tax Officer. He can record such a finding only if the partition  in  question  satisfies  the  definition  of  the expression ’partition’  found in Explanation to section 171. A transaction can be recognised as a partition under section 171 only  if,  where  the  property  admits  of  a  physical division, a  physical division  of the  property  has  taken place. In  such a  case mere physical division of the income without a physical division of the property producing income cannot be  treated as  a partition.  Even where the property does not  admit of a physical division then such division as the property admits of should take place to satisfy the test

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of a partition under section 171. Mere proof of severance of status under  Hindu law  is not  sufficient to  treat such a transaction as  a  partition.  If  a  transaction  does  not satisfy the above additional conditions it cannot be treated as a  partition under  the Act  even though  under Hindu law there has been a partition total or partial. The consequence will be  that the  undivided family  will be continued to be assessed as  such by  reason of  sub-section (1)  of section 171.      At this  stage one  contention urged  on behalf  of the assessee needs to be considered. It is asserted on behalf of the assessee that the fiction contained in section 171(1) of the Act  does not  at all apply to an undivided family which continues to  be in  fact an  undivided family  even after a partial partition  as regards  some of  its  properties  had taken place.  The argument is that a ’deeming’ provision can operate only  where the  real state  of affairs is different from what the law deems as existing and it can not where the real state  of affairs is the same as the one which law by a fiction treats  as existing.  It is  urged  that  since  the undivided family  in fact  continues even  after  a  partial partition as  regards property,  there is no need to enact a rule declaring  that it  shall be  deemed to  continue as an undivided family.  Hence section 171(1) of the Act cannot be construed as  being applicable  to such  a  case.  In  other words, it  is  urged  that  where  all  the  members  of  an undivided family  continue to  be  members  of  such  family owning the  remaining properties  which are  yielding income after a  partial partition  as regards  some properties  has taken place,  the undivided  family is liable to be assessed as such only in respect of the income derived by it from the remaining items  of property  owned by  it  and  the  income derived properties  which have  gone out of the ownership of the family  by reason  of the  partial partition  should  be excluded from  the total  income of  the family. Reliance is placed on the following obser- 31 vations of the Privy Council in the case of Sir Sunder Singh Majithia (supra)  where sub-section  (3) of  section 25-A of the 1922 Act arose for consideration:           "The section  has nothing  to say  about the Hindu      undivided family  which continues  in  existence  never      having been  disrupted. Such  a case  is  outside  sub-      section (3)  because it  is not  within the  section at      all. No  sub-section is required to enable an undivided      family which  has never  been broken up to be deemed to      continue. But  it need  not have the same assets or the      same income  in each  year and it can part with an item      of its  property to  its individual members if it takes      the proper steps."      It is  not necessary  to  make  any  comment  on  these observations as  they had  held the field until the Act came into force  with section  171 inserted in it. The Parliament enacted section  171 after taking note of the above decision and several other decisions following it which had taken the view that  a partial partition did not fall within the scope of section  25-A. It  expressly stated in section 171 of the Act that  the said provision was applicable to both kinds of partitions-total or  partial, It  has also  defined  partial partition  as  one  which  is  partial  as  regards  persons constituting  the   undivided  family   or  as  regards  the properties  belonging  to  the  undivided  family  or  both. Virtually the  present provision  deals with  all  kinds  of partitions the nature of which sometimes may be difficult to predicate correctly.  Take a  joint family  consisting of  a

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father, his  sons and  grandsons as  shown in  the following genealogical tree:                          A                          |                          |                          |      ______________________________________________      |                   |                   |      |                   |                   |      B                   C                   D      |                   |                   |      |                   |                   |   ______________      ___________        ___________  |             |      |         |        |          |  |             |      |         |        |          |  E             F      G         H        I          J      When a  partition takes place in the above family there may be  a partition when all of them-A, B, C, D, E, F, G, H, I and J 32 become divided each of them taking his rightful share in the family property.  In this  case there  is a total partition. The second kind of partition may be amongst four groups, the first consisting  of A  only, the  second consisting of B, E and F,  the third  consisting of  C, G  and H and the fourth consisting of  D, I and J each group taking one fourth share in all  the properties and the branch of B, the branch of C, and the  branch of  D continuing  as undivided families. The third kind  of partition may be a partition where any one of the three  branches the  branch of B, or the branch of C, or the branch of D separates from the rest of the family taking its share  thus resulting  in  two  undivided  families  one family which  has gone  out of  the  family  and  the  other consisting of  the remaining  members. In  these  cases  the partition can  be called partial both as regards persons and as regards properties. The next kind of partition may be one where all the members divide amongst themselves only some of the  family   properties  and  continue  as  members  of  an undivided family  owning the  remaining  family  properties. This is called a partial partition as regards property. Even here the division of the property which is subject matter of partial partition  may be  groupwise also.  In the case of a partial partition  as regards property, one thing noticeable is that  after such  partition, the  property which  is  the subject matter  of partition  is held  by the members of the family as  tenants-in-common and  the  rest  of  the  family properties continue  to be  held by  them as  members of the undivided family.  This  is  the  very  principle  which  is expounded by the Privy Council in Appovier’s case (supra) in the two passages extracted above.      After a  partial partition  as  regards  property,  the property divided  is held  by the  members of  the undivided family as  divided members  with all  the incidents  flowing therefrom and  the property  not so divided as members of an undivided family.  The fiction  enacted in section 171(1) of the Act,  therefore, operate in such a case also because the family which  has become  divided as  regards  the  property which is  the subject-matter  of partial partition is deemed to continue  as the owner of that property and the recipient of the  income derived from it except where and in so far as a finding  of partition has been given under section 171. In such a  case it  is obvious  the real state of affairs is in fact different  from what  is created  by the fiction and it cannot be  said that there is no occasion for the fiction to operate. That  is the true meaning of section 171 (1) of the

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Act. In view of the substantial changes that are brought 33 about in  section 171,  we find  it impossible to accept the contention that  the fiction  in section  171 (1) of the Act does not  operate in  the  case  of  partial  partitions  as regards property  where the  composition of  the family  has remained unchanged.      The answer  to the  first question referred to the High Court by  the Tribunal depends upon the true construction of sub-clause (i)  of clause  (a) of the Explanation to section 171 of  the Act.  The subject matter of partial partition as mentioned earlier,  consisted of eighteen items of immovable property. The  value of each of them is given in the earlier part of  this  judgment.  Under  the  partial  partition  in question, six  persons were  allotted 1/12th  share each  in these eighteen  properties and  four persons  were  allotted 1/8th share each. The total value of the eighteen properties was Rs.  7,26,120.  Six  of  the  members  were,  therefore, entitled to properties of the value of Rs. 60,510/- each and four of them were entitled to properties of the value of Rs. 90,765 each.  Before the  Tribunal two submissions were made on behalf  of the  assessee in  support of the plea that the arrangement entered  into amongst  the parties providing for division of the income of the properties in question without resorting to  physical division  of  the  properties  was  a partition as  defined by  the Explanation  to section 171 of the Act.  The first  submission was that the word ’property’ occurring in  clause (a)  (i) of  the Explanation to section 171 referred  to an  individual item  of property  which  is divided and  not to  all the properties which are divided at the partition-total  or partial-and  hence as  it  had  been accepted by  the Department  that each of the eighteen items of property  could not  be  divided  conveniently  into  ten portion without  destroying its  utility it  had to  be held that the  properties did not admit of physical division. The second submission  which was  urged in  the alternative  was that  even  if  it  was  possible  to  distribute  the  said properties equitably  amongst the  shares by  asking them to make necessary monetary adjustment to equalise the shares as the Explanation  to section 171 did not contemplate any such monetary adjustment,  the assessee could not be denied under section 171  the recognition  of the partial partition which had taken  place as  per Hindu  law. In support of this plea the assessee  depended upon  the opinion  of the  arbitrator Tandon, on  the basis  of whose  award the  decree had  been passed and  also the  evidence of  Lakshman Swaroop tendered before the  Appellate Assistant  Commissioner.  Taking  into consideration all the material before them and having regard to the  shares allotted  to each  of the members, the market value, situation, size and the age 34 of each  of the  items of  the property in question, the tax payable in respect of each of them and also the fact whether an item of property is in the occupation of a tenant or not, the Tribunal  came to the conclusion that it was possible to divide the  properties in question physically into different lots so  that each  member could  take his rightful share in them. The High Court also has expressed the same opinion.      On the  facts and  in the circumstances of the case, we approve of  the above  view of  the High Court. We feel that the properties  involved in  this case  admitted of physical division  into  the  required  number  of  shares  and  such division would not have adversely affected their utility. It is common  knowledge that in every partition under Hindu law unless the  parties agree to enjoy the properties as tenants

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in-common, the need for division of the family properties by metes  and  bounds  arises  and  in  that  process  physical division of  several items  of property  which admit of such physical division  does take  place. It  is not necessary to divide each item into the number of shares to be allotted at a partition.  If a  large number  of items  of property  are there, they  are usually  apportioned on  an equitable basis having regard  to all  relevant factors  and if necessary by asking the parties to make payments of money to equalise the shares. Such  apportionment  is  also  a  kind  of  physical division of  the properties  contemplated in the Explanation to section 171. Any other view will be one divorced from the realities of life. The case before us is not a case where it was impossible to make such a division. Nor is it shown that the members were not capable of making payment of any amount for equalisation of shares. We are of the view that there is no material  in the  case showing  that  the  assessee  ever seriously attempted  to make  a  physical  division  of  the property as  required by  law. All that was attempted was to rely upon  the arbitrator’s  award  and  Lakshman  Swaroop’s evidence which  were rightly  held to be insufficient by the Tribunal to  uphold the  claim of the assessee. The assessee cannot derive any assistance from the decision of this Court in Charandas  Haridas Anr.  v. Commissioner  of  Income-tax, Bombay North.  Kutch and  Saurarhtra,  Ahmedabad,  and  Anr. There the  item of asset which had to be partitioned was the right in  certain  managing  agency  agreements.  The  Court upheld the arrangement of division of commission amongst the members among whom the said right was divided as a partition satisfying the  test laid  down by  the income-tax law as it was of  the view  that any  physical division  of that right meant the dissolution of 35 the managing agency firms and their reconstitution which was not altogether  in the hands of the karta of the family. The Court also  was satisfied  that the  family took the fullest measure  possible  for  dividing  the  joint  interest  into separate interests.  In the  present case  we are  satisfied that no such attempt to divide the properties was made. This case clearly falls under sub-clause (i) of clause (a) of the Explanation to  section 171  of the Act but does not satisfy the requirement  of that  sub-clause as no physical division of the  properties  was  made  even  though  they  could  be conveniently so  divided. Sub-clause  (ii) thereof  does not apply to  this case  at all.  We, therefore,  agree with the answer given  by the High Court to the first question in the affirmative. The  appeal  of  the  assessee  is,  therefore, liable to be dismissed.      Having held that the assessee was not entitled to claim a partial  partition had  taken place under section 171, the High Court  fell into an error in holding that the income of the properties  which were  the subject  matter  of  partial partition could  not be  included in the total income of the assessee by  relying  upon  the  decisions  which  had  been rendered on  the basis of section 25-A of the 1922 Act which had been  construed  as  not  being  applicable  to  partial partitions. We have already held that section 171 of the Act applies to  all partitions-total and partial-and that unless a finding  is recorded  under section  171  that  a  partial partition has  taken place  the income  from the  properties should be  included in  the total  income of  the family  by virtue of  sub-section (1) of section 171 of the Act. To put it in  other words  what would  have been  the position of a Hindu undivided  family which  had claimed  in an assessment proceedings under  the 1922  Act that  a total partition had

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taken place  and had  failed to  secure a  finding  to  that effect in its favour under section 25-A thereof would be the position of  a Hindu  undivided family  which has  failed to substantiate  its  plea  of  partial  partition  as  regards property under section 171 of the Act. The property which is the subject-matter of partial partition would continue to be treated as  belonging to  the family  and its  income  would continue to  be included  in its  total income  until such a finding is  recorded. That is the true effect of section 171 (1). It  was, however,  urged on  the analogy  of the income from a  family property  alienated by a karta in favour of a stranger that  the income which was not actually received by the family could not be taxed and in support of 36 this plea  reliance was  placed on  a decision of the Madras High Court  in A.  Kannan Chetty  v. Commissioner of Income- tax, Madras In that decision it is observed thus:           "For instance, if the karta of a family effects an      alienation or  even makes  a gift.  in so  far  as  the      taxing department  is concerned it is the income of the      members of  the Hindu  undivided  family  that  can  be      assessed, and if by reason of an alienation, whether it      is binding upon the members of the joint family or not,      an item  of property  ceases to  be in the hands of the      joint family, it would not be open to the department to      say  that   they  would   ignore  such  an  alienation,      notwithstanding that  the possession  of the properties      and its  income may  pass into the hands of a stranger.      It may  be different  in cases  where the  joint family      deals with one or more items of property or converts it      into a  different estate  retaining both possession and      income in  its own  hands. That  may properly be a case      where the department may ignore such a transaction."      It is  significant that  in the passage extracted above the Madras  High Court  has distinguished  the  case  of  an alienation in  favour of  a stranger from the case where the joint family  deals with  one or  more items  of property or converts  it   into  a   different  estate   retaining  both possession and  income in  its own hands. We do not consider that such  a plea  is available  to the assessee because the acceptance of such a plea would lead to the nullification of the scheme  of section  171 of  the Act itself. As long as a finding is  not recorded  under section  171 holding  that a partial partition had taken place the Hindu undivided family should be deemed for the purposes of the Act to be the owner of the property which is the subject matter of partition and also the  recipient of  the income  from such  property. The assessment should  be made  as such and the tax assessed can be recovered  as provided  in the Act. In the circumstances, the decision of the High Court on the second question has to be reversed.  We accordingly record our answer to the second question in the affirmative and in favour of the Department. 37      In the  result,  Civil  Appeal  No.  1370  of  1974  is dismissed and  Civil Appeal No. 1768 of 1975 is allowed. The assessee shall  pay the costs of the Department. Hearing fee one set. N.V.K.                                Civil Appeal 1370/1974                                          dismissed and Civil                                    Appeal 1768/1975 allowed. 38