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PETITIONER: THE ADDITIONAL COMMISSIONER OF INCOME TAX LUCKNOW

       Vs.

RESPONDENT: MAHARANI RAJ LAXMI DEVI

DATE OF JUDGMENT:       11/02/1997

BENCH: S.C. AGRAWAL, K.S. PARIPOORNAN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      These  appeals,  by  special  leave,  arise  out  of  a reference  made   by  the   Income  Tax  Appellate  Tribunal Allahabad  Bench,   (hereinafter  referred   to  as   ’  the Tribunal’) under  Section 255(1) of the Income Tax Act, 1961 (hereinafter referred to as ’the Act’) whereby the following question was  referred for the opinion of the Allahabad High Court :      "Where on  the  facts  and  in  the      circumstances  of  the  case  1/6th      income from the from computation of      income   of    assessee   -   Hindu      Undivided   Family   -   could   be      excluded pertaining  to  the  miner      son as Maharaja?"      By the  impugned judgment  the High  Court has answered the said  question against  the Revenue and in favour of the assessee. The  High Court has placed reliance on its earlier decision  in   M/s  Kalloomal   Tapeswari  Prasad   v.   The Commissioner of  Income  Tax,  1973  Tax  Law  Reports  697. Briefly stated the facts are as follows.      Maharaja P.P.  Singh of Balrampur was being assessed as an individual  up to and including the assessment year 1964- 65, He  had no  issue of  his own.  On December 28, 1963, he adapted Maharaja  Dharmendra Pratap  Singh, who was a minor, as his  son. After  the said adoption the status of Maharaja P.P. Singh  was taken  as that of the Hindu Undivided Family (for short  ’HUF’). Maharaja  P.P. Singh  died on  June  20, 1964. Thereafter  his wife,  Maharani Raj Laxmi Devi, became the karta  of the HUF consisting of herself and the afresaid minor  son,   Maharaja  Dharmendra  Pratap  Singh.  For  the assessment  year   1966-67  the   assessee  filed.  For  the assessment  year   1966-67  the   assesses  filed  a  return declaring the  total  income  of  the  Huf  as  Rs.  28935/- Subsequently she  filed another  return  showing  the  total income as  Rs. 25,288/-  The difference between the original and revised  returns was  explained on  the basis  that  the revised return  had been  filed by  the HUF  after excluding 1/6th share  belonging to the minor son. Maharaja Dharmendra Pratap Singh,  As an individual because according to Section

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6   of the  Hindu Succession  Act, 1956, 1/3rd share of Late Maharaja P.P.  Singh in the HUF property devolved on his two heirs Maharaja  Dharmendra  Pratap  Singh  (minor  son)  and Maharaja Raj  Laxmi Devi (wife). The Income Tax Officer held that the  At is a separate, distinct and complete statute in itself and  under the  Act a  changed in  HUF status  can be effected only  by claiming  partition    either  partial  or complete and that such partition could become operative if a claim of  partition has  been preferred  and after examining the evidence produced, and order under Section 171 accepting the claim  of partition  has been accepted by the Income Tax Officer, and  that in  the case  of the  assessee  both  the element where missing. He, therefore, held that the assessee HUF continued  to be  as it  was before.  The said  view was followed by  the Income  Tax Officer  in the Assessments for the Subsequent assessment years 1967-68 to 1970-71. The said view of  the Income  Tax Officer  was upheld  in  appeal the Tribunal reversed  the said  view and  held that the case of the assessee  was not of a partition contemplated in Section 171 and, therefore, no claim was necessary and absence of an order under  section 171 does not mean that the whole estate should be deemed to belong to the assessee HUF. The Tribunal following the  edecision of  the Allahabad High Court in the case of M/s Kalloomal Tapeswari Prasad (Supra), further held that assuming the assessee’s case came under Section 171 the estate of  the assessee  HUF having been diminished in terms of Section  6 of  the Hindu  Suceessinon Act, 1956 but which regard to  Which an  order accepting  the claim  for partial partition has  not been  made, the income from such properly could not  be included  in the  computation of the income of the HUF.  The Tribunal  referred the question abovementioned to the  High Court for its opinion and the said question was answered by  the High  Court in  favour of  the assessee and against  the  Revenue.  The  High  Court  has  followed  its decision in  the  case  of  M/s  Kallomal  Tapeswari  Prasad (supra). Hence this appeal.      Shri  P.A.   Choudhary,  the   learned  senior  counsel appearing for  the revenue,  has argued  that the High Court was in  error in  upholding the  view of  the Tribunal  that Section 171  of the  Act was  not applicable  in the present case. Shri  Choudhary has  pointed out  that the decision of the High  Court in M/s Kalloomal Tapeswari Prasad (supra) on which reliance  has been  placed by  the High  Court in  the impugned  judgment  has  been  reversed  by  this  Court  in Kalloomal Tapeswari  prasad (HUF)  v. Commissioner of Income Tax, Kanpur,  (1982) 133  N.K. Sarade  Thampatty, (1991) 187 ITR 696,  and R.B.  Tunki Sah Baidyanath Pd. v. Commissioner of Income Tax. Bihar -1 Patna, (1995) 212 ITR 632.      Shri  Janender   Lal,  the   learned  counsel  for  the assesses,  has  sought  to  distinguish  the  aforementioned decisions of  this Court  on the  ground that in those cases partial partition was claimed to have been effected and they fell within  the ambit of Section 171 of Act. The submission is that  in the  present case  there was  inheritance of the share of  late Maharaja  P. P.  Singh by his widow and minor son under  Section 6  of the  Hindu Succession Act, 1956 and that in  such a  case where  on account  of  inheritance  by virtue of  statue there is a diminution of the assets of the HUF Section 171 of the Act has no application.      In Kalloomal  Tapeswari Prasad  (HUF)  v.  CIT  (supra) there was  a partial  partition in  respect of  18 immovable properties which  were divided  amongst 10  members  of  the family. There  was no  actual  division  of  the  properties because it was felt that physical division of each of the 18 properties into  10 portion was not possible. The Income Tax

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Officer did not, however, accept that division of Properties was not  possible and,  while considering  the claim  of the assessee under Section 171 of The Act, he did not accept the case of  the assessee that there was a partial partition for the purpose of Section 171 of the Act, he did not accept the case of  the assessee that there was a partial partition for the purpose  of Section  171 of  the Act.  The said view was affirmed by  the Appellate  Assistant Commissioner  and  the Tribunal. The Tribunal referred two question for the opinion of the  Allahabad High Court. The first question was whether the Tribunal  was right  in holding  that the  properties in dispute were  capable of  division in define portion amongst 10 coparceners  as contemplated  in Explanation  n(a) (i) to Section 171  of the Act. The second question was 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 in the income of the  assessee, a  HUF. The  High Court answered the first question in  the affirmative  and upheld  the  view  of  the Tribunal 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, however, answered  the second  question  in  favour  of  the assessee and held that the income accuring from 18 immovable properties after  the partial partition was not liable to be imcluded in the computation of the included of the HUF. This Court, while  agreeing with  the answer  given by  the  High Court on  the first question, did not agree with the view of the  Allahabad   High  Court  on  the  second  question.  On interpretation of  the provisions  of Section 171 of The Act this Court has held:      "Where there  is no claim made that      a partition- total or partial - had      taken place  or where it is made an      disallowed a Hindu Undivided Family      which in  higher to  being assessed      as such will have to be assessed as      such notwithstanding  the fact that      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.      [p. 704]      "We have  already held that Section      171  of  the  Act  applied  to  all      partitions - total or partial - and      that unless  a finding  is recorded      under Section  171 that  a  partial      partition has  taken place  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."      [p.901]      This Court has taken note of the decision of the Madras High Court  in A Kannan Chetty v. Commissioner of Income Tax (1963) 50 ITR 601, wherein was observed :-      "For instance,  if the Karta of the      family  effects  an  alienation  or

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    even makes  a gift,  insofar 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 any      alienation, whether  it is  binding      on 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   to  the  hands  of  the      stranger."      This Court  did not  agree with  these observations and said:-      "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 purpose of      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."      The same view was reiterated in ITO v. Smt. N.K. Sarada Thampatty (supra).  It was a case where a preliminary decree for partition had been made out but the final decree had not been passed  and not division of the properties by metes and bounds had taken place.      In R.B. Tunki Sah Baidyanath Pd. v. CIT, Bihar-I, Patna (supra) the  Hindu Undivided Family consisted of Rai Bahadur Tunki Sah,  the Karta,  his wife  Budhi Devi, son Baidyanath Prasad and  daughter-in-law Godawari Devi. Rai Bahadur Tunki Sah died  in 1955  and on his death Baidyanath Prasad became the Karta  of the  Hindu Undivided Family. Budhi Devi, widow of Rai Bahadur Tunki Sah, was entitled to a limited interest in the  property under  the provisions  of the Hindu Womens’ Right property Act, 1937. After the coming into force of the Hindu Succession Act, 1956, her limited interest turned into an absolute  one and  she acquired absolute ownership rights under section 14(1) of the said Act. Budhi Devi died in 1960 or thereabout  and her  share was  inherited by her only son Baidyanath Prasad.  Baidyanath Prasad  and his wife Godawari Devi adopted  Nand Kumar  as their  son sometime in 1961. On may 3,  1969, Baidyanath  Prasad executed  a registered gift deed in  respect of  his share  in the property which he had inherited from  his mother  to his  adopted son  Nand  Kumar which gift  was accepted by the Gift Tax Officer. During the assessment year  1970-71 and 1971-72 the Income Tax Officer, while assessing  the Hindu  Undivided Family and Nand Kumar, accepted the  contention of  the assessee  that only  50 per Cent of  the income  from  the  property  and  business  was assessable in the hand of the Hindu Individed family and the balance in  the hands  of the adopted son Nand Kumar. In the subsequent years  1972-73 to  1975-76 the Income Tax Officer rejected the assessee’s contention that the income as liable to be  divided 50: 50 between the Hindu Undivided Family and adopted son Nand Kumar and assessed the entier income of the Hindu Undivided  Family, The  said view  of the  Income  Tax

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Officer was  upheld by  the Appellate Assistant Commissioner but the  Tribunal held  that only  50 per cent of the income should be  assessed as  income of the Hindu undivided Family leaving the balance 50 per cent to assessed as income of the adopted son  Nand  Kumar.  The  High  Court,  on  reference, reversed the  view taken by the Tribunal and upheld the view taken by  the Appellate  Assistant Commissioner. Before this Court the questions of Section 171 of the Act was necessary. This Court has laid down:-      "Sub-Section (1)  of Section 171 in      terms provided  that a Hindu family      Higher  to  assessed  as  undivided      shall be deemed for the purposes of      this Act  to continue to be a Hindu      Undivided Family,  except where and      insofar as  a finding  of partition      has been  given under  this section      in respect  of the  Hindu Undivided      Family. On  a plan  reading of this      sub-section it becomes clear that a      Hindu family  which is  assessed as      undivided has  for the  purposes of      the Act  to be deemed t continue as      such unless  there is a evidence of      partition and  finding is  recorded      to that  effect under  the  Act  in      respect of such family. The section      creates  a   deeming   fiction   of      continuing the  HUF except  where a      finding of partition has been given      in respect  of the  HUF  concerned.      Before this  finding is recorded an      inquiry has to be undertaken on the      question whether  there has  been a      total  or   partial  partition  the      Joint family  property and if there      has been  any such  partition,  the      date on which it took place."      [p. 635]      "In the  instant case, admittedly ,      no inquiry  was undertaken  on  the      question whether  there had  been a      total or  partial  partition of the      joint family  property and  if  yes      the date  on  which  it  had  taken      place. That  being so,  in view  of      the language  of Section  171  (1),      the HUF would be liable to be taxed      as  undivided  notwithstanding  the      effect  of  Section  14(1)  of  the      Hindu succession Act."      Reliance has  been placed  by the Court on the decision in Kalloomal  Tapeswari Prasad  (HUF) v. CIT (supra) and ITO v. Smt  N.K. Sarada  Thampatty (supra).  On  behalf  of  the assessee it  was urged  that in  view  of  the  language  of Section 14(1)  of the  Hindu Succession  Act, 1956 the widow acquired and  absolute right  by statute  and, therefore, if the view  urged by  the revenue  was accepted as correct, it would be  setting the  clock back to the position as existed prior to  Hindu Succession Act, 1956, which could not be the intention  of  the  Legislature.  The  said  contention  was rejected by  the Court  by referring  to the decision of the Madras High Court in A. Kannan Chetty v. CIT (supra) holding that an  alienation by  the Karta of the family in favour of the a  Stranger could  not be  ignored by the department and

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the observations of this Court in Kalloomal Tapeswari Prasad (HUF) v.  CIT (supra)  disagreeing with the said view of the Madras High Court.      It is not doubt true that in Kalloomal Tapeswari Prasad (HUF) v.  CIT (supra)  and ITO  v. Smt N.K. Sarada Thampatty (supra)  this  Court  was  dealing  with  cases  of  partial partition by  way of  voluntary act  of the parties which is directly covered  by Section  171 of the Act. But R.B. Tunki Sah Baidyanath  Pd. v.  CIT (supra) was a case where a claim was made  on the  basis of  statute, viz., the provisions of Section 14(1)  of the Hindu Succession Act, 1956, and it was held that  Section 171  of the  act would  govern the matter insofar as income tax law is concerned. For the same reason, it must  be held  that  though  for  the  purpose  of  Hindu undivided Family,  Section 6  of the  Hindu succession  Act, 1956 would  govern the  rights of the parties but insofar as income tax law is concerned the matter has to be governed by Section 171(1) of the Act.      For the  reason aforementioned,  the question  question referred to  the High  Court must, therefore, be answered in favour of  the Revenue and against the assessee and it is so answered. The appeal is/are allowed accordingly. No order as to costs.