MANCHANDA J. - This is a consolidated case stated under section 66(1) relating to the assessments for the years 1949-50, 1950-51 and 1951-52 made upon Sri Purshottam Das in the status of a Hindu undivided family.
The questions referred are;
1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was partial partition with respect to zamindari property
2. Whether, on the facts and in the circumstances of the case, the issue of notice by the State Government to the members of the family separately for compensation of zamindari property, mutation in khewats and separate possession of cultivated lands constitutes evidence for finding that the zamindari property had been partitioned
3. Whether the partition of house properties can be effected by the division of the rental receipts in the account books and by naming the six members of the family in the receipts issued to the tenants and recording the names of all the six persons in the records of the municipal Board or
Whether a division by metes and bounds is necessary
The material facts are that the assessee constituted a Hindu undivided family consisting of Purushottam Das, his wife and mother and three sons. It derived income from its zamindari properties, share from Government securities, money-lending and grain business, sugar refinery business and house properties. In the present reference we are only concerned with the zamindari and house properties as the three questions set out hereinabove only refer to these two assets of the Hindu undivided family. It would here by convenient to deal first with the facts relating to the zamindari properties separately and to determine the answer to the first two questions before proceeding to the third question.
In January, 1948, a suit for partition was brought against Purushottam Das by his wife, mother and sons. A consent decree was passed on the 13th May, 1948. A mutation in respect of the zamindari properties in the names of each of the erstwhile members of the family was duly carried out. In the Agricultural Income-tax Act proceedings ultimately, after a remand by the Supreme Court, it was held by a majority decision of this Court that a partition had taken place and a separate assessment was required to be made on each of the erstwhile members in respect of agricultural income. In addition, at the time of the abolition of zamindari, the State Government recognised this when making payment of compensation to the individual members of the family and the compensation was paid to them individually and not to the family as a whole. In the statement of the case it is stated that 'the lands cultivated by the family had been allotted and divided by metes and bounds between the six members of the family.'
In view of this statement which is based on a finding of fact, our answer to question No. 2 cannot be any other than in the affirmative and in favour of the assessee, that the zamindari properties had been partitioned.
Question No. 1 is not really a question of law and is wholly redundant and therefore does not require an answer.
As regards question No. 3, this question as framed is misleading as it does not mention that only partial of the houses was being claimed and not any order under section 25-A of the Act. The alternative question would again give the impression when it talks of 'division by metes and bounds' that the provisions of section 25-A (1) had to be considered. The claim was one of partial partition of property consisting of house properties and stood to be governed by the principles of Hindu law. The question is how houses can be partitioned The Hindu law does not impose an obligation of dividing property by metes and bounds after disruption of the joint status. When a joint family is disrupted the corparceners at once become co-owners or tenants-in-common of the joint property in definite shares. The moment a joint family consisting of three brothers is disrupted each brother becomes an owner of one-third share in the joint property and so long as the property is not divided by metes and bounds, i.e., specific property is not given in the share of each, they remain co-owners in equal shares. Hindu law recognises this position and does not oblige the members thereof to divide the property by metes and bounds so that each of them gets specific property as his share of which he becomes the exclusive owner and no property is held by him as a tenant-in-common. It is open to them to divide the property by metes and bounds at any time later. If the joint property consists of houses only, then on disruption each brother will have a one-third share in each of the houses. So long as the houses are not divided by metes and bounds each of them is entitled to one-third share in the income from each of the houses and the names of all three have to be entered in the municipal records. Therefore, the first limb of the question must be answered in the affirmative. The second limb being in the alternative must necessarily be answered in the negative.
Hindu law recognises that a joint family can, while retaining the status of joint family, divide part of the joint family property among its members. The whole of the joint family property is owned by the joint family; the joint family being the owner is capable of exercising its right as such in respect of any of its assets. It can alienate an item thereof without thereby affecting its status as a joint family in respect of the remaining property. Just as it can alienate it to a third person so also it can alienate it to its own members, i.e., take it out of the class of joint family property and divide it among its members. This division of an item of the joint family property among its members after removing it from joint family property has no effect either on its status or on the remaining property; it remains a joint family and the remaining property remains a joint family property. Consequently, when a joint family divides among its members a part of the joint property without intending to server there is no disruption of the joint status and it remains a joint family. The only effect is that the joint family the joint family property is reduced, but so long as any property is left as joint family property there must be a joint family to own it : see Mulla on Hindu Law, 12th edition, para 328.
Section 25-A lays down that a joint family which is being assessed as such will continue to be so assessed so long as the Income-tax Officer has not recorded an order that 'the joint family property has been partitioned among the various members or groups of members in definite portions.' The Income-tax Officer can record such an order only after a partition, i.e., disruption followed by division of the joint family property has taken place among the members. A partition, e.g., division of the (entire) joint family property among the members, can take place only after disruption of the joint family. There can be no question of division of the whole joint family property in the absence of disruption of joint status. When a joint family, while remaining joint, divides an item of the joint property among its members it does cause disruption of its status and, therefore, section 25-A does not apply to it and it must continue to be assessed as joint family; it will now be assessed on theirncome of the remaining property which continues to be the joint property and the members will become liable to be assessed on their shares in the income of the item divided among them.
If there is disruption of a joint family but the joint property is not divided between the members in definite portions, i.e, specific portions or by metes and bounds, no order contemplated by section 25-A(1) can be recorded by the income-tax Officer and the family must continue to be assessed as a joint family. Section 25-A is inapplicable unless there is disruption of the joint status followed by division of the property by metes and bounds. The mere disruption of the status results in fixation of the shares of the members in the joint property but that is not enough and something more must happen, it being partition in definite portions. the only thing that can happen after the disruption resulting in the fixation of the shares is the allotment of specific property to each of the members in accordance with his share. That is the 'partition' referred to in section 25-A(1).
If a joint family continues to be joint but divides by metes and bounds or otherwise an item of it among its members section 25-A is not applicable at all; the joint family continues to be assessed as such in respect of its income from the remaining property and the members become liable to be assessed as individuals on their income from the property allotted to them, whether specifically or in shares. The question whether the item is partitioned among the members in definite portions or by metes and bounds is wholly irrelevant. If it is divided by metes and bounds every member will be assessed as an individual on his income from the portion specifically allotted to him; otherwise he will be assessed on his share in the income jointly derived from the item.
In this case the joint family consisting of Purushottam Das and his wife, mother and three sons was assessed as such and now it itself claims to have undergone partition. The partition is claimed through a civil court consent decree dated May 13, 1948. It was given effect to in the khewat in respect of the zamindari property; the names of all the six members were recorded in the khewat as owning one-sixth share in it. In proceedings under the Agricultural Income-tax Act the family was held to be separate and each member liable to pay agricultural income-tax separately on income pertaining to his share in the zamindari. Compensation for the abolition of zamindari was given to each member in respect of his sixth share and not to the joint family as a unit. In the municipal records the houses forming joint property are now recorded in the name of all the six members, each having one-sixth share. Rental receipts are issued to the tenants on behalf of the six members. Then there is the claim made by the members that after the disruption they all formed a partnership through an instrument dated march 31, 1948. During the assessment proceedings for 1947-48, a claim of partition was made but not pressed. The claim was repeated for the assessment year 1948-49 but was rejected because the houses were not divided by metes and bounds. Then in the alternative a claim of partial partition was made and it was also rejected. For the assessment year 1949-50 partition was again claimed and in the alternative partial partition was claimed in respect of the zamindari, houses, cultivatory land, Government securities, shares in joint stock companies and fixed deposits. The claim of partition was rejected but the claim of partial partition was accepted by the Tribunal in respect of the zamindari, the houses, the securities, the shares and the deposits excepting a sum of Rs. 1,00,000 and odd. The claim of partition is inconsistent with the claim of partial partition, e.g., taking out an item of joint family property and dividing it among the six members in equal shares. Partial partition, as understood in this sense, means that the family remains joint in respect of the remaining property; if there is partition the joint family ceases to be joint even though the property may continue to be owned by the members as tenants-in-common. It is, therefore not possible to reconcile the claim of partition with the alternative claim of partial partition. If partition is claimed and it is found that the property is not divided in definite or specific portions, no order contemplated by section 25-A(1) can be recorded and the family must continue by virtue of section 25-A(3) of the Act to be assessed as joint and no question of considering partial partition can arise at all. The whole of the joint family property must be divided in definite portions; it is not enough that only a part of it is so divided.'The joint family property' means the entire joint family property. On disruption of a joint family the entire joint property is held by its members as tenants-in-common and the article 'the' denotes that the whole of it must be partitioned in definite portions. It is an absolute requirement that the joint family property is partitioned in definite portions. If in respect of it or any part of it, it cannot be said that it has been partitioned in definite portions, section 25-A simply is not applicable and no order contemplated by it can be passed by the Income-tax Officer. All tangible property is ordinarily capable of being partitioned in definite portions. Only intangible property cannot be partitioned in definite portions because it has no portions; it can be divided only in shares. Land, houses, shares, deposits and securities are all capable of being partitioned in definite portions and as some of these have not been partitioned in definite portions in the instant case no order contemplated by section 25-A could be issued by the Income-tax Officer and the assessment must be made on the joint family as if there was no disruption. This finding disposes of the claim of complete partition if any was intended by the question as posed. The requirement of partition in definite portions arises only under section 25-A, but if the section is not applicable there is no occasion for considering whether the partial partition is in definite portions or not. Just as the Hindu law does not require partition to be in definite portions, so also it does not require partition to be in definite portions. The Income-tax Act does not at all affect or later the rules of Hindu law and they are to be given effect to in every case. If what is valid under the Hindu law is not regarded as valid, or is not recognised for income-tax purposes, there must be a specific provision to that effect in the Income-tax Act. Under the Hindu law if there is disruption of the status of a joint family it ceases to be joint family and would but for the provisions of section 25-A not be liable to be assessed as such. The legislature decided that disruption not followed by division in definite portions, though valid under the Hindu law, must not be recognised for purposes of the Income-tax Act and consequently enacted the special deeming provision in section 25-A(3) of the Act. If a joint family in spite of its disruption is assessed as such (because of the absence of partition in definite portions) it is because of the special provision in section 25-A, refusing to recognise it for purposes of the Income-tax Act. If the legislature had decided that partial partition not followed by division in definite portions also must not be recogniesed and that the property partially portioned should still be treated as joint family property it would have enacted a special provision to that effect and when it has not done so it is not open to us to disregard any partial partition, though valid under the hindu law, and refuse to give effect to it. We are as much governed by the Hindu law as by the Income-tax Act. So long as the Income-tax Act has not altered any rule of the Hindu law it must be given effect to. We have no power to alter any rule of the Hindu law or to refuse to give effect to it. No specific provision in the Income-tax Act is required for our giving effect to any rule of the Hindu law not altered by it. If a joint family must be prevented from taking out an item from the joint family property and dividing it among its members but not in definite portions it must be done through an enactment. If it is thought desirable to check joint families from reducing their properties through a series of provost partial partitions there must be a law checking it; the court cannot legislate and refuse to enforce the law. No case has been referred to us in which a joint family had been assessed on the income of an item partitioned among its members on the ground that the partition was not in definite portions. All the cases in which the joint family has been assessed on the income of the entire joint family property are those in which partition, and not partial partition, had been claimed, but it was found to be not in definite portions. They were the cases in which the benefit of section 25-A had been claimed on behalf of the joint families and it was refused because there was no partition in definite portions. There are authorities such as Meyyappa Chettiar v. Commissioner of Income-tax, Biradhmal Lodha v. Commissioner of Income-tax, and In re Sir Sundar Singh Majithia, laying down that section 25-A has no application to a case of partial partition; if it has no application one cannot insist upon partition in definite portions in partial partition.,
Question No. 3, as already observed, is not properly framed; it does not bring out the essence of the controversy. It is, however, irrelevant because the question of partition of houses in definite portions arises only under section 25-A and it has been found to be inapplicable. The Tribunal has rejected claim of partition and accepted the claim of partial partition; consequently the property partially partitioned ceased to be joint family property and the joint family cannot be assessed on its income. It is irrelevant to consider in a claim for partial partition as to whether it has been partition in definite portions or not. All that may be necessary to be seen is that the transaction of partial partition was not a sham or colourable transaction but was an effective one. So long as the partition is effective and was not found to be a sham or colourable transaction the department cannot refuse too recognise the partial partition and must exclude the income from such assets from the assessment of the Hindu undivided family. The Tribunal, which is the final fact finding authority, has believed the factum of partial partition. The Supreme Court in Charan Das Haridas v. Commissioner of Income-tax, in connection with the partial partition of an intangible assets, i.e., the managing agency, has held :
'When once the family has disrupted, the position under the partnership continues as before but the position under the Hindu law changes. There is then no Hindu undivided family as the unit of assessment under the Income-tax Act and the income which accrues would be said to be of the Hindu undivided family. There is nothing in the Indian Income-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 effected so as to bind the members; the Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoyment can otherwise be acquired according to the shares of the members.'
We would, therefore, leave question No. 3 unanswered but if it has to be answered the answer must be in the affirmative.
The reference is answered accordingly. The Commissioner will pay the costs of this reference which we assess at Rs. 200. Councils fee is also assessed at Rs. 200.