1. These appeals involving an interesting point pertaining to the provisions of the Hindu Succession Act, 1956, and its implication while dealing with the provisions of Section 171 of the Income-tax Act, 1961 ('the Act'), are disposed of together for the sake of convenience.
On 28-1-1962, Harilal died intestate and Indravadan became the karta of the assessee-HUF. Thereafter, Chanchaiben died on 3-12-1965 leaving behind Smt. Kantaben, Indravadan and his family.
3. Up to the assessment year 1975-76, the assessee was assessed in the status of a 'HUF'. The assessee-HUF owned both movable and immovable properties. On 9-8-1974, by a registered deed of partition, certain properties of the assessee-HUF were divided between Kantaben and Indravadan. In the course of the assessment proceedings for the assessment year 1976-77, the members of the assessee-HUF made an application to the ITO to pass an order under Section 171 recording the partial partition. The ITO, however, did not accept the assessee-HUF's claim as under: During the course of assessment proceedings for the assessment year 1976-77, HUF made claim for partial partition. It is stated that partition of certain immovable and movable properties has taken place on 9-8-1974. The claim is based on partition deed dated 9-8-1974. It is stated that partition has taken place between Shri Indravadan Harilal, karta and mother, Smt. Kantaben Harilal. The claim of partition cannot be accepted as there can be partition among coparcener of the HUF. Since Shri Indravadan Harilal is the only coparcener of the HUF, the claim for partition cannot be accepted. However, during the course of hearing, Shri P.N. Vadwala the representative of the assessee, by letter dated 26-2-1979 claimed that as per the Hindu Succession Act, which came into force on 17-6-1976, the partition of HUF of Shri Harilal Ambalal has already taken place on the death of Shri Harilal Ambalal. In support of the statement, Shri Vadwala has quoted the decision of the Supreme Court in the case of Gurupad Khandappa Magdum's case--Civil Appeal No. 1828 of 1975 dated 27-4-1978. The same is not on its all fours with the case of the assessee. In the case referred by the assessee, the widow had her right as per the Hindu Women's Property Act, 1937 and the Hindu Succession Act, 1956 and question before the Supreme Court was regarding the determination of widow's interest in the HUF property. To work out the same the Supreme Court constructed the hypothesis and arrived at the widow's interest in the HUF property. The hypothesis cannot be applied as decision and as such the same is not applicable in this case. However, as per the decision of the ITAT dated 18-11-1977 in the case of Chandulal K. Mukhi, (2) the Gujarat High Court's decision in the case of CIT v. Shantikumar Jagabhai [1976] 105 ITR 795 and decision of the Supreme Court in the case of Mallesappa Bandoppa Desai v. Mallappa AIR 1961 SC 1288 unless there are two coparceners in HUF, partition cannot take place. The claim for partial partition is, therefore, rejected.
Order passed under Section 171(3) of the Act.
4. In appeal before the AAC, the assessee-HUF submitted that the ITO has failed to understand the implication of the decision of the Hon'ble Supreme Court in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440, pronounced on 27-4-1978 dealing with widow's right in the joint family property. It was, therefore, urged that the ITO should be directed, to pass an order under Section 171, accepting the partial partition as claimed by the assessee-HUF.Applying the ratio laid down in the case of Gurupad Khandappa Magdum (supra), the AAC directed the ITO to pass an order under Section 171(3) recognizing partial partition so far the properties received by Smt.
Kantaben is concerned. As regards the partition of the debt of Indravadan (smaller HUF), the AAC upheld the action of the ITO in the following manner: 8. It was also claimed before the ITO that Indravadan (smaller HUF) was advanced a loan by the HUF of Harilal Ambalal and the said debt was released by the appellant in favour of the Indravadan (HUF) and to that extent there is partition. Since the HUF of Harilal Ambalal consists of only one major coparcener, there could not be a partition of a debt between the HUF-appellant and its karta. The ITO was correct to that extent. The claim of partition, by the HUF for release of debt in favour of the Indravadan (HUF) is, therefore, not recognised.
5. Being aggrieved by the order of the AAC, both the assessee as well as the revenue have come up in appeal before the Tribunal. The learned Counsel for the assessee submitted that the AAC ought to have accepted that on the partial partition, the debt of Indravadan (smaller-HUF) was given back to the said smaller-HUF and it no longer remained the property of the assessee-HUF. In other words, he urged that the AAC should have directed the ITO to accept the claim for partial partition in its entirety. The learned representative for the department vehemently argued that the AAC ought to have upheld the order of the ITO under Section 171 in toto. In this connection, he relied on the decision of the Hon'ble Supreme Court in the case of Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690 dated 12-1-1982, and submitted that in order to get benefit of partial partition of the joint family properties, the assessee has to obtain an order of the ITO under Section 171, recognizing such partition even though such partition may be valid partition under the Hindu law or the Hindu Succession Act. According to him, the decision in the case of Gurupad Khandappa Magdum (supra) had no retrospective effect and, therefore, the partition deed executed on 9-8-1974 could not be a valid partition on various grounds, viz. (i) there should have been two coparceners for effecting valid partition, (ii) a Hindu female cannot ask for partition of the joint properties, (iii) on the death of Harilal, the family properties were not disrupted, (iv) even if they were disrupted, then the conduct of the properties shows that there was voluntary reunion of the members of the assessee-HUF, and (v) the properties should have been divided by metes and bounds. He also made reference to the definition of the expressions 'partition' and 'partial partition' contained in the Explanation to Section 171. He, therefore, contended that the order of the AAC be set aside and that of the ITO be restored.
The learned Counsel for the assessee, in his reply, submitted that the ratio laid down in the case of Kalloomal Tapeswari Prasad (HUF) (supra), on the other hand, helps his case inasmuch as the deed of partial partition under consideration is nothing but the recording by the members of the assessee-HUF of the fact about the effect of the death of Harilal on the family assets. According to the learned Counsel for the assessee, the decision in the case of Kalloomal Tapeswari Prasad (HUF) (supra) shows that the claim for partition or partial partition under the Act is quite different from such partition under the Hindu law. A partition or partial partition even though valid one under the Hindu law, would not automatically be valid under the Act.
Under the Hindu law, a partition or partial partition could be claimed by the coparcener only while under Section 171, any member of a Hindu family can make an application to the ITO to record partition or partial partition in the family. In other words, he wanted to impress upon us that under the Act, a Hindu female can also ask for partition of the joint family properties. He further submitted that in view of the decision of the Hon'ble Supreme Court in the case of Gurupad Khandappa Magdum (supra), total partition in the family had already taken place on 28-1-1962 which could not be reversed. However, for the purposes of the provisions of Section 171, members of the assessee-HUF applied for recording a partial partition in respect of such properties which were already divided under the Hindu Succession Act, but wanted recognition of such partition under Section 171. He, therefore, submitted that once the properties of the assessee-HUF were divided amongst its members by operation of law, neither the ITO nor the assessee could reverse that process and, therefore, there was no question of 'voluntary reunion of the members of the assessee HUF', as was contended on behalf of the revenue. He further submitted that once the properties of the assessee HUF were divided amongst its members by the operation of law, there was no question of dividing the same by 'metes and bounds' as contended on behalf of the revenue. He also invited our attention to the deed of partial partition dated 9-8-1974 and highlighted the fact that the loan advanced by the assessee HUF to Indravadan (smaller HUF) was allotted to Indravadan (smaller-HUF) and, therefore, it cannot form part of the assets of the assessee-HUF. He also highlighted the fact that out of the many immovable properties, certain properties were allotted to Smt. Kantaben Harilal. in this view of the matter, he submitted that the decision in the case of Kalloomal Tapeswari Prasad (HUF) (supra) would support the assessee-HUF, as in that case, the Hon'ble Supreme Court upheld the action of the income-tax authorities mainly on the ground that there was a finding given by the Tribunal that in that case "it was possible to divide the properties in question physically into different lots so that each member could take his original share in them". Since this was not done by the assessee in that case, the decision had gone against the assessee. However, in the instant case, according to the learned Counsel for the assessee, the decision of the Hon'ble Supreme Court in the case of Charandas Haridas v. CIT [1960] 39 ITR 202, would directly be applicable. He, therefore, contended that the decision of the AAC regarding the properties received by Smt. Kantabcn on the death of Harilal was in order and should be upheld.6. We have carefully considered the rival submissions of the parties as well as the material placed before us and we find considerable force in the submissions made on behalf of the assessee.
7. In our view, in order to decide the point at issue in these appeals, we have to consider very carefully the ratio laid down by the Hon'ble Supreme Court in the cases of Gurupad Khandappa Magdum (supra) and Kalloomal Tapeswari Prasad (HUF) (supra). The first case deals with the implication of the provisions of the Hindu Succession Act on the death of a coparcener, while the second case deals with the provisions of Section 171 of the Act. Since these two decisions deal with entirely different set of facts, it would be necessary to reproduce below certain relevant portions of the said decisions. The following observation in the case of Gurupad Khandappa Magdum (supra) is quite illuminating: In order to ascertain the share of heirs in the property of a deceased coparcener it is necessary in the very nature of things, and as the very first step, to ascertain the share of the deceased in the coparcenary property. For, by doing that alone can one determine the extent of the claimant's share. Explanation 1 to Section 6 resorts to the simple expedient, undoubtedly fictional, that the interest of a Hindu Mitakshara coparcener 'shall be deemed to be' the share in the property that would have been allotted to him if a partition of that property had taken place immediately before his death. What is, therefore, required to be assumed is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. That assumption, once made, is irrevocable. In other words, the assumption having been made once for the purpose of ascertaining the share of the deceased in the coparcenary property, one cannot go back on that assumption and ascertain the share of the heirs without reference to it. The assumption which the statute requires to be made that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one's imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased.
The allotment of this share is not a processual step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional partition.
The interpretation which we are placing upon the provisions of Section 6, its proviso and Explanation 1 thereto, will further the legislative intent in regard to the enlargement of the share of female heirs, qualitatively and quantitatively. The Hindu Law of Inheritance (Amendment) Act, 1929, conferred heirship rights on the son's daughter, daughter's daughter and sister in all areas where the Mitakshara law prevailed. Section 3 of the Hindu Women's Right to Property Act, 1937, speaking broadly, conferred upon the Hindu widow the right to a share in the joint family property as also a right to demand partition like any male member of the family. The Hindu Succession Act, 1956 provides by Section 14(1) that any property possessed by a female Hindu, whether acquired before or after the commencement of the Act, shall be held by her as a full owner thereof and not as a limited owner. By restricting the operation of the fiction created by Explanation 1 in the manner suggested by the appellant, we shall be taking a retrograde step, putting back as it were the clock of social reform which has enabled the Hindu women to acquire an equal status with males in matters of property. Even assuming that two interpretations of Explanation 1 are reasonably possible, we must prefer that interpretation which will further the intention of the Legislature and remedy the injustice from which the Hindu women have suffered over the years.
(p. 447) It is worthwhile to mention here that in the penultimate paragraph of the said decision, the Hon'ble Supreme Court has approved the decision of the Hon'ble Gujarat High Court in the case of Vidyaben v.Jagdishchandra Nandshankar Bhatt AIR 1974 Guj, 23.
8. The relevant portion in the case of Kalloomal Tapeswari Prasad (HUF) (supra) reads as under: 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-in-common, the need for a division of the family properties by metes and bounds arises and in that process a 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 ... (p. 708) 9. It would appear from the above extracts that on the death of a Hindu coparcener dying intestate, the members of the HUF had no say in the matter of the distribution of the family properties as the law will take its own course as per the provisions of the Hindu Succession Act.
Therefore, on the death of Harilal on 28-1-1962, there was complete partition of the properties of the assessee-HUF amongst the members of the family. Kantaben, Chanchalben and Indravadan got one-fourth share in the properties of the assessee-HUF. Again, each one of them got one-third share out of one-fourth share of Harilal. The net result was that each one of them got one-third share in the properties of the assessee-HUF. When Chanchalben died intestate on 3-12-1965, her one-third share in the properties of the assessee-HUF belonged to Indravadan under the Hindu Succession Act. In other words, after the death of Harilal and Chanchalben Kantaben got one-third share while Indravadan got two-third share in the properties of the assessee-HUF.10. On the plain reading of the provisions of Section 171, it is quite clear to us that any member of a HUF, male or female, can make an application before the ITO for recording total or partial partition of the properties of the joint family. This is clear departure from the Hindu law as under the Hindu law, only a coparcener could claim for partition either full or partial. In this view of the matter, we are not prepared to accede to the submissions made on behalf of the revenue that a Hindu female cannot ask for partition of the joint family property or that there should be two coparceners for effecting family partition. Again, in view of the decision in the case of Gurupad Khandappa Magdum (supra), it is not possible for us to accept the stand taken on behalf of the revenue that on the death of Harilal, the joint family properties could not be disrupted. Since the decision of the Supreme Court in the case of Gurupad Khandappa Magdum (supra) was pronounced on 27-4-1978, i.e., after the deed of partial partition executed by the members of the assessee-HUF, the fact that their conduct shows that there was a voluntary reunion of the members of the assessee-HUF would not be of any help to the revenue. Perhaps this has happened as the members of the assessee-HUF had no benefit of the said decision of the Hon'ble Supreme Court, having far reaching effect on the succession of joint family properties. It may be true that the decision pronounced by the Hon'ble Supreme Court cannot have retrospective effect. However, this approach of the revenue is not at all commendable as it is a trite law that the decision pronounced by the Hon'ble Supreme Court simply state the law as was understood by the Legislature. Therefore, in view of the decision of the Hon'ble Supreme Court in the case of Gurupad Khandappa Magdum (supra), there was total partition amongst the members of the assessee-HUF on the death of Harilal, i.e., on 28-1-1962.
11. Now let us consider the ambit and implication of the decision of the Hon'ble Supreme Court in the case of Kalloomal Tapeswari Prasad (HUF) (supra). It is worthwhile noting that the said decision had gone against the assessee (in that case) mainly on the ground that the Tribunal had given a clear finding that it was possible to divide the properties physically into different lots so that each member could take his rightful share in them. However, that was the case in which the members of the HUF had claimed partial partition regarding certain properties owned by them. In the instant case, as noted above, the partition had taken place by the operation of law on the death of Harilal on 28-1-1962, and the members of the family had no say in it.
But as required under Section 171 the members of the assessee-HUF had applied for recording partial partition of certain properties in which each one of them had right, title and interest in exclusion of others.
In the case of Kallooomal Tapeswari Prasad (HUF) (supra), the members of the joint family had distributed the income arising from various properties but had not allotted the properties as such to each one of them in spite of the fact that such division was possible.
(i) a Hindu female can ask for partition of the joint family property under Section 171.
(ii) even if the properties of the joint family are divided amongst the members of the family under the Hindu law or the Hindu Succession Act, in order to get the benefit of the provisions of Section 171 the members of the family had to apply to the ITO for recognising the partition which might have been effected by the operation of law, and (iii) since, in the instant case, the members of the family had in fact partitioned some of the properties amongst themselves in exclusion of others, the AAC ought to have accepted the assessee-HUF's claim for partial partition in its entirety.
We would, therefore, set aside the orders of the income-tax authorities and restore the case once more to the file of the ITO with a direction to pass a fresh order under Section 171, recognising the partial partition as claimed by the members of the assessee-HUF.13. In the result, the appeal filed by the assessee is allowed and that filed by the revenue is dismissed.