APOORVA SHANTILAL SHAH versus COMMISSIONER OF INCOME TAX GUJARAT-I, AHMEDABAD

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APOORVA SHANTILAL SHAH

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COMMISSIONER OF INCOME TAX GUJARAT-I, AHMEDABAD

March 3, 1983

[P. N. BHAGWATI AND AMARBNDRA NATH SEN, 'JJ.J "

Partial partition- lVhether the father in exercise of his right as "patrla potestas" or otherwise can effect a pa,tial partition between himself and his minor so1',_s of joint family properties of a Hindu Joint Family governed by the Mitakshara School of Hindu Law-Income Tax Act, 1961, Section 171.

the

The assessee

is a Hind undivided Family consisting of four members, namely, Sri Apoorva Sbantilat Shah, his wife Smt. Karuna and their minor sons Chintan and Tejat. During assessment pertaining to the assessment year 1975-76. Shri Apoorva as a Karta of the H.U.F. made an application to the Income Tax Officer for recognising partial partition under S. 171 of the Income .Tax Act, 1961 (hereinafter referred to as the Act) claiming that two partial parti· tions had taken place amongst the members of the said family, one on 24.12.1973 in respect of 200 shares of Gujarat Steel Tubes Ltd. and the other on 29.12.1973 in respect of 1777 shares of the same company. The Ince.me Tax Officer refused to· record them for three reasons. namely (i) the partitions have not been made at the instance of the minor sons; (ii) after making certain allocations in favour of the two minor sons, the remaining shares were not allotted in their entirety to the remaining third coparcener, namely Apoorva separately or Apoorva and Smt. Karunajointly describing them as H.U.F'. and (iii) the distribution of shares had not been made equally either amongst the three members including the two minor sons or amongst the four members of the H.U.F., as Apoorva's wife Karuna also became entitled to an equal share on partition between the father and sons. The appeal preferred before the Assistant Appellate Commissioner was accepted. The further appeal, by Revenue to the Income Tax Appellate Tribunal was allowed since the Tribunal was of the opinion that the partial partitions in the instant case, being outside the framework of the Hindu Law could not be recognised as valid for the purposes 6f Section 171 of the Income Tax Act. All the questions referred to in the reference under Section 256 (1) to the High Court were answer assessee. The High Court held that under Hindu Law the ed against father has no power or authority to effect any partial partition of joint family properties between himself and &his minor sons. Hence the appeal by speci~l Jeave.

the

AHowing the appeal, the Cour~

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APOORVA SHANTILAL v. c.1.r.

493

HELD : J. I. Partial Partition of the shares belonging to the Hindu A

undivided Family cannot be said to be bad either under the Hindu Law or under the Indian Income Tax Act.

[514 H, SIS A]

1.2. Partial partition of properties brought about by the father between himself and his minor sons is valid and binding under the Hindu Law. This right of the father to effect a partial partition of joint family properties between himself and bis minor sQDs, whether in exercise of bis superior riaht as father or in exer cise of the right as patria poles/as has neqessarily (_to be exercised bona fide by the father and is subject to the right of the sons to challenge the partition, if the parti tion is not fair and just. [Sll C·E]

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1.3. The

right of the father to bring about the disruption nf the joint family properties in exercise pf his superior right, as fathCt" or of his rights as patria potestas is recognised in ancient Hindu Law.

[509 D-E]

1.4. The stand taken by the High Court to the effect that the propo,ition down by judicial decisions to the effect that partial partition of a joint laid Hindu family qua some joint family properties or qua some members of the joint family is permissible and valid in law, will apply only when partial partition is f':ffected with the consent of the members of joint family and cannot be extended to a case when partial partitiori is sought to be brought by father in exercise of his superior rights as father or his right as patria potestas is incorrect. (509 F-H]

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If the father in exercise of his superior

right or of bis right as patria potestas in entitled to bring about a complete disruption of the joint family and to effect a complete partition of joint family properties of a Hindu joint family consisting of himself and bis -minor sons even against the wishes of the minors and if partial partition be permissible with the consent of sons when they have all become major, the pOwer or authority of the father to effc:ct the partition of properties c.aonot be limited only to a case where the partition is tot111. Even if · the test of consent is to apply, the father as the natural guardian of the minor sons will normally be in a position to give such consent and it cannot be said as matter of universal application )hat in all such cases of partition, part.iaJ or other· wise, there is bound to be a conflict of interest between the father and bis sons. If tbe father does not act bonafide in the matter when he effects partition of joint family properties between himself and his minor sons, whether wholly or partially the sons on attaining majority may challenge the partition and ask for appropriate ~eliefs lincluding a proper partition. In appropriate cases even during minority, the minor sons through a proper guardian may impeach the validity of the parti tion brought ab~ut by the fathCr either in entirety of the joint family properties or only in respect of part thereof, if the partition had been effected by'(be father to the detriment of the minor sons and to the prejudice of their interest. [SID A-HJ

Charandas Haridas v. Commissioner of Income Tax, Bombay'(1960) 39 I. T.R. 202 (S.C.) Kalloomal Tapeswari Prasad (HUF) v. Commissiontr of Income Tax. Kanpur (1982) 133 l.T.R. 690 {S.C.) followed: ·

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SUPREME COUF:T REPORTS

[19831 2 S,C.R.

1.5. The provisions of the Income Tax Act, 1961 before the amendment by Finance Act (No. 2 of 1980) also clearly recognise partial partition. The defini· tioo of partial partition in Explanation (b) filakes it clear that partial partition as regards the persons constituting the Hindu undivided family or as regards proper [514 F·G] ties belonging to the Hindu Undivided family, or both, is recognised.

2.1. A partial partition of any joint family property by the·father between himself and his sons does not become inva1lid on the ground that there bas been no equal distribution amongst the co-sharers It is expected that the father who seeks to bring about a partial partition of joint family properties will act bana fide in the interest of the joint family and its members bearing in mind in particular the interest of the minor sons. If, however. any such partial revision causes any prejudice to any of the minor sons and if any minor son feels aggrieved by any such partial partition, be can always challenge the validity of such partial parti· tion in an appropriate proceeding and the validity of such partial partition will necessarily have to be adjudicated upon in the proceeding on a proper considera tioil of an the facts and circumstances of'the case. Till such partial partition has been held to be invalid by any competent court, the partial partition must be held to be valid.

[515 D-FJ

2.2. It is

not open to the Income-tax Authorities to consider a partial partition to be invalid on the ground that shares b3.ve not been equally divided apd to refuse to recognise the same. It is uodoubted_ly open to the: Income-tax Officer before recognising the partition to come .to a conclusion on proper enquiry whether the partition is genuine or not. If the Income·tax Officer on enquiry comes to a finding that the partition is sham or fictitious, be will be perfectly within his right to refuse to recognise the same. [515 F-GJ

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In the instant case, there is no:, finding that

the partial partition is sham or fictitious or that the partial partition is not a genuine one and ha~ not been acted upon. As there is no finding that the partial partition is sham or ficti· tious or not a genuineione, on enquiries made by the Income-tax Officer, and as the partial partition is otherwise valid under the Hindu Law1 the partial partition baS necessarily to be recognised under the provisions of S. 171 of the Income-tax the assessment must be necessarily made on the basis that there is Act and partial partition of the said shares. _[515 H, 5,16 A-BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 35 of

1982

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Appeal by Special leave from the Judgment and Order dated the 9th July, 1981 of the Gujarat High Court in Income Tax Refer ence No. 28 of 1980.

P.H. Parekh, Harlsh Salva and Gautam Philip for the Appel-

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APOORVA SHANTILAL v. C.l.T. (A.N. Sen, J.)

49S

S.C. Manchanda, Anii·Dev Singh and Miss A. Subhashini for

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the Respondent.

The Judgment of the Court was delivered by

AMARENDRA NATH SEN, J. The principal question for decision in this appeal by Special Leave is whether the father in exercise of his right as Patria Potestas or otherwise can effect a partial partition between himself and his minor sons of joint family proper ties of a Hindu joint family governed by the Mitakshara School of Hindu Law.

The assessee, a Hindu undivided family (hereinafter referred to as H.U.F.), which consists of four members, namely,(l) Shri Apoorva Shantilal Shah, 2) bis wife Smt. Karuna and their minor sons (3) Chin tan and 4) Tejal, is the appellant before us. The members of the H.U.F. are governed by the Mitaksbara School of Hindu Law. The assessment year in question is the year 1975-76. During the assess ment pertaining to the assessment year under consideration, Sbri Apoorva who is the father of the minor sons and husband of Smt. Karuna and the Karta of the H. U .F. made an application to the Income Tax Officer for recognising partial partition under S. 171 of the Income Tax Act, 1961 (hereinafter referred to as the Act), claim ing that two partial partitions had taken place amongst the members of the said family, one on 24.12.1973 in respect of 200 shares of Gujarat Steel Tubes Ltd. and the other on 29.12.1973 in respect of 1777 shares of the same company.

On enquiry the Income-Tax Officer (hereinafter for the sake of brevity referred to as I.T.O.) found that the partial partitions had been embodied in memoranda of agreements of partition. The I.T.O. however, refused to record that there had been a partial partition of joint family properties, as he was of the view that partial partitions in question could not be recognised inasmuch as the remaining shares, after making certain allocations in favour of the two minor sons were . third coparcener, not allotted in their entirety to the n•mely, Sbri Apoorva separately or to Shri Apoorva and his wife Karuna jointly, describing them as members of the H.U.F. The I.T.O. further held that the said partitions did not purport to have been made at th~ .instance of the minor children, as this course would re quire the apprQY!!l ()f the <;:ourt b11t the s~me l!ad been purported to

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496

SUPRBMB COURT RBPORTS

(1983) 2 S.C.R.

have been m.ade at the instance of Shri Apoorva. The I. T.O. hinted in the order that the distribution of the shares had not been made equally either amongst the three.members including the two minor sons or amongst the four members of the H. U.F., as Apoorva's wife Karuna also became entitled to an equal share on partition between the father and the sons.

Against the order of the I.T.O. the assessee H.U.F. presented an appeal before the Appellate Assistant Commissioner (hereinafter referred to as A.A.C. for the sake of brevity). The A.A.C. allowed the appeal and held that there had been genuine partial partitions the coparceners in respect of the said shares. The A.A.C. between held that it was not necessary to obtain courCs sanction even in a case where some of the parties to the partition were minors. As regards the point that the distribution of shareholdings had not been made on equal basis, the A.A.C., taking into consideration some earlier partitions, came to the conclusion that the distribution had been equally made. The A.A.C. further observed that even if the distri· bution had not been made on equal basis that would not affect the validity of the partitions in question and the minor sons, if they felt this regard, could on attainment of majority seek to aggrieved in avoid the said partitions.

Aggrieved by the order of the A.A.C., the Revenue went up in appeal to the Income· Tax Appellate Tribunal (referred to as tribunal hereinafter for the sake of brevity) to challenge]the A.A.C's recogni· tion of the said partitions. The Tribunal held for reasons recorded in the order that partial partitions in the instant case were out,ide the framework of the Hindu Law and as such they could not be recogni· sed as valid for the purposes of S. 171 of the Act. In that view of the matter the Tribunal . set asideihe A.A.C's order and restored the order of the I.T.O.

Under S. 256 (1) of the Act, the Tribunal referred the

follow

ing question to the High Court :-

(I) Whether on the facts and in

the circumstances of the'.case, the Tribunal was!right in holding that Shri Apoorva Shantilal could not himself have given consent on behalf of his minor sons to the partitions proposed b:y him in bis individual capacity as father 7 .

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APOORVA SHANTILAL P. C.l.T. (A.N. Sen, .1.)

497

(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the partial partitions were outside the framework of Hindu Law ?

(3) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the partial partitions could not be recognised as valid for the purpose of section 171 of the Income·tax Act, 1961?

( 4) Whether on the facts and circumstances of the case, in holding that partial partitions the Tribunal was right made by a Hindu father in exercise of his patria potestas cannot be recorded as a valid partitions under section 171 of the Income-tax Act, 1961 ?

(5) Whether on the facts and in the circutnstances of the case, the Tribunal was right in holding that the partial partition did not amount to a family arrangement in which the father acted as a natural guardian of the two minors sons after he bad exercised. his patria potestas?

(6) Whether the Income-tax Department is competent the exercise of patria potestas by a Hindu to challenge father in respect of coparcenery property, making a partial partition?

For reasons recorded in the judgment the High Court answered all the questions in the affirmative and against the assessee. The High Court in its judgment has held that the father under the Hindu Law has no power or authority to effect any partial partition of Joint family properties between himself and his minor sons. The High Court has observed that apart from the decision of the Madhya Pradesh the case of Commissioner of Income-tax v. Seth High Court in Gopaldas H.U.F. (') there was no decision of any court on the point. The High Court also considered other decisions and books and treatises on Hindu Law. The Higb,Court held that on a consideration of the authorities, the following propositions were established :.

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I. From the. stand point of ancient Hindu Law, what was recognised was only a paflition in respect of all the

(I) (1979) 1161.T.R. sn"

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SUPREME COURT 'REPORTS

11983) 2 S.C.R.

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properties of the H.U.F., upon disruption of the status of H.U.F. regardless of whether the properties were actually divided by metes and bounds or whether these were there after (after distruption of joint status) held as tenants-in common.

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2. Partial partition in the sense of division in respect of part of the assets while continuing the status of HUF in respect of rest of the assets was not known to the ancient Hindu Law and was not recognised by ancient Hindu Law.

3. Partial Partition in the sense of division of some of the properties whilst continuing the status of HUF in res pect of other items of property originally belonging to the HUF came to be recognised only later on by evolution of custom and by judge-made law.

4. Such a partial partition was so recognised only if it was made by consent of all the coparceners. In other words, partial partitions in respect of only some items of property whilst continuing the status of HUF in respect of rest of the items of property could be effected only with the consent of all the coparceners. When there was a disruption of the status of the HUF only one or more of the coparceners could not insist for division of some items of the property without effecting division in respect of all the items of 'pro· perties except by consent of all the coparceners.

5. In respect of a joint family consisting of a father and bis sons, the traditional Hindu Law recognised the right of a father in his capacity as patria protestas to exer cise his extraordinary power to disrupt the Status of HUF and to divide bis sons inter se without their consent subject to the rider that 'all' assets of the HUF were subjected to partition.

6. The aforesaid extra-ordinary power is subject to the that he gives to his sons an equal share and qualification division is not unfair (vide Gupte's Hindu Law 2nd Edn., Page 259). "The Power of the father to sever the sons inter se is a survival of the patria potestas and may be exercise<l

APOORVA SHANTILAL v. C.I.T. (A.N. Sen, J.)

499

by him without the consent of his sons'" ... "Again, in all cases his power must be exercised by him bonafide and in accordance with law; the division must not be unfair and the allotment must be equal. He must give his sons equal share with himself."

'1. There is nothing in (I) either ancient Hindu Law or (2) cµstomary or judge·made law which authorises the father in exercise of his extraordinary power to effect a partial partition of HUF consisting of himself and his minor sons by dividing some items of properties whilst continuing the joint status in respect of the rest of the properties.

The High Court observed :-

"The validity of the aforesaid propositions is incapable of being disputed and has not been disputed. What has bee.o contended on behalf of the assessee is that whilst there is no express provision in so many words, either in the ancient Hindu texts or Judge-made law, that the power of a Hindu father to effect partition of a HUF consisting of him· self and his sons including minor sons in exercise of his power as patria protestas extends even to partition in res pect of only some items of property it to be inferred by implication. Io other words, it is argued that though there is no express reference to the power to effect that partial partition in the sense of division of some items of property while continuing the status of HUF in respect of the rest and though such power is not recognised in terms, it follows as a necessary corollary."

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The High Court noted that this contention has been nega tived by the Madhya Pradesh High Court in the case of Gopalda1 (supra) and the High Court for reasons recorded in~the judgment rejected this contention. The High Court further held that the transaction in question was in any event invalid in the facts and in the circumstances of this case.

Aggrieved by the judgment of the High Court, the assessee

with special leave granted by this Court has preferred this appeal.

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SUPREME COURT REPORTS

(19831 2 s.c.R

In this appeal before us, two main contentions have been urged on behalf of the appellant. The first contention urged is that the High Court went wrong in holding that the father cannot effect any valid partial partition between himself and his minor sons of joint family property belonging family consisting of himself, bis wife and minor sons who are governed the Mitakaslira School of Hindu Law. The other contention by raised is that the High Court erred in coming to the conclusion that in the facts and circumstances of this case, the partial parti tions were invalid.

to a Hindu undivided

Mr. Desai learned counsel appearing on behalf of the appellant

bas advanced the following arguments.

!. According to the Mitakshara School of Hindu Law, the father has a power to divide ancestral property among his sons and the partition made by him is binding on bis sons provided that the power is exercised bonafide and in accordance with law which regulates and restricts it in the interests of his sons. This power on the part of the father is recognised in text books on Hindu Law and has been accepted in a number of decisions beginning · with the case of Kandaswami v. Doraisami, Ayyar.(')

2. A father in any SU•ch case of ancestral property has the power to separate frcm all or from even some of his sons remaining sons or leaving them to continue as a joint with the other joint family with each other. The consent of the sons is not neces sary for the exercise of that power whether they are majors or In this connection reference is made to para 323 of Hindu minors. Law by D.F. Mulla and para 458 at p. 559 of Mayne's Hindu Law (lithe Edn.).

Para 323 of Mulla's Hindu Law, II th Edn. at page 443 and

444 reads as follows :-

"The father of a joint family bas the power to divide the family property at any moment' during his life, pro vided he gives his sons equal shares with himself, and if he does so, the effect in law is not only a separation of the father from the sons, but a separation of the sons inter se. The consent of the som1 is not necessary for the exercise

(I) 1.L.R. (1880) 2 Mad. 317,

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APOOilVA SHANnLAL v. C.I.T. (A.N. Sen, J.)

501

of that power. But a grandfather has no pow.er to bring about a separaration among the grandsons. ' The right of a father to sever sons inter se is a part of the patria potestas still recognised by the Hindu Law."

Para 458 of Mayne's Hindu Law and Usage, 11th Edn. at

p.559 and 560 reads as follows :-

"Partition may be either total or partial. A partition may be partial either as regards the persons making it or the property divided .

. It is open to the members of a joint family to sever in interest in respect of a part of the joint estate while retaining their status of a joint family and holding the rest as the properties of an undivided family.

Any one coparcener may separate from the others, but no coparcener except the father or grandfathers, can com pel the others to become separate amongst themselves. A father may separate from all or from some of bis sons, remaining joint with the other sons or leaving them to continue a joint family with each other. A separation between coparceners, for instance, between two brothers, does neither necessarily nor even ordinarily involve a separation between either of the coparceners and his own sons."

3. So extensive and wide is this patriarchal power of the father that it bas been recognised even in cases where all the sons were minors or an only son was a lunatic. Reference is made to the decision of the Bombay High Court in the case of Bapu Hambira Patil v. Shankar Bhau Patil,(') and to the decision of the Madras High Court in the case of Venkataswara Pattar v. K. Mankayammal.(')

4. S. 171 of the Income-tax Act, 1971 and S. 25A of the earlier Act have been . all along accepted as machinery provisions and not In the earlier Act though there was no express charging sections. reference to partial partitions, the preferable view experessed in deci·

(1) A.J.R. 1!126 Born. 160. (2) A.l.R. 1933 Mad. 775,

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sions under that Act was that if there was a partial partition of an asset of the family or an asset of the family was divided and a partnership was constituted and the family continued joint as regards other properties, the assessment on the basis of undivided Hindu family would be confined to the income of the properties so remain ing undivided and the income of the property partitioned would be excluded from the computation of the income for assessment. It was only income received from the properties not partitioned that would be considered to be the income of the joint family. Reliance has been placed on the decision iu the case of Charandas Haridas v. C.I.T. Bombay. (1

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5. This power of the father has been described as bis "superior power" or "peculiar power'\ or "patria potestas". There is neither principle nor authority for the proposition that the exercise of this independent and extensive powc:r of the father even in the context of minor sons could not take into its purview the lesser power to partition only some of the family properties without disrupting the status of the members of the joint family as regards other pro perties even when it is a genuine exercise of the lesser power. At no time was· there recognised any limitation or inhibition on the power of the father, though of course the partition effected by him had to be fair and equitable. There is no text of Hindu Law which prohibits partial partition whether as to person or as to property.

6. The decision of the Privy Council in the case of Appovier v.· Ram Subba Aiyan,(') when it speaks of partial partition of the joint family by agreement of tbc coparcener cannot possibly be read as restricting the patriarchal and superior power of the father to effect division of the entire joint family properties and to exclude operation in case of exercise of the lesser right of division of only some of the family properties.

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Mr. Manchanda learned counsel appearing on behalf of the

department, bas advanced the following arguments :

(!) [1960] 39 I. T.R. 202. (2) [1866] 11 M.I A. 7,,

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APOORVA SHANTILAL 1•. c.I.T. (A.N. Sen, 1.)

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I. Under ancient Hindu Law, partial partition was unknown. Severence of status disrupted the family. The joint family foeed not If it has property, then its separa necessarily have any property. tion is only an incidence of the severence of status.

2. Partial partition is judge-made law and the earliest case where this was mooted was in 1846 in the case of Rewun Prashad v. Radha Beeby.(1) This was followed in Appovier's case (supra) and then in certain decisions of Indian Courts. Reference is also made to paragraph 458 of Mayne's Book on Hindu Law and Usage for contending that agreement between the parties is a sine qua non.

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law which has

3. The powers of patria potestas are confined mainly to the power to sever the status of the joint family as a whole. recognised partial partition has Judge· made attempted to extend feudal archaic patriarchal to joint families so as to include powers ·of patria potestas the consent of the parties. the power of partial partition with There could be no justification for now extending it, particularly as the legislature itself, as per the Finance Act (2) 1980 w.e.f. 1,4.80 has de-recognised partial partition altogether. Sub-section· (9) has been added to S. 171 of the Act and by this provision partial parti tion of a HUF effected after 31.12.78 will be de-recognised for income-tax purposes and this sub-section bas been incorporated with the object of curbing the creation of multiple HUF by making partial partitions. Where a HUF is taxed in the status of HUF it will continue to be taxed as such unless there has been a total parti tion of the family properties by metes and bounds and an order to that effect is recorded by I.T.O.

4. The powers of patria potestas of a father have always been understood to be restricted and limited to a complete and whole partition. This power can only be exercised with regard to the entire property, provided the property is divided equally and fairly by the father.

We may observe that in course of the hearing, reference was made to a number of decisions of various courts by the learned counsel for the parties.

(2) (1846] 4 M.J.A. 137@ 165.

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We shall now proceed to consider the decisions which appear to us to have a material bearing on the question involved in the appeal. We shall first refer to the decision of this Court in the case of to Charandas Haridas have the question and which considers an earlier decision of the Privy Council, does not appear to have been cited before the High Court. The material facts of this case may be briefly noted ;-

(supra). This decision which appears

clear bearing on

Charandas Haridas WllS the Karta of a Hindu undivided fall!ilY consisting of his wife, Shantabcm, three sons and himself. He was a In previous years partner in six managing agcmcy firms in six mills. the income received by him as partner in these Managing Agencies was being assessed as the inc:ome of the Hindu undivided family. On December JI, 1945, CharandaLS Haridas acting for bis three minor sons and himself and Shantaben bis wife, entered into an oral agreement for partial partition. By that agreement Cbarandas Haridas gave one pie share to bis daughter Pratibba in the manag ing agency commission from two of the six managing agencies held by the family. The balance' together with the other shares in the other managing agencies was divided in five equal shares between Charandas Haridas, bis wife and sons. This agreement was to come into effect from !st January, 1946 which was the beginning of a fresh accounting year. On I Ith September, 1946 Cbarandas Haridas acting for himself and bis minor sons and Shantaben executed a memorandum of partial partition in which the above facts were recited, the document purporting to be a record of what bad taken place orally earlier. In the assessment year 1947.4g and 1948-49, Cbarandas Harida.s <olaimed that the income should no longer be treated as income of Hindu undivided family but as separate income of the divided members. The Income-tax Officer de clined to treat the income as any but of the Hindu undivided family, and assessed the income as before. An appeal to the Appellate Assistant Commissioner was unsuccessful and the matter was taken to the Income-tax Appellate Tribunal. The Tribunal held that by the document in question, the di vision, if any, was of the income and not of the assets from which the income was derived inasmuch as "the agreements of the managing agency with the managed com panies did not undergo any change whatever as a result of the alleged partition." The Tribunal, ther·efore, held that the arrangement to share the receipts from this source of income was not binding on

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APOORVA SHANTILAL v. C.l.T. (A.N. Sen, J.)

505

the department, if.the assets themselves continued to remain joint. It further held that the document was "a farce", and did not save family. The the family from a•sessment as Hindu undivided following question as directed by the High Court on the application of Charandas Haridas was referred to the High Court :

"Whether there were materials to justify the finding of the Tribunal that the income in the share of the com mission agency of the mills was the income of the Hindu undivided family ?"

The High Court held that though the finding given by the Appellate Tribunal could not be construed as a finding that the document was not genuine, the method adopted by the family to partition the assets was insufficient to bring about the results intend ed by it. According to the High Court the Tribunal was right in holding ·that the document was ineffective and though the income might have been purporte.d to be divided and might, in fact, have been so divided, the source of income still remained undivided as belonging to the Hindu undivided family. The High Court accor dingly answered the question in the affirmative holding that there were materials before the Tribunal to enable the Tribunal to reach the conclusion that in so far as these income-bearing a ssets were con cerned, they still belonged to the Hindu undivided family. The assessee Cbarandas Haridas filed an appeal in this Court with special leave granted by this Court. This Court allowed the appeal. At page 207, this Court referred to the following observations of the Privy Council in Apoovier v. Rama Subba Aiyan (supra).

"Nothing can express mere definitely a conversion of the tenancy, and with that conversion a change of the '{he produce is status of the family quoad this property. no longer to be brought to the common chest, as repre senting the income of an undivided property, but the proceeds are to be enjoyed in six distinct equal shares by the members of the family, who are thenceforth to become entitled to those definite shares."

Thereafter this Court proceeded to hold at page 208 :-

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"In our opinion, h"re there are three different branches of law to notice. There iis the law of partnership, which takes no account of Hindu undivided. family. There is also the Hindu Law which permits a partition of the family and also a partial partition binding upon the family. There is then the income-tax law, under which a particular income may be treated as the income of the Hindu undivi ded family or as the income of the separated members enjoying separate shares by partition. The fact ofa parti tion in the Hindu Law· may have no effect upon the posi tion of partner, in so far as the law of partnership is concerned, but it has full effect upon the family in so far as the Hindu Law is concerned. Just as the fact of a karta becoming a partner does not introduce the member of the undivided family into the partnership, the division of the family does not change the position of the partner vis-a-vis the other partner or partuers. The Income-tax law before the partition takes note, factually, of the position of the karta, and assess1!e not him qua partner but as representing the Hindu undivided family. In doing so, the Income-tax law looks not to the provisions of the Partner ship Act, but to the provisions of Hindu Law. When once the position under the partnership continues as before, but the position under the Hindu Law changes. There is then no Hindu undivided family as a unit of assessment in point of fact, and the income which accrues cannot be said to be or a Hindu undivided family. There is nothing in the Indian Incom-tax law or the law of partnership which prevents the members of a Hindu joint family from dividing any asset. Such division must, of course, be effective so as to bind the members; but Hindu law does not further require that property must in every case be partitioned by metes and bounds, if separate enjoyment can otherwise be secured according to the shares of the members. For an asset of this kind, there was no other mode of partition open to the parties if they wished to retain the property and yet held it not jointly but in severalty, and the law does contem plate that a person should do the impossible. Indeed, the result would have been the same, even if the dividing mem bers had said in so many words that they had partitioned

the family has disrupted,

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APOORVA SHANTILAL v. C.l.T. (A.N. Sen, J.)

507

the assets, because in so far as the firms were concerned. the step would have been wholly inconsequential."

This Court further observed at p. 209 :-

"No doubt, there were many modes of pariition which might have been adopted; but the question remains that if the family desired to partition these assets only and no more, could they have acted in some other manner to achieve the same result? No answer to the question was It is, therefore, manifest that the family took attempted. the fullest measure possible for dividing the joint interest into separate interests. There is no suggestion here that this division was a mere pretence nor hao the Appellate Tribunal given such a finding. The docur....ent was fully effective between the members of the famil:', and there was actually no Hindu undivided family in respect of tnese particular assets."

In the case of Kal/oomal Tapeswari Prasad (HUF) v. Commi!J

sioner of Income-tax, Kanpur('), this Court observed at p. 702 :-

"Under Hindu Law partition may be either total· or partial. A partial partition may be as regards persons who are members of the family or as regards properties which belong to it. Where there !Jas been a partition, it is presumed that it was total one both as to the parties is a part:tion between and property but when there brothers, there :s no presumption that 'there has been parti It is, tion between one of them and his descendents. 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 pro perties or as to both. When there is partial partition as to the family ceases to be undivided as regards property, properties in respect of which such partition has taken place but continues to be undivided with regard to the

\J) [1982] 133 I.T.R,. 690,

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[198312 s.c.a.

remaining family property. After such partial partition the righfof inheritance and alienation differ according as to property in question belongs to the members in their divid ed or undivided capacity. Partition can be brought about, (I) by a father during his life time between himself and bis sons by dividing equally amongst them, (2) by agreement, or (3) by a suit or arbitration."

These two decisions of this Court clearly state that partial

partition under Hindu Law is permissible.

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We may mention that in the case of Moti Lal Shyam Sunder ) a division Bench of the v. Commissioner of bzcom.,-tax, U.P.( 1 Allahabad High Court also recognised the validity of partial partition. R .S. Pathak, J. (as bis Lordship then was) who spoke for the Bench held for reasons stated in the judgment that the tribunal was in error in holding that there was no valid partial partition in law on !st July, 1961.

• It may be noted that in the case of Charandas Haridas (supra) decided by this Court and in the case of Mori/al Sham Sunder (supra) decided by the Allahabad High Court to which we have just refer red, all the sons were minor.

We have earlier quoted the relevant passages on the subject from Mulla's Hindu Law and from Mayne's Hindu Law and Usage. We may now qoute the following observations apppearing at p. 18 in 'Mitacshare and Daya-Bhaga-Two Treatises on the Hindu Law of Inheritance translated by H.T. Colebrooke, Bsq.,' in Ch. I, sec. II (2) :-

"When a father wishes to make a parti!ion, he may separate bis children from himself,

at his pleasure whether one, two or more sons".

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In . 'History of Dharmashastra' by Sbri P.V. Kane (second

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Edition, 1973) Vol. III at p. :592, it bas been stated:-

"The Manager is called Karla in modern

times though the smritis and digests employ words like Kutumbin (Yaj II. 45), Grhin, Grhapali, Prabhupa Kat. 543) and not Karta. He has special powers of disposition (by mortgage,

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(1) [1972] 84 I.T.R. 186.

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APOORVA SHANTILAL ¥. C.l.T. (A.N. Sen, J.)

509

sale ot gift) of family property' in a season of distress (for debts), for the purposes and benefit of the family (mainte nance, education and marriages of members and other dependents) and particularly for religious purposes (Sradhas and the like). The father has the same powers as manager and certain other special powers, which no other coparcener has. The father can separate his sons from himself and also among themselves if he so desires, even if they do not desire · to separate (Yaj. II. 114)".

There are observations more or less to the similar effect in the other commentaries on Hindu Law by other learned authors. We do not, therefore, . consider it necessary to refer to the comments of the other learned authors placed before us in course of the hear ing of the appeal.

The various commentries on Hindu Law by the various learned authors go to indicate that ancient Hindu Law speaks of complete severance of joint family and partition of joint family properties and does not mention partial partition either with regard to tbe joint family properties or with regard to some of the members of the joint family. The right of the father to bring about the disruption of the joint family properties in exercise of his .superior right as father or of his rights as patria potestas is recongnised in ancient Hindu Law.

It is, however, well settled by judicial decisions that partial partition of a joint Hindu family qua some joint family properties or qua some members of the joint family is permissible and valid in Jaw. The High Court appears to have accepted this position the proposition but the High Court then proceeds to hold that laid down by judicial decisions with regard to partial partition will apply only when partial partition the consent of the members of the joint family and cannot be extended to a case where partial partition is sought to be brought about by father in exercise of his superior rights as father or his right, as patria potestas. On an anxious and careful consideration of the matter we are unable to agree with the vjew expressed by the Hi$h Court,

is effected with

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If the father in execise of his superior right or of his right as patria potestas is enttitled to bring about a complete disruption of the joint family and to effect a complete partition of joint family properties of a Hindu family consisting of himself and his minor sons even against the wishes of the minors and if partial partition be permissible with the consent of sons when they have all become major, we see no reason to limit the power or authority of the father to effect the partition only to a case where the partition is total. The superior right or the right of patria potestas which a father enjoys is always expected to be exercised in the best interest . of the members of the family and more particularly his minor sons. The father, undoubtedly, enjoys the right to bring about a complete disruption of the joint family consisting of himself and his minor sons and to effect a complete partition of the joint family properties even against the will of the minor sons. It is also now recognised that partial partition of joint family properties is permissible. When father can bring about a complete partition of joint family properties between himself and his minor sons even against the will of the minor sons and when partial partition under the Hindu Law is now accept,ed and recognised as valid by judicial deci sions, we fail to appreciate on what logical grounds it can be said that the father who can bring about a complete partition of the joint family properties between himself and his minor sons will not be entitled to effect a partial partition of joint family properties bet ween himself and his minor sons if the father in the interest of the joint family and its memlbers feels that partial partition of the pr<l· in the best interest of the joint family and its mem perties will be bers including the minor sons. Even if the test of consent is to apply, the father as the natural guardian of the minor sons will normally be in a position to give such consent and it cannot be said as a matter of universal ;ipplication that in all such cases of partition, partial or other\\'.ise, there is bound to be a conflict of interest between the father and his sons. If the father does not act bona fide in the matter when he effects partition of joint family pro. perties between himself and his minor sons, whether wholly or partially, the sons on attaining majority may challenge the partition and ask for appropriate reliefs including a proper partition. In appropriate cases even during minority, the minor sons through a proper guardian may impeach the validity of the partition brought about by the father either in entirety of the joint family properties or only in respect of part thereof, if the oartition had been effected by the father to the detriment of the minor sons and to the pre judice of their interests.

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APOORVA SHANTILAL v. C.l.T. (A.N. Sen, J.)

511

We may point out that in the case of Charandas Haridas to which we have earlier referred and in which this Court recognised the validity of partial partition brought about by the father of some joint family properties, the sons were all minors. Also in the case of Motilal Shamsunder earlier quoted, where the Allahabad High Court recognised the validity of partial partition brought about by the father between himself and his sons, all the sons were minors.

The decision of this Court in the observations of this Court

the case of Charandas Haridas the case of Kalloomal and Tapeswari Prasad (supra) which we have earlier quoted, in our opinion, clinch the decision of the question.

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We must, therefore, hold that partial partition of properties brought about by the father between himself and his minor sons cannot be said to be invalid under the Hindu Law and must be held to be valid and binding. We wish to make it clear that this right of the father to effect a partial partition of joint family pro perties between himself and his minor sons, whether in exercise of his superior right as father or in exercise of the right as patria potestas has necessarily to be exercised bona fide by the father and is subject to the right of the sons to challange the partition if the partion is not fair and just.

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S. 171 of the Income-tax Act, 1971 provides as follows :

(I) A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family, except where and in as far as a in finding of partition has been given under this section respect of the Hindu undivided family.

(2) Where, at the time of making an assessment under sec. 143 or section 144, it is claimed by or on behalf of any member of Hindu family assessed as undivided that a parti tion, whether total or partial, has taken place among the members of such family, the Income Income-tax Officer shall make an enquiry thereinto after giving notice of the enquiry to all lb~ members of the familr.

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(3) On the completion of the enquiry, the IBcome tax Of(icer shall record a finding as to whether there has been a total or partial partition of the joint family pro perty, and, if there has been such a partition the date on which it has taken plac:e.

(4) Where a finding of total or partial partition has been

recorded by Income tax Officer under this section, and the partition took place during the previous year-

(a)

the total income of the joint family in repect of the period up to the date of partioo shall be assessed as if no partion had taken place; and

(b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed.

(5) Where a finding of total or partial partition bas 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 at as if no partition had taken place ; and the provisions of clause (b) of sub-section (4) shall, so far as may be, apply to the case.

(6) Notwithstandi11g anything contained in this section if the Income-tax Offii:er finds, after completion of the assessment of a Hindu undivided family that the family has already effected a partition, whether total or partial the Income-tax Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every ·such person shall be jointly and severally liable for the tax on the income so assessed :

(7) For the purposes of this section, the several liability of any membeir or group o! members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, wl!ether total or partial.

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(8) The provisions of this section shall, so far as may be apply in relation to the levy and collection of any penal ty, interest, fine mother 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.

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Explanation : In this section.-

(a) "partition" means -

(i) where the property admits of a physical division, a physical division of the property, but a physi cal division of the income without a physical division of the property producing the 0incomc shall not be deemed to be a partition ; or

(ii) where the property does not admi~ of a physical then such div:lion as the property division admits of, but a mere sevence of status shall not be deeemed to b~. a partition ;

(b) "partial partition" means a partition which is pratial as regards the persons constituting the Hindu undivided family, or the properties be to the Hindu undivided family, or longing both .

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It may· be noted that the following further prov1Sion was included in the said section as sub-section (9) by the Finance (No. 2) Act, 1980 w. e. f. !st April, 1980 :-

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(9) Notwithstanding anything contained in the forego ing provisions of this section, where a partial partition has taken place after the 31st day of December, 1978 among the members of a Hindu undivided family hitherto assessed as undivided :-

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(a) no claim that such partial partition has

taken place shall be inquired into under sub-section (2) and no finding shall be recorded under sub-section (3) that such partial partition had taken place and any finding recorded under sub-section (3) to that effect whether before or after the 18th day of June, 1980 being the date of introduction of the Finance (No 2) Bill 1980, shall be null and void;

(b) such family shall continue to be liable to be asses· sed under this Act as if no such partial parti· t ion had taken place ;

(c) each member or group of members of such family immediately before such partial partition and the family, shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable in respect of any under this Act by the family period whether before or after such partial partition;

(d)

the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition :

and the provisions of this Act shall apply accordingly.

This sub-section (9) wa.1 not in existence at the relevant time and has no retrospective operation and it is of no material conse· quence in deciding the present case.

The aforesaid provisions of

the Income-tax Act, as they time, clearly recognise partial partition. stood at the material The definition of partial partition in explanation (b) makes it clear that partial partition as regards the persons constituting tbe Hindu undivided family or as regards properties belonging to the Hindu undivided family, or both, is recognised.

In the present case, the partial partition of the shares belong· to

ging to the Hindu undivided family cannot, therefore, be said

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Ai'Cl6RVA SHANtILAL v. C.l.T. (A.N. Sen, J.)

515

)

in deciding

be bad either under the Hindu Law or under the Indian Income that the High Court therefore, hold tax Act. We must, went wrong partition of the . joi?t that partial family properties of the Hindu joint family by the father was mvahd and could not be recognised under the Income-tax Act. The sub· sequent amendment of section 171 by the inclusion of su~·section (9) does not require any consideration as the said sub·sectton was not in existence in the relevant assessment year and is only operative from !st April, 1980.

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his minor sons and a part of

The other question which falls for determination is whether the partition can be said to be bad at the time of the partition there the father amongst was no equal division of the shares by himself and the share holding had not been distributed to the father or to the father and mother jointly. We may point out that the A.A.C. has found that at the time of division of the shares, the shares had been distributed equal- ly taking into consideration the shares which had earlier been distri- In our opinion, a partial partition of buted amongst the parties. any joint family property by the father between himself and his sons does not become invalid on the ground that there has been no It is expected that the equal distribution amongst the co-sharers. father who seeks to bring about a partial partition of joint family properties will act bona fide in the interest of the joint family and its members, bearing in mind in particular the interests of the minor sons. If however, any such partial partition causes any prejudice to any of the minor sons and if any minor son. feels aggrieved by any such partial partition, he can always challenge the validity of such partial partition in an appropriate proceeding and the validity of such partition will necessarily have to be adjudicated upon in the proceeding on a proper consideration of all the facts and circum stances of the case. Till such partial partition has been held to be invalid by any competent court, the partial partition must be to held to be valid. It is not open to the Income-tax Authorities consider a partial partition to be invalid on the ground that shares G have not been equally divided and to refuse to recognise the same. It is undoubtedly open to the Iocome·tax Officer before recognising the partion to come to a conclusion on proper enquiry whether the partition is genuine or not. If the Income-tax Officer on enquiry comes to a finding that the partition is sham or fictious, be will be perfectly within his right to refuse to recognise the same. Io the instant case, there is no finding that the partial partition is sham or

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fictitious or that the partial partition is not a geoioue one and has not been acted upon. As there is no finding that the partial parti tion is sham or fictitious or not a genuine one, oa enquiries made by the Income-tax Officer, and as the partial partition is otherwise , valid under the Hindu Law, the partial partition bas necessarily to be recognised under the provisions of S. 171 of the Income-tax Act and the assessment must be necessarily made on the basis that there is partial partition of thu said shares.

In the result, the appeal succeeds. The judgment and order of the High Court are hereby set aside. The partial partition is held to be valid and the Income-tax Officer is directed to recognise the same and to proceed to make the assessment on that the basis there bas been a partial partition of the said shares between the parties. In the facts and circumstances of this case, we do not propose to make any order as to costs.

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Appeal allowed.

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