1. These two appeals pertaining to assessment year 1981-82 in the case of C.S. Tiwana & Sons, HUF, first emanating from the assessment framed under Section 143(3) of the Tncome-tax Act, 1961 ('the Act') and the second regarding the assessee's claim of partition under Section 171 of the Act were heard together, because the second appeal was actually the base for the dispute raised in appeal emanating from assessment under Section 143(3), and are disposed of by this consolidated order for the sake of convenience.
2. For the sake of convenience and clearer understanding, we will first deal with the appeal of the assessee in which the action of the AAC confirming the rejection of the assessee's claim of partition, is challenged. The sum and substance of all the grounds raised in this appeal, which is IT Appeal No. 850 (Chd.) of 1984, is that inspite of the fact that the assessee-HUF out of five properties held by it, only effected the partition of two properties but the same, according to the assessee's contention, was legal, despite Section 171(9), as the three properties, which were not partitioned, were such which could not be partitioned either legally or physically. In order to appreciate the dispute, a small backdrop shall be of immense assistance.
3. The assessee-HUF C.S. Tiwana & Sons was constituted of Justice C.S.Tiwana, his wife, Mrs. Manjit Kaur and his two sons, Mr. Jasjit Singh Tiwana and Major Harjit Singh Tiwana. Justice Tiwana is the 'karta' of the said HUF. The said HUF owned following five properties: (ii) One-eighth share in two plots of land situated near Sirhindi Gate, Patiala ; (iii) Rights relating to possession over agricultural land situated at village Dayagarh, Tehsil Nabha, Distt. Patiala ; (iv) Agricultural land measuring 10 bighas 12 biswas comprised of khasra Nos. 1121 to 1126, situated at Patiala ; The said HUF had effected partition only of the properties at Nos. (iv) and (v), i.e., agricultural land measuring 10 bighas 12 biswas, Patiala and 181-182, Madhya Marg, Sector 8, Chandigarh. Originally the partition was effected on 10-2-1980 orally and, subsequently, memorandum of partition to that effect was executed by members of the said HUF on 28-3-1980. On the basis of the same, the assessee-HUF came forward with its claim for partition under Section 171 for assessment year 1981-82, for which the relevant 'previous year' ended on 31-3-1981.
4. The ITO rejected the assessee's claim on the basis of Section 171(9), which came on the statute with effect from 1-4-1980 inserted by the Finance (No. 2) Act, 1980, as per which no partial partition which had taken place after 31-12-1978 was capable of recognition. The contention of the assessee before the ITO was that it was only those properties which were not capable of being physically/legally partitioned which were kept joint and, therefore, its claim was in order.
5. When the dispute came before the AAC, the first appellate authority, the very same contentions were raised and submissions reiterated, but the AAC confirmed the action of the ITO regarding rejection of the assessee's claim of partition under Section 171. It is this action of the AAC which has left the assessee aggrieved.
6. The learned counsel for the assessee, Shri Rajinder Rattan, while disputing the said order of the AAC, vehemently argued that the three properties which were owned and kept jointly at that stage when partition of the two properties was effected, were such which could not be partitioned. He submitted that as per Chandigarh (Sale of Sites and Buildings) Rules, 1960, property No. 1107, Sector 11-C could not be partitioned because no fragmentation in site or building is permitted in Chandigarh. Regarding plot of land at Patiala in which the assessee-HUF had only one-eighth share, the submission of the learned counsel for the assessee was that share of the assessee-HUF itself would have come to only 150 sq. yds. or so and, therefore, it was kept out of partition. Similarly, regarding third property which was possession of right in agricultural land, he submitted that it was also not capable of being partitioned. As a matter of fact, the learned counsel for the assessee only summarised the written note filed with the appeal by Justice C.S. Tiwana himself under his signatures as karta of the said HUF. The said note is placed on the assessee's compilation at pages 17-18 and the same reads: By the memo of partition executed on 28-3-1980, it cannot be said that there has been a partial partition of the joint Hindu family property. As mentioned in the deed, only three properties have been kept joint and the reason for the same is that they are virtually impartible properties at this stage.
2. Property No. 1 is residential house No. 1107, Sector 11-C, Chandigarh. By virtue of Rule 14 of the Chandigarh (Sale of Sites and Buildings) Rules, 1960, framed under Section 22 of the Capital of Punjab (Development and Regulation) Act, no fragmentation of any site or building can be permitted. Even if all the members of the HUF had agreed to partition the house by metes and bounds, it would have created a difficulty for them because in that manner, by violating the rules on the subject, they would have committed an offence under the Capital of Punjab (Development and Regulation) Act.
3. Property No. 2 is a plot of land at Patiala, in which the HUF has only one-eighth share. Half the share belongs to another person and in the remaining half, the HUF has a fourth share. The remaining share of the property belongs to three brothers of the karta of the HUF. Unless there is at first a partition with the person having one-half share and then there is a partition amongst all the brothers of the karta, it is somewhat impossible to partition the HUF property.
The share of the HUF only comes to 150 sq. yds. and it would materially reduce its value, if ultimately it has to be partitioned amongst all the co-sharers. This course is being considered feasible that whole of the property should be sold by all the co-sharers and the price obtained should be shared by all. It is by keeping in view this kind of situation that none of the co-sharers is making any effort to get the property partitioned.
4. Property No. 3 relates to some possessory rights in agricultural land situated in some village. In the ownership column of the jamabandi, there is the name of Nagar Panchayat as whole of the land on some previous occasion was shamalat land. The HUF has sold away possessory rights in 28 acres of land and the proceeds have already been utilised for joint purposes. There only remains 16 acres of land in relation to which there has already been an agreement for the transfer of possessory rights. That transfer is to take place for a consideration of Rs. 1,04,000. A sum of Rs. 5,000 has been obtained as the advance money and on payment of another sum of Rs. 30,000 by way of one of the instalments, the possession of the land would be transferred to another person on 30-6-1981. Even if partition of the whole property were to take place at the present stage, nothing remains to be partitioned by the HUF. Under these circumstances, the objection on the point that only partial partition has taken place, should not prevail with the Income-tax authorities.
7. The learned departmental representative Shri C.L. Jain, on the other hand, beside relying on the orders of the two lower authorities, read out Section 171(9) with Explanation given thereunder and mainly relied on the case of CIT v. O.N. Talwar [1980] 123 ITR 80 (Delhi) and he said boldly that the very purpose of introduction of Section 171(9) shall be defeated in case contention raised by the assessee is accepted.
8. In rejoinder, when the learned counsel for the assessee virtually repeated what he had submitted before, to the query raised by the Bench, as to what is the difference between the two properties situated at Chandigarh, one No. 1107, Sector 11-C and the other No. 181-182, Sector 8, was it so that restrictions as per Chandigarh (Sale of Sites and Buildings) Rules, 1960, were applicable to residential house No.1107 and not to No. 181-182, Madhya Marg, the learned counsel for the assessee was fair enough to admit that there was no distinction so far applicability of said rules to the two properties was concerned.
9. After taking into consideration the rival submissions and going through the record carefully, we are unable to interfere in the finding of the AAC. After we have detailed out the factual background of the dispute in earlier part of this order, it will be very relevant to reproduce hereunder Section 171(9) with Explanation given thereunder: -- (9) Notwithstanding anything contained in the foregoing provisions of this section, where a partial partition has taken place after the 31st day of December, 1978, among the members of a Hindu undivided family hitherto assessed as undivided,-- (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 assessed under this Act as if no such partial partition had taken place ; (c) each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under this Act by the family in respect of any period, whether before or after such partial partition ; (d) the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition and the provisions of this Act shall apply accordingly. Explanation: In this section,-- (i) where the property admits of a physical division, a physical division of the property, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition ; or (ii) where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition ; (b) 'partial partition' means a partition which is partial as regards the persons constituting the Hindu undivided family or the properties belonging to the Hindu undivided family or both.
By mere reading of the above section and meaning of the words 'partition' and 'partial partition' given in the Explanation, it does not hold us even for a moment back from holding that after 31-12-1978, no partial partition could get the recognition by the ITO. It is trite law by now that in fiscal statute, neither a word is to be ignored nor a comma is to be added, when one comes to interpretation. Once we observe that introduction of Section 171(9) which was inserted by Finance (No. 2) Act with effect from 1-4-1980, partition for the purpose of enquiry, recognition and order had to be 'complete partition', on the one hand, and on the other hand, we find that the assessee in respect of the two properties situated at Chandigarh kept one in jointness of the HUF and effected the partition of the second property by assignment of shares only, Chandigarh (Sale of Sites and Buildings) Rules could not come in the way of the assessee. When we go through the types and texture of the property which was owned by the HUF, on the one hand, and mode of partition adopted by the assessee in respect of two properties, we are of the view that in that way all the properties which were held by the assessee-HUF were capable of being partitioned and since the assessee has not effected the complete partition, as all the properties were not partitioned, it is a case of partial partition which is incapable of being recognised by the revenue on the strength of Section 171(9).
10. When we go carefully through the note placed by the karta of the assessee-HUF, extracted and placed above, which alone was summarised by the learned counsel for the assessee in course of his arguments, we don't find the same free from contradictions. For example, House No.1107, Sector 11-C, according to the assessee, in respect of this property, restrictions and restraints as per Rule 14 of the Chandigarh (Sale of Sites and Buildings) Rules, framed under Section 22 of the Capital of Punjab (Development and Regulation) Act, came in the assessee's way because no fragmentation of any site or building could be permitted. All these restrictions and restraints were equally applicable to another property situated at Chandigarh itself, which is 181-182, Madhya Marg, Sector 8. Regarding the second property, which was not partitioned, was the assessee's one-eighth share in land at Patiala. When the assessee-HUF could hold one-eighth share in land at Patiala jointly with someone else, coparceners of the assessee-HUF could also own one-fourth of one-eighth of the share or it could be partitioned by monetary adjustments. Similarly, regarding third property in respect of which the assessee's contention is that subsequently this property was sold out, a property which could be sold out could also be partitioned by assigning some shares or monetary adjustments, which is the normal way of partitioning properties.
11. To some extent, reliance of the learned departmental representative on the case of O.N. Talwar (supra) supports in principle the revenue's finding. But we need not go that far when on the basis of facts alone, out of two properties at Chandigarh, which faced similar restrictions and restraints so far partition was concerned, one was partitioned and the other was kept joint and when Section 171(9) is on the statute, we are afraid, the assessee's contention in respect of its claim of partition, cannot be accepted.
12. Coming to second appeal, which is more or less consequential, once the assessee's claim of partition under Section 171 stands rejected, even income from those properties which have been partitioned, have to be assessed in the hands of the HUF as it has not been considered as partition. For the reasons given by the two lower authorities, which we confirm, and on the basis of facts detailed above, rejection of the assessee's claim is hereby confirmed.