V.G. Oak, C.J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961. Messrs. Brij Mohan Lal Rameshwar Lal is the asseseee. It is a Hindu undivided family. The assessment year is 1962-63.
2. There was a registered firm by the name Messrs. Brij Mohan Lal Rameshwar Lal. Up to the assessment year 1961-62, the firm had two partners, Rameshwar Lal and Kundanlal. The two partners respectively repre-sented their Hindu undivided familes. On or about the 2nd of February, 1961, Kundanlal died. On February 3, 1961, the firm was reconstituted, partners of the reconstituted firm were Rameshwar Lal as the karta of his Hindu undivided family, Kundanlal's widow, Smt. Bharbati Devi, and her adopted son Prem Chand. Rameshwar Lal's minor son, Ghanshyam, was admitted to the benefits of the partnership. A fresh partnership deed was drawn up on February 22, 1161. In that partnership deed it was mentioned that out of the capital of the Hindu undivided family of Rameshwar lal, partner, a sum of Rs. 60,000 had been divided equally between Rameshwar Lal, Saraswati Devi and Ghanshyam.
3. At the time of assessment for 1962-63, the Hindu undivided family of Rameshwar Lal set up the partial partition of that sum of Rs. 60,000 and pleaded that that sum did not represent the assessee's assets. This claim was rejected by the Income-tax Officer. He held that there was no effective partial partition, as pleaded by the assessee. Upon that basis, the share of profit received by Ghanshyam, minor, and the interest paid by the new firm to Rameshwar Lal and Saraswati Devi were treated as the income of the assessee family.
4. The assessee filed two separate appeals against the two decisions of the Income-tax Officer. The first appeal was against the order rejecting the assessee's claim with respect to partial partition under Sub-section (2) of Section 171 of the Act. The other appeal was against the assessment for the year 1962-63. Both the appeals were allowed by the Appellate Assistant Commissioner. He held that there was effective partial partition with respect to the sum of Rs. 60,000. Consequently, he directed that the profit paid to Ghanshyam, and the interest paid to Rameshwar Lal and Saraswati Devi should be deleted from the assessee's income.
5. The decisions of the Appellate Assistant Commissioner were challenged by the department by filing two separate appeals. Both the appeals were allowed by the Appellate Tribunal, Allahabad. The Tribunal set aside the order of the Appellate Assistant Commissioner, and restored the decisions of the Income-tax Officer.
6. At the instance of the assessee, the Tribunal has referred the following questions of law to this court :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no partial partition as claimed by the assessee ?
(2) Whether the share of profit paid to Ghanshyam and the interest paid to Rameshwar Lal and Saraswati Devi by the firm M/s. Brij Mohan Lal Rameshwar Lal was rightly included in the income of the assessee, Hindu undivided family ?'
7. Mr. Brijlal Gupta appearing for the department urged that question No. 1 ought to be answered against the assessee for two reasons. Firstly, there was no genuine partition as claimed by the assessee. Secondly, a division of a part of an asset is not permissible in law.
8. As regards the suggestion that the partial partition was not genuine, we find no indication in the two orders passed by the Tribunal on April 21, 1964, that the Tribunal was persuaded that the so-called partition was fictitious. It is true that during the course of one of the two orders the Tribunal observed :
'It is also curious that the alleged partial partition of the capital standing to the credit of the Hindu undivided family of Rameshwar Lal is not incorporated in the books of the Hindu undivided family or in a separate deed or agreement by the three members of the Hindu undivided family, but is only mentioned in the said partnership deed of the firm wherein Rameshwar Lal is described as a partner representing his Hindu undivided family and Ghanshyam, the minor, is admitted to the benefits of the partnership.'
9. But those observations were made by the Tribunal during the course of the narrative of the case. Having given the narrative of the case, the Tribunal gave its conclusion in paragraph 6 of the main judgment. In paragraph 6 of the main judgment the sole reason given by the Tribunal for not recognising the partial partition was that a part of a specific item of asset cannot be divided. In paragraph 6 of the judgment there is no indication that the transaction of partial partition was not genuine. In paragraph 2 of the judgment the Tribunal observed that a fresh partnership deed appears to have been executed on March 22, 1961. It appears that, according to the Tribunal, both the partition and the partnership were genuine transactions.
10. Consequently, the sole question for our consideration is whether the attempted partial partition was effective or not. Towards the end of the main judgment dated April 21, 1964, the Tribunal observed :
'As in this case there was no complete division of the joint family business or share of the joint family firm in the said business, the Appellate Assistant Commissioner was not right in holding that there was a partial partition with effect from February 4, 1961, or otherwise.'
11. The basis of the decision of the Tribunal is that if a Hindu undivided family owns a certain asset, that unit of asset has to be divided as a whole. This proposition of law is not quite accurate. Whether a particular asset is capable of partial division or not will depend upon the nature of the asset. It may be that a business or a share cannot be divided partially. But it does not follow that no single item can be divided partially. If a building has got two defined sections, there should be no difficulty in dividing one section of the building, keeping the second section as joint family property. The matter is still easier, when one deals with cash. It appears that upon the dissolution of the former partnership, a sum of Rs. 1,60,242 came to the share of Rameshwar Lal as representing his Hindu undivided family. The family decided to divide Rs. 60,000 out of that sum among the members of the family. There was no legal difficulty in taking out this specified sum of Rs. 60,000 out of the original sum of Rs. 1,60,242 for purposes of partial partition. The Tribunal was not right in holding that the specific sum of Rs, 60,000 was incapable of division simply on the ground that it formed a part of the capital owned by Rameshwar Lal's branch. Apparently, the family decided to take out this specific portion amounting to Rs. 60,000 for purposes of partial partition. Partial partition is expressly recognised by Section 171 of the Act. If, in fact, there was partial partition and such partial partition is permissibly in law, the Tribunal was bound to recognise it. Question No. 1 has, therefore, to be answered in favour of the assessee.
12. Question No. 2 is consequential. The Income-tax Officer decided to add the profit earned by Ghanshyam and the interest paid to Rameshwar Lal and Saraswati Devi on the short ground that there was no partial partition. On the finding that the partial partition was effective, the profit earned by Ghanshyam and the interest received by Rameshwar Lal and Saraswati Devi cannot be treated as income of the assessee family. The result is that question No. 2 has also to be answered in favour of the assessee.
13. We answer both the questions referred to the court in the negative, and in favour of the assessee. The Commissioner of Income-tax, U.P., shall pay the assessee Rs. 200 as costs of this reference.