M. L. Shrimal, J. - In relation to asst. yr. 1960-61 notice u/s 13(2) of the Expenditure Tax Act, 1957 (to be hereinafter referred to as the Act), was served on M/s. Gopi Chand B. Tholia, Gheewalon-ka-Rasta, Jaipur (to be referred to hereinafter as the assessee). Inspite of the notice having been served, no return was filed. A notice u/s 15(4) of the Act was issued on February 16, 1962 and was served on the assessee. A second notice for hearing on February 28, 1962, was again served on the assessee. Rajendra Kumar Tholia appeared for the assessee. Though no return was filed, yet an oral plea was raised that the joint Hindu family stood partitioned by an award dated January 3, 1958.
2. The assessees attention was invited, by the Expenditure Tax Officer, Central Circle-II, New Delhi, to the fact that one of the family properties, named and styled as Tholia Garden was not dividend among the family members in definite portions by metes and bounds. The alleged partition, therefore was not complete with the meaning of s. 19(1) of the Act. The assessee paid no heed to the advice of the Expenditurer Tax Officer and no return was filed. The assessment proceedings were completed on March 29, 1962, u/s 15(5) of the Act. The total expenditure of the family and its members was estimated at Rs. 90,000/- for the relevant asst. yr.
3. The assessee challenged the order of the Expenditure Tax Officer before the AAC of IT C Range, New Delhi. The AAC while deciding the appeal filed by the assessee, claiming partition within the meaning of s. 25A of the IT Act, 1922, relating to the same asst. yr. held that the family had been partitioned on and from January 3, 1958. There being no joint family in the year previous to the asst. yr. no expenditure tax could be levied on the family. The appeal was accordingly accepted and the order passed by the Expenditure Tax Officer was set aside vide order dated September 13, 1966.
4. The Revenue preferred an appeal before the ITAT (Delhi Bench A) and the same was registered as Expenditure Tax Appeal No. 10 of 1966-67. The Tribunal, after hearing the parties, upheld the order of AAC of IT vide order dated May 14, 1968.
5. A reference application was filed u/s 25(1) of the Act by the Commer. of Expenditure Tax, Rajasthan, Jaipur. It came up for disposal before the Tribunal on April 25, 1969. The Tribunal held that in its opinion a question of law had arisen out of its order. It, therefore, drew up a statement of the case and referred the following question of law to this Court :
'Whether on the facts and in the circumstances of the case, the Appl. Tribunal erred in law in upholding the order dated 13-9-1966 of the AAC cancelling the assessment made u/s 15(5) of the Expenditure Tax Act, 1957 ?'
Ld. counsel appearing on behalf of the assessee as well as the Department agree that the question, as drafted by the Tribunal, correctly represents the controversy between them.
6. The answer to the question depends upon true interpretation of the language of sub-s. (1) of s. 19 of the Act. The language of s. 19 of the Act and s. 25A of the Indian IT Act, 1922 is identical in essential parts. It will be advisable to reproduce below both the sections in juxtaposition :
Sec. 19(1) of the Expenditure Tax Act, 1957
Sec. 25A(1) of the Indian IT Act, 1922
'19(1). Where at the time of making an assessment, it is brought to the notice of the Expenditure-tax Officer that partition has taken place among the members of a Hindu undivided family, and the Expenditure-tax Officer, after inquiry, is satisfied that the joint family property has been partitioned as a whole among the various members or groups of members in definite portions he shall record an order to that effect, and make assessments on the expenditure of of the undivided family as such of the undivided family as such including the year relevant to the previous year in which the partition has taken place, and each member or group of members shall be liable jointly and severally for the tax assessed on the expenditure of the joint family as such.'
'25A(1). Where at the time of making an assessment under s. 23 it is claimed by or on behalf of any member of a Hindu family hither to assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to to that effect :
Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family'.
7. Ld. counsel for the assessee argues that what s. 19(1) contemplates is separation among the members of the family, which implies that the status of certain member undergoes a change. In other words, they cease to be members of the joint Hindu family. It is an elementary principle of Hindu Law that a mere declaration by a Notification to dissolve joint Hindu family tie is enough. Partition of the joint family property by metes and bounds is not a necessary requirement for its disruption. The requirement of law is that separating members share in the property must be definite. Partition contemplated by s. 19(1) of the Act is not necessarily a partition of all the properties by metes and bounds. In the alternative, it was urged that the words 'partition' as a whole among the various members or groups of members in definite portions', appearing in s. 19 of the Act, indicate no more than an ascertainment in clear terms. In the case of business, exclusion of other members could well be brought about by accepted mercantile practice of making appropriate entries in the books of accounts. Similar is the position in the matter of division of cash and ornaments. Ld. counsel further argued that the expression 'partition as a whole among the various members or groups of members in definite portions'does not mean actual partition of all the items by metes and bounds. If a running business could be partitioned by making entries in the account-books an immoveable property could also be partitioned in definite portions by defining respective shares.
8. Ld. counsel for the assessee further urges that where at the time of making assessment it is claimed, by and on behalf of the members of the Hindu family hitherto assessed as undivided, that a partition has taken place among the members of the family, the Expenditure Tax Officer is required to make inquiry in respect thereto.If the Expenditure Tax Officer is satisfied that separation of the members of the family has already taken place and that the joint family property has been partitioned among various members or groups of members, he has to record that the joint family no longer exists and its property is not taxable as such. Ld. counsel then persuasively submitted that various decisions delivered by various High Courts on s. 25A of the IT Act, 1922, could well be read with advantage in connection with interpreting the provisions of s. 19 of the Act, since the essential portions of both the sections are pari materia to each other. Placing strong reliance on Rang Lal Modi v. CIT, the counsel submits that on January 3, 1958, the partition had actually taken place among the members of the family and by the award, the immoveable property belonging to the joint family, had been allotted in definite shares to different persons of the family. Only Tholia Garden, situated at Jaipur, had not been divided by metes and bounds as the same was hardly capable of being so divided. Each party had been given 1/6th share in the Tholia Garden. It is not necessary that there should be physical division of all the properties of a joint family by metes and bounds. The fact that an item of joint family property has not been divided by metes and bounds would not by itself be enough to take the case out of the purview of s. 19 of the Act.
9. There can be two types of cases; firstly, a family may divide between themselves some items only of its property either by metes and bounds or by allotting definite shares. However, in respect of the rest of the property it may still continue as undisrupted and undivided. Secondly, the family may be completely disrupted in status and be no longer a joint Hindu family, though in respect of some items they may for one reason or the other continue to hold them jointly not as undivided Hindu co-parceners but as co-shares under the ordinary law with definite separate interest.
10. With reference to the second category, formulated above, joint family according to counsel becomes completely disrupted and there remains no status of joint family. It cannot, under the circumstances, be said that the family has not been partitioned as a whole. If a particular property or some items of family property, which are comparatively small in proportion to the entire family assets and which bring in only a substantially small income in relation to the total income of the family properties or which property is kept undivided for the reason that it may be used as a place of recreation and does not bring in any income worth the name, it cannot be said that the family has not been partitioned. The AAC and the Expenditure Tax (Income Tax) Appl, Tribunal, ld. counsel adds, were correct in holding that the joint family had not existed and as such its properties could not be taxed under the Expenditure Tax Act, 1957 for the year 1960-61.
11. Ld. counsel further argues that so long as the transaction is legal, the object being to reduce the liability from payment of tax, it must be given effect to according to law. Reliance has been placed on the Full Bench decision of the Lahore High Court in Sher Singh Nathu Ram v. CIT (a case decided u/s 25 A of the IT Act, 1922). In the above case it was held that requirement of law would not necessarily demand a partition by metes and bounds, but it contemplated that there should be firstly a finding by the concerned authority that the Hindu family as such stood disrupted and secondly, a finding that the joint family property had been divided among various members or groups of members in definite portions.
12. Ld. counsel appearing for the Revenue contends that the words 'partition as a whole among the various members or groups of members in definite portions', referred to in s. 19 of the Act clearly mean an actual partitioning the property. What the law contemplates is segregation of the portion of the property and not a mere specification of the extent of the share. Shersingh Nathurams case (supra) was considered by a Division Bench of the Madras High Court in M. S. M. M. Meyyappa Chettier v. CIT. Their Lordships Satya Narain Rao and Vishvanath JJ. observed that where the family properties consisted only of business, the observations made in Shersingh Nathurams case (supra) would hold good; but if the properties were capable of physical division, they disagreed with it. Their Lordships of the madras High Court, placing reliance on Dr. Sardar Bahadur Sir Sunder Singh Majithia v. CIT held that the law ignored a mere severance in status, though it would put an end to the joint Hindu family under the Hindu law. Inspite of the severance the joint family continued to exist as a person or legal entity for the purpose of income-tax and was liable to be assessed as such.
13. We have given careful thought to the rival contentions raised by the parties. There cannot be any dispute on the point that in the case of trade and business there need not be winding up and division of goods, outstandings and assets in order to satisfy the provisions of s. 19 of the Act. But in case of immoveable property the position is altogether different. In our considered opinion the expression 'partition as a whole' and 'in definite portions', appearing in s. 19, indicate actual physical division. A member may take a particular house in which he can live or a piece of land which he can cultivate of sell or mortgage or may take particular ornaments, which he can wear a dispose of. The expressions, 'partition as a whole' and 'in definite portions' would, under no stretch of imagination, mean undivided share in Tholia Garden. All the members can respectively claim a portion of the income. But they cannot claim a division of the corpus unless partitioned. In this view of the matter, we stand supported by a Division Bench judgment of the Delhi High Court, reported in Roshan Lal De Hatti v. CIT. The ratio decidendi of Ranglal Modis case (supra) also does not help the assessee. A perusal of the award reveals that the total value of the property partitioned was Rs. 12,15,000/- and the value of the Tholia Garden was Rs. 1,98,000/-. Keeping in view the facts and circumstances of the case, it cannot be said that the property kept undivided was merely a small portion in proportion to the entire family assets. We fail to appreciate the reasoning of the AAC as well as the ITAT in holding that Tholia Garden was only a small part of the family assets. The value of the property (Tholia Garden) is 1/6th of the entire assets, which cannot be termed to be a small portion. Neither it is a temple, not is it a burial ground or a property of the like nature, for which the question of sentiment could arise. The ratio decidendi of the Ranglal Modis case (supra) in no way helps the assessee. Tholia Garden is capable of being partitioned in definite portions. It cannot be said that the land used for the purpose of garden cannot be used after being divided into definite shares either for the purpose of horticulture, agriculture or construction of a building.
14. We find ourselves unable to agree with the decision of the AAC as well as the Expenditure (Income) Tax Appl. Tribunal and the ratio decidendi of Rang Lal Modis case (supra). Our answer to the question referred to us is in the affirmative in favour of the Revenue and against the assessee. In the circumstances of the case, the parties are ordered to bear their own costs.