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Commissioner of Income-tax Vs. Babu Lal Jiwan Ram and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference Nos. 1123 and 1266 of 1977
Judge
Reported in(1982)29CTR(All)286; [1983]141ITR156(All); [1982]10TAXMAN95(All)
ActsIncome Tax Act, 1961 - Sections 171
AppellantCommissioner of Income-tax
RespondentBabu Lal Jiwan Ram and Co.
Appellant AdvocateM. Katju, Adv.
Respondent AdvocateR.R. Agarwal, Adv.
Excerpt:
- .....of an huf. he died in 1949. after his death, his widow and the three sons formed the huf. krishna kumar kedia, one of the members of the huf, separated from the family leaving the widow of jiwan ram kedia, vijai kumar kedia and mani lal kedia as members of the huf.4. after the partition in 1946, babu lal kedia was assessed as an individual till the assessment year 1962-63. on november 5, 1961, babu lal kedia, proprietor of m/s. gangadhar babu lal, threw his properties in the common hotchpotch consisting of himself, his widowed daughter-in-law and three grandsons. the department, however, did not accept the said huf. in 1969-70, the name of the business, m/s. gangadhar babu lal was changed to m/s. babu lal jiwan ram and company. babu lal kedia died on may 3, 1963. mani lal kedia.....
Judgment:

Seth, J.

1. The Income tax Appellate Tribunal, Allahabad, at the instance of the Revenue, has referred the following question for the opinion of this court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that there was a partial partition in the HUF of M/s. Babu Lal Jiwan Ram and Company under Section 171 of the Income-tax Act ' (I.T.R. No. 1123 of 1977)

2. In the connected case the question referred is :

'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in deleting the addition of Rs. 15,636 from the assessment of the assessee's HUF in view of the acceptance of the assessee's claim of partial partition made under Section 171 ?'

3. The matter related to the assessment year 1972-73. One Babu Lal Kedia had a son, Jiwan Ram and a daughter, Jiwani Devi. Jiwan Ram had three sons, Krishna Kumar, Vijai Kumar and Mani Lal. Till the assessment year 1945-46, M/s. Gangadhar Babu Lal was assessed in the status of an HUF which consisted of Babu Lal Kedia, his son, Jiwan Ram and the sons of Jiwan Ram. A partition took place in the HUF of Gangadhar Babu Lal between Babu Lal Kedia and Jiwan Ram Kedia and an order under Section 25A of the Indian I.T. Act, 1922, was passed on March 13, 1946. After the partition, Jiwan Ram Kedia was assessed in the status of an HUF. He died in 1949. After his death, his widow and the three sons formed the HUF. Krishna Kumar Kedia, one of the members of the HUF, separated from the family leaving the widow of Jiwan Ram Kedia, Vijai Kumar Kedia and Mani Lal Kedia as members of the HUF.

4. After the partition in 1946, Babu Lal Kedia was assessed as an individual till the assessment year 1962-63. On November 5, 1961, Babu Lal Kedia, proprietor of M/s. Gangadhar Babu Lal, threw his properties in the common hotchpotch consisting of himself, his widowed daughter-in-law and three grandsons. The Department, however, did not accept the said HUF. In 1969-70, the name of the business, M/s. Gangadhar Babu Lal was changed to M/s. Babu Lal Jiwan Ram and Company. Babu Lal Kedia died on May 3, 1963. Mani Lal Kedia separated from the HUF on April 30, 1971. The remaining members, Vijai Kumar and the widow of Jiwan Ram continued in the HUF. Mani Lal Kedia went out after receiving a sum of Rs. 81,518.96 as his share in the entire business assets and other movables in the HUF. An application under Section 171 was filed claiming partial partition in the family of Babu Lal Jiwan Ram and Company (HUF). The ITO rejected the application on the ground that the assets belonging to M/s. Babu Lal Jiwan Ram (HUF) had not at all been included while making the partition though the same belonged to the HUF and the constitution of both the HUFs was the same and consequently it could not be held that there was a partial-partition or a complete partition. The order of the ITO was confirmed by the AAC in appeal. The AAC took the view that there was no documentary evidence to show that Mani Lal Kedia had separated from the HUF and the property credited in his name continued to belong to his HUF.

5. On appeal by the assessee the Tribunal found that Mani Lal Kedia separated from the HUF after taking a sum of Rs. 81,519 representing his share of capital in the entire business assets and the movables. This finding was recorded on the basis of the entries in the account books.

6. As noted earlier, after the death of Jiwan Ram Kedia, the HUF consisted of his widow, Smt. Kapuri Devi and the three sons, Krishna Kumar, Vijai Kumar and Mani Lal. Krishna Kumar Kedia separated from the family and thereafter the assessee's HUF consisted of Vijai Kumar, Mani Lal and their widowed mother.

7. According to Expln. (b) appended to Section 171, ' partial partition ' means a partition which is partial as regards the persons constituting the HUF, or the properties belonging to the HUF, or both. It is thus clear that there can be a partial partition either with regard to the persons constituting the HUF or the properties belonging to the HUF. In the present case, partial partition was claimed on the basis that one of the members of the HUF, namely, Mani Lal, separated from the family after taking a sum of Rs. 81,519 as his share of the capital in the entire business assets and other movables. The finding recorded by the Tribunal that Mani Lal is separate from the family with effect from April 30, 1971, is essentially a finding of fact based on the entries in the account books and has not been shown to be erroneous. It was not necessary for the assessee to establish that there was any special occasion for one of the members to separate from the HUF or to give any explanation about the situation in which a member of the HUF claimed partition and went out from the joint family. The Tribunal was, therefore, justified in coming to the conclusion that the assessee's HUF had established its case of partial partition in the family.

8. During the assessment proceedings of the assessee's HUF for the year 1972-73, the ITO added a sum of Rs. 15,636 in the income of the assessees, being the income earned by Mani Lal as partner from M/s. Vikas Agencies on the reasoning that he continued to be a member of the HUF and the claim for partial partition was not established. The Tribunal rightly deleted this amount on the finding that there was a genuine partition made under Section 171 of the Act and consequently the amount earned by Mani Lal Kedia as partner from M/s. Vikas Agencies could not be added to the income of the assessee's HUF.

9. In the result our answers to the questions referred are in the affirmative, in favour of the assessee and against the Department. The assessee is entitled to costs which are assessed at Rs. 250, one set.


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