Holding

The properties were capable of physical division, no partial partition under section 171 was recorded, and therefore the income from those properties must be included in the joint Hindu family’s total income.

Summary

The Hindu Undivided Family (HUF) Kalloomal Tapeshwari Prasad derived income from various sources and claimed that a partial oral partition in 1963 had divided eighteen immovable properties among ten coparceners, who then maintained separate accounts. The Income‑Tax Officer rejected the claim, holding that the properties could be physically divided and that mere severance of status was insufficient for a partition under section 171 of the Income Tax Act, 1961. The assessee appealed, but the Appellate Assistant Commissioner and the Tribunal also rejected the claim, leading to a reference to the High Court on two questions: (1) whether the properties were capable of division in definite portions as required by the Explanation to section 171, and (2) whether the income from those properties should be included in the joint family’s total income. The Supreme Court held that the properties were indeed capable of physical division and that no partial partition under section 171 had occurred; consequently, the income must be included in the HUF’s total income. The Court dismissed the assessee’s appeal and allowed the Revenue’s appeal.

Issues considered

Whether the eighteen immovable properties were capable of division in definite portions among the ten coparceners as contemplated in Explanation (a)(i) to section 171 of the Income‑Tax Act, 1961, and whether mere severance of status suffices for a partition.
Whether the income from the properties, which were accepted as partitioned under Hindu law but without a recorded order under section 171, should be included in the total income of the joint Hindu family.

Legislation cited

Income Tax Act, 1922s. 10, s. 14, s. 2, s. 25A, s. 3, s. 4, s. 64(2)
Income Tax Act, 1961s. 171, s. 256(1)

Subjects

Hindu Undivided Familypartial partitionsection 171income tax assessmentphysical division of propertyseverance of statustax liabilityHindu law

Judgment

9

KALLOOMAL TAPESWARI PRASAD (HUF), KANPUR A
V,

THE C. L T., KANPUR

(AND VICE VERSA)
B
j January 12, 1982

(R. S. PATHAK AND E. S, VENKATARAMIAH, JJ.]

Income Tax Act 1961, S. 171-Scope of,

Hindu Undivided Fam(ly-Ora/ panition in respect of immovable proparti~ c
Properties incapable of physical division in equal shares-Capable of division by
apPortionment and equali1alion by payment ofmCJney-."dere severa11ce of status-
Nor sufficient to record finding of partition-Whether entitles the inclusion of
income from an asset which has ceased to belong to the Joint family in the
assessment ofjoint Hindu family.

• Hindu Law-Partition-What is-How brought about-Partition may be D
total or partial.

The assessee, a Hindu Undivided Family was deriving income from
various sources ,-such as income from property, income from money-lending
business, income from speculaiion business and cloth bttsiness etc. There was a
partial partition in the family in the year 1951, which was accepted and acted
upon by the Income ta:t department, whereafter the doth business was treated as E
the business of a ti.Cm consisting of most of the coparceners as partners. On
December 1, 1963 which fell within the assessment year 1964.65 there was another.
partial partition orally, as a result of which eighteen immovable properties were
divided amongst the ten members of the family: who held those properties as

-.·r
tenants-in-common from that date. These eighteen immovable properties were
situated in different places and their valuation was about Rs. 7 lacs.
F
In the course of assessment proceedings; the assessee claimed that the
mem bcrs of the family had commenced to maintain separate accounts with regard
to the income from the eighteen immovable properties and to divide the nett
profits amongst themselves according to their respective shares at the end of the
year. When required by the Income-tax Officer to explain as to why the proper·
ties were not divided in definite portions as required by section 171 of the Income
Tax Act 1961, the assessee·stated that physical partition of the properties ainongst G
the ten members was impossible and th" only way to partition those properties
was to define the respective shares and to enjoy the income from them separately.
In support of his contention that the properties did not admit of physical division
the assesse.e relied on an arbitration award. The Income-tax Officer did not'agrec
with the assessce's contention that it was not possible to divide the properties iU
definite portions. He rejected the claim of panial partition in respect of the H
-+ eighteen immovable properties and proceeded to assess the income derived there-
from in the hands of the assessee.
10 SUPREME COUltT REPORTS [1982) 3 S.C.R.

A The assessec ft.led an appeal before the Appellate Assistant Commissioner.
During the pendency of the appeal the assessec appointed another arbitrator to
examine the possibility of physical division of each of the eighteen properties into
ten portions. The artitrator by his award stated that the properties were not
capable of physical division into ten shares by metes and bounds and that any
practical division was that of allocation of proportionate shares in an the eighteen
properties. The Appellate Assistant Commissioner held that the case of the
8 assessee that it was not possible to divide the properties physically as untenable
and dismissed the appeal.

In.further appeal to the Tribunal, the Tribunal held that the contention of
the assessec that if the properties had been divided into ten shares they would )
have been either. destroyed or would have lost their values was not correct, and
c that the claim of the assessee under section 171 of the Act that there was a partial
partition was to b.! rejected.

On an application by .the asscssee under section 256 ·(l) of the Act, the
Tribunal referred two questions to the High Court : (1) Whether the Tribunal was t
right in holding that the properties in dispute were capable of division in definite
portions amongst the ten coparceners as contemplated in Explanation (a) (i) to
D section 171 of the Act, and (2) whether the Tribunal was justified in holding that
the income from the properties in dispute which were accepted to have been
•
partitioned under the Hindu Law but with regard to which an order accepting the
claim of partial partition was not made was liable to be included in the computa·
tion of the assessee•s income '!

The High Court held : (I) that even though the eighteen properties could
E not individually be divided into ten Shares without destroying their utility but
.after assessing the value of the properties they could be apportioned betwCen the
ten members and the difference in the allocations could be equalised by payment
of cash amounts by one to the other and in view of clause (a) (i) of the Explana-
tion to section 171, mere severance of status was not sufficient for recording a fin·
ding of partition; and (2) that tbe income accruing from the eighteen immovable
F properties after December 11, 1963 was oot liable to be included in the computa-
tion of the joint Hindu Family's income.

Dismissing the Assessee's appeal and allowing the Department's
appeal:

HELD : 1. (i) The law relating to assessment of Hindu undivided family
G underwent a change when the 1961 Act came into force. Section 171 of the Act
provided for the assessment after partition of a Hindu undivided family. [24-I)]

(ii) A finding to the effect that partition bas taken place has to be recor-
ded under section 171 by the Income-tax Officer. He can record such a finding
only if the partition in questiOn satisfies the definition of the expression 'partition'
H round in Explanation to section 171. A transaction can be recognised as a parti·
tion under section 171 only If, where the property admits of a physical division a
physical division of the property bas taken place. In such a case mere physical
KALLOOMAL V. C.J.T. 11

division of the income without a physical division of the property producing A
+ income cannot be treated as a partition. Even where the property does not admit
of a physical division 1hen such division as the property admits of should take
place to satisfy the test of a partition under section 171. Mere proof of severance·
of status under Hindu Law is not sufficient to treat such a transaction as a parti·
tioo. If a transaction does·not satisfy the above additional conditions it cannoi
be treated as a ~artition under the Act, even though under Hindu Law there has
been a partition.total or partial. The consequence will be that the undivided B
family will be continued to be assessed as such by reason of sub·section (1) of
section 171. [30.A-D]

(iii) It is common knowledge that in every partition under Hindu Law
unless the parties agree to enjoy the properties as tenants-in-common, the need
for division of the family properties by metes and bounds arises and in that pro..
cess physical division of several items of property which admit of such physical c
division does take place. It is not necessary to divide each item into the number
of shares to be allocated at a partition. If a large nuOJber of items of property
-t are there, they are usually apportioned on an equitable basis and if necessary by
asking the parties to make payments of money to equalise the shares. Such a
partition is also a kind of physical division of the properties and is contemplated
in the Explanation to section 171. [34-C-E]
D
' In the instant case no attempt to divide the properties was made. The
case clearly falJs under sub.cJause (i) of cJausc (a) of the Explanation to section
171 of the Act but does not satisfy the requirement of that sub-clause as no physi~
cal division of the properties was made even though they could be conveniently so
divided. Sub-clause (if,. therefore does not apply to this case. [35-B]
E
2. (i) The High Court having held that the assessee was not entitled to
to claim that a partial partition had taken place under section 171, fell into an,
error in holding that the income of the properties which were the subject-matter
of partial partition could not be included in the total income of the assessee by
relying upon the decisions which had been rendeRd on the basis of section 2SA
of the 1922 Act which bad been construed as not being applicable to partial
partition. [35-D] F
'"' )-
' (ii) The true effect of section 171 (1) is that property, which is the sub-
ject-matter of partial partition would continue to be treated as belonging to the
family and its income would continue to be included in its total income until such
a finding is recorded. [35-G]

. (iii) ~uh-section (1) of section l 71 contains a 'deeming' prov1s1on. ft
G
says that a Hindu family hitherto assessed as undivided shall be deemed for the
~urpose of the Ac.t to continue to be a H,indu undivided fa'mily except where and
10 so far as a ~~ding of partiti~n h~s been recorded in respect of it under- section
171. The pa~ution referred to 10 the section can include a partial partition also
~1ther ~s regar~s the ~rson~ con~tituting the undiJ.ided fan:-Uy or the properties H
~~l~~rng ,to ,1t or. bo~hl in .v1~w, of the provisions contained in the other sub-
secuons and the Explapation to the section. (29-F-GJ ·
12 SUPREME COURT REPORTS [1982] 3 S.C.R.

A (iv) Whore there is no claim that a partition-total or partial-had taken
place made> or where it is made and disallowed a Hindu undivided family which
is hithefto being asseBsed as such will have to be assessed as such notwithstanding
the fact a partition bad in fact taken place as per Hindu law. A finding to the
effect that partition bad taken place has to be recorded under section 171 by the
Income-tax Officer. He can record such a finding only if the partition in ques·
tion satisfies the definition of the expression 'partition' found in Explanation to
B section 171. The transaction can be recognised as a partition under section 171
only if where the properties admit of a· physical division, a physical division of
the property bas taken place. In such a case mere physical division of the income
without a_ physical division of the property producing income cannot be treated
as a partition. Even where the property does not, admit of a physical division
then such a division as the property admits of should take place to satisfy the
test of a partition under section 171. Mere proof of severance of status under
c Hindu Law is not sufficient to treat such a transaction as a partition. If a transac·
tion does not satisfy the additional condition it cannot be treated as a partition
under the Act even though under Hindu Law there has been a partition total or
partial. The consequence will be that the undivided family will be continued to
be assessed as such by reason of sub-section (1) of section 171. [29 0.H, 30 A·D] +
Govinddas & Ors. v. Income-tax Officer & Anr., [1976] 193 I.T.R. 123;
D Charanda1 Haridas & Anr. v. Commissiomr of lncome·tax, Bombay North,
•
Kutch & Saurashlra, Ahmedabad & Anr., (1960] 39 I.T.R. 203; A. Kannan
Chetty v. Commissioner of lm:ome-tax, Madras, [1963] 50 I.T.R. 601; referre>d
to.

(v) As long as a finQing is not recorded under section 171 that a partia1
partition had taken place the Hindu undivided family should be decme>d for the
purposes of the Act to be the owner of the property which is the subject matter of
the partition and also the recipient of the income from such property. The
assessment should be made as such and the tax assessed can be recovered as
provided in the Act. [36 F·G] -f
3. Under section 25A of the 1922 Act, a Hindu undivide>d family which
had been assessed to tax could be treated as undivided and subjected to tax under
F the Act in that status unless and until an order was made under ~ection 25A (1)
and if in the course of the assessment proceedings it is claimed by any of the
members of the Hindu undivided family that there has been total partition of the
family property resulting in physical division thereof as it was capable of, the
assessing authority should bold an enquiry and decide whether there has been
such a partition or not. If he held that such a partition had taken place, he
should proeeed to make an assessment of the total income of the family as if no
G partition had taken place and then proceed to apportion the liability as stated in
see:tion 25A amongst the individual members of the family. If no claim was made
or if the claim where it was made was disallowed after the enquiry, the Hindu
undivided family would continue to be liable to be assessed as such.
[23 G·H, 24 A-CJ

H 4. Whm Parliament enacted section 171 it took note of tho decisions
which had taken the view that a partial partition did not fall within the scope of
section 25A. It exprcgly stated in se>etion 171 of the Act that the said provision
KALLOOMAL •. C.l.T. 13

was applicable to both kinds of partitions-total or partial. It has also defined A
partial partition as one which is partial as regards persons constituting the undi-
. Vided family or as regards the properties belonging to the undivided family or
both. It deals with aU kinds of partitions, the nature of which sometimos may
be difficult to predicate correctly. [31 D-E]

Sir Sunder Singh Majithia v. The Commissioner of Income-tax. C.P. & U.P.,
[1942] 10 I.T.R. 457, Gordhandas T. Manga/das v. C~mmlssloner of income-tax 8
Bombay, [1943] 11 I.T.R. 183, Waman Satwappa Kalghatgl v. Commi8'iontr of
incpme-tax [1946]14 I.T.R. 116, M.S.M.S. Meyyappa Chettiar v. Commissioner of
income-tax, Madras, [1950] 18 f.T.R. 586, Lakhmtchand Baljnath v. Comm/8'/0ntr
of income-tax West Bengal, [1959] 35 l.T.R. 416, Ka/wa Dnadatta and Or1. v.
Vnion of india and Ors., [1963] 49 l.T.R. [S.C.] 165, Additional income-tax
Officer, Cuddapah v. A. Thimmayya and Anr., [1965] 55 I.T.R. 666, Joint Family of
Vdayan Chit:iubhai etc.·v. Commisrioner of Income-tax, Gujarat, [1967] 63 I.T.R. c
416, referred to.

5. Partition may be several kinds. It may be a total partition or a partial
partition. A partition can be caned partial both as regards persons and as
regards properties. The next kind of partition may be one where all the members
divide amongst themselves only some of the family properties and continue as
members of an undivided family owing the remainlog family properties. This is D
called a partial partition as regards property. Even here the division of the pro-
perty which is subject matter of partial partition may be groupwise also. In the
case of a partial partition a_s regards property, one thing noticeable is that after
such partition, the property which is subject-matte! of partition is held by the
members of the family as tenants-in-common and the rest of the family proper-
ties Continue to be held by them as members of the undivided family.
[31 F-H, 32 A-E]

6. After a partial partition as regards property, the property divided
is held by the members or the undivided family_ as divided members
- " with all the incidents flowing therefrom and the pr.operty not so divided as
members of an undivided family. Section 171 (I) of the Act can, therefore

- ~
operate in such a case also because the family which has become divided
as regards the property which is the subject matter of partial partition is deemed
to continue as the owner of that property and the recepient of the income derived
from it except where and in so far.as a finding of partition has been given under
ocction 171. [32 F-G]
F

7. Partition can be brought about, (I) by a father during his life time
between himself and his sons by dividing properties equally amongst them, (2) by
agreement, or (3) by a suifor arbitration. A declaration of intention of a copar-. G
cener to become divided brings about severance of status. [27 E]

8. A physical division of tho property which:,is the subject matter of
partition is not necessary to complete the process of partition in so Car as the item
of property is concerned under Hindu Law. Tho parties to the partition may
citjoy tho property in question as tenants-in-common. [27 GJ
H
Appo•i1r v. Rama Subba Aiy1J11 [1866] ll M.I.A, 75, referred to.
14 SUPREME COURT REPORTS (1982] 3 s.c.R.

A 9. Hindu Law does not require thal the property must in every case be
partioned by metes and bounds or physically into different portions to complele a
partition. Disruption of status can be brought about and it is open to the parties
to enjoy their shares of property as tenants-in-common in any manner known to
law according to their desfre. (28-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1370/74
B and 1768 of 1975.

From the judgment and order dated the 29th September, 1972
of the Allahabad High Court in Income-Tax Reference No. 47
of 1971.
c S.T. Desai J.B. Dadachanji and K.J. John for the Appellant
in C.A. 13;0/74 and for Respondent in C.A. 1768/75.

V.S. Desai, Miss A. Subhashini, K. C. Dua and S. P. Nayar for
• the Respondent in CA. 1370/74 and for the Appellant in CA.
D 1768/75.

The Judgment of the Court was delivered by

VENKATARAMIAH, J. These two appeals by certificate-one by
the assessee and the other by the Commissioner of Income-tax,
E Kanpur are filed against the judgment and order dated September
29, 1972 of the High Court of Judicature at Allahabad in Income-tax
Reference No. 47 of 1971 under section 256(1) of the Income-tax.
Act, 1961 (hereinafter referred to as 'the Act') made by the Income· ·~
tax Appellate Tribunal, Allahabad Bench, Allahabad (for short '1he
Tribunal'). The two questions which were referred by the Tribunal
F for the opinion of the High Court were :

"(l) Whether on the facts and in the circumstances of the
case the Tribunal was right in holding that the pro-
perties in dispute were capable of division in definite
portions amongst the 10 coparceners as con temp lated
in Explanation (a) (i) to section 171 of the Income-
tax Act, 1961 and that even otherwise the. mere seve·
ranee of status was not sufficient to entitle the assessee
to succeed in. its claim for partial partition ?
H
(2) Whether on the facts and in the circumstances of the
case. the Tribunal was justified in holding th at the
KALLOOMAL v. c.l.T. (Venkataramlah, J.) 15

__,. income from the properties in dispute which were A

I
accepted to have been partitioned under the Hindu Jaw
.but with regard to which an order accepting the claim
of partial p~rtitic;in was not made was liable to be
I
included in the computation of the assessee's
I
I
i
income?"
B
I
I
I
,.. The assessee is a Hindu undivided family known as M/s.
Kalloomal Tapeshwari Prasad and the year of assessment is 1964·65.
'( The assessee is governed by the Mita ks hara school of law. The
., following genealogical tree represents the relationship amongst the
--= members of the family : C
Phakki Lal
I I I
I I I
Chandoolal Bishambhar Nath Sitaram
(His wifo Rampiari (died issueless (wife·Kripa
died on 17.9.63) in 1940-wife 1 Devi) D
I predeceased him) I
I I
I
I
I I
II
I I I E
I Gopalji Ramji
I
I I - I I I
Jagat Roop Swamp Shyam Bimal
Narain Narain Narain Narain Narain

During the relevant previous year, the family consisted of F
Chandoolal, Sitaram and his wife Kripa Devi, Jagat Narain, Roop
Narain, Swamp Narain, Shyam Narain and Bimal Narain who were
the five sons of Chandoolal and Gopalji and Ramji, the two Sons
of Sitaram. The assessee (Hindu undivided family) was deriving
income from various sources such as income from property, income
from money lending business, income from speculation. busi· G
ness and cloth business etc. There was a partial partition in the
a
family in the year 1951 when sum of Rs. 5,00,000 out of its total
capital of Rs. 12,85,423 was divided amongst the coparceners at the
rate of Rs. 41,666/10/8 amongst members of Chandoolal's branch
and at the rate of Rs. 83,333/5/4 among~ the members of Sitaram's H
branch. Kripa Devi did not receive any share at that partition.
The said partial partition was accepted and acttd upon by
16 SUPREME COURT REPORTS fl 982] 3 S.C.R •.

the Income-tax Department where after the cloth business
was treated as the business of a firm consisting of most
of the coparceners as partners. Again. on December II,
1963 which fell within the previous year relevant for the assess-
ment year in question i.e. 1964-65, according to the assessee,
there was another partial partition orally as a result of which its
B eighteen immovable properties were divided amongst the ten
members of the family and that they held those properties as
tenants-in-common from that date. It was claimed by the assessee
in the course of the assessment proceedings that the members of the
family had commenced to maintain separate accounts with regard
to the income from the said eighteen properties and to
c divide the net profits amongst themselves according to their
respective shares at the end of each year. The eighteen immevable
properties were situated in different places and their valuation was
as follows :

b S. No. Municipal number of Value
the property

l. 75/2 1,78,875/-
2. 76/162 27,000/-
3. 76/169 45,000/-
4. 47/110 13,500/·
5. 47/26 20,7001-
6. 48/203 16,200/-
7. 55/124 90,000/-
8. 55/361
F 9. 55/37 J 41,400/·
10. . 70/87 1,57,500/-
11. 71/150 8, 100/-
12. 71/89 3,600/-
13. 71/112 19,800/-
14. 63/61 7,425/-
G 17,100/-
15. 51/68
16. 51/73 14,400/-
17. 86/37 20,520/-
18. 1/301A 45,000/-

l
. 7,26,120/·
.H
-1.·.

' KALLOOMAL v. 0.1.T. (Vmkataramiah, J.) 17

• -1- When required·by the Income·tax Officer to explain as to why A
the properties were not divided in definite portions as required by
section 17 l of the Act, the assessee stated that physical division of
the properties in question amongst the ten members was impossible
and the only possible way to partition those properties was to define
their respective shares and to enjoy the income from them separatly.
In support of the above claim the assessee relied upon a copy of an '8
award dated April 15, 1964 made by one S.B. Tandon which was
made into a decree in Suit No. 60 of 1964 on the file of the Court
of the First Civil Judge, Kanpur dated September 21, 1964. In
that award the arbitrator had stated that the properties did not
admit of physical division. The Income·tax Officer did not agree
with the asscssee's contention that it wa• not possible to divide the
properties in question :n definite portions. Accordingly he rejected c
+ the claim of partial partition in respect · of the eighteen immovable
properties ,and proceeded to assess the income derived· therefrom in
the hands of the assessec. Against the order of the Income-tax
. Officer, the assessec filed an appeal before the /\ppellate Assistant
Commissioner of Income·lax. During the pendency of that appeal
D
the assessee appointed another arbitrator by the name Lakhsman
Swaroop, a retired Chief Engineer to examine the posssibility
of a physical division of each of the eighteen properties into
ten portions and if that was not possible to suggest any other mode
or modes to divide them into ten parts in accordance with the share
allotted to each of the parties to the partition. By his award dated
E
February 3, 1965, Lakshman Swarwp stated tl1at the aforesaid
properties were "not capable of physical division into ten shares by
metes and bounds and that any practical division is that of alloca-
tion of proportionate shares in all the 18 properties in question."
It may be mentioned here that out of the ten shares, six shares were
I/12th each and four shares were I/8th each. Chandoomal and his F
five sons had been allotted l/ 12th each and Sitaram, his wife and
his two sons had been allotted l /4th each. Lakshman Swaroop was
also examined as a witness before the Appellate Assistant
Com missioner by the assessee and cross-examined by the Income-
tax Officer. The Appellate Assistant Commissioner on a considera-
tion of the material before him including the decree of the court G
referred to above and the evidence of Lakshman Swaroop held that
the case of the assessec that it was not possible to divide the pro-
perties physically into ten shares referred to above was not tenable
and dismissed the appeal. The assessee, thereafter took up the
+ matter before the Tribunal in appeal. The Tribunal also was of the
view that the contention of the assessee that if the properties had
H
•

18 SUPREME COURT REPORTS [1982] 3 S.C.R.
i
A been divided into ten shares, they would have· either been destroyed
or would have lost in value was not correct. Accordingly tile claim
of the assessee under section 171 of the Act that there was a partial
partition was rejected. Thereupon on an application of the assessee
made under section 256(1) of the Act, the two questions set out
above were referred by the Tribunal to the High Court for its
B opinion.

After hearing the parties, the High Court recorded its answer
to the first question in the affirmative and in favour of the Depart-
ment and in reaching that conclusion, it observed thus :
i
c "We have seen the evidence of the arbitrator as well
as the Chief Engineer, and it is apparent there from'
that even though the 18 properties could not indivi-
+
dually be divided into I 0 shares without destroying
their utility but after assessing the value of the pro-
perties. they could l>e apportioned between the ten
D
members and the difference in the allocations could be
equalised by payment of cash amounts by one to the
other. In our opinion, it cannot, in such a situation,
be said that. these 18 properties were incapable of
physical division in 10 shares, and so, in view of clause
(a) (i) of the Explanation, mere severance of status was
not sufficient for recording a finding of partition."

The High Court answered the second question in favour of
the assessee holding that the income accruing from the eighteen
immovable properties after December 11, 1963 was however not
F liable to be included in the computation of the joint Hindu family's
income. In recording this answer, the High Court observed
thus:
"Sec. 171 of the 1961 Act in essence, is a re-actment ·
of Sec. 25A with the difference that it applies not only
to cases of toial partition but also to cases of partial
G
partition. There are some incidental changes as well,
e.g. sec. 171 applies also for purposes of levying and
collecting penalty, fine or interest and in addition
requires the Income-tax Officer to record a finding as
to the date on which total or partial partition took
H
place. The fact that sec. 171 applies to a partial
partition (meaning a partition which is partial as
KALLOOMAL v. C.l.T. ( Venkararamiah, J.) 19

regards the persons or as regards the properties of the A
-t family or both) as well shows that a findin11 of partial
partition can be recorded and on such a finding being
·recorded under sub-section (4) the total income of the
joint family in respect of the period upto the date of
partition is to be assessed .as if no partition had taken ·
place and each member of the family was to be liable, B
notwithstanding anything contained in clause (2) of
sec. I0, jointly and severally for the tax on the income
so assessed. Thus sec. 171, like sec.'25A, seeks to
nullify the effect of sec. 10 (2) under which a member
was not liable to be taxed on the income received as ·a
member of Hindu undivided family.· The section c
does not entitle the inclusion of income from an asset
which has ceased to belong to the joini family, in the
assessment of the joint Hindu family.

In the present case, on the· findings, the position D
is that the joint Hindu family stood disrupted in rela-
tion to the 18 immovable properties as a result of. the
oral partition dated 1 lth December, 1963. Thereafter
the income of these properties belonged to the indivi-
dual members and not to the joint family. It could not
be included in the assessment of the family." E

Aggrieved by the answer to the first question, the assessee
has filed Civil Appeal No. 1370 of I974 and aggrieved by the answer
to the second question, the Revenue has filed Civil Appeal No. 1768
of 1975.
F
It is necessary to refer to the history of the relevant provisions
in order to decide the questions raised before us. Under the Indian
Income-tax Act, 19i2 (for short 'the 1922 Act') a Hindu undivided
family could be assessed on its income. Section 3 of the 1922 Act
laid down that where any Central Act enacted that income·tax
should be charged for any year at any rate or rates, tax at that rate G
or those rates should be charged for t.hat year in ilccordance with
and subject to the provisions of that Act in respect of total income
of the previous year of every individual, Hindu undivided family
etc. But section 14 (I) of the 1922 Act provided that no tax was
pay~ble by an individual assessec in respect of any sum which he H
received as a member of a Hindu undivided. family w4ere such sum
had been paid out of the income of 'the family. Section 25-A was
20 SUPREME COURT Rlll'ORTS [1982] 3 S.C.R;
A inserted in the 1922 Act in the year 1928 providing for the machi-
.nery for assessmdnt after partition of a Hindu undivided family.
That section immediately before the repeal of the 1922 Act read as
follows:

"25A. Assessment after partition of a Hindu undivided
B family-(!) Where, at the time of making an assess· •.
ment under section 23, it is claimed by or on behalf of
any memper of a Hindu family hitherto assessed as
undivided that a partition has taken place among
the members of such 'family, the Income-tax Officer
shall make such inquiry there-into as he may think fit, -~
c 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 that effect :

Provided that no such order shall be recorded
D
until notices of the inquiry have been served on all the
members of the family.

(2) Where such an order has been passed, or
where any person has succeeded to a business, pro-
E fession or vocation formerly carried on by a Hindu
undivided family whose joint family property bas been
partitioned on or after the last day on which it carried
on such business, profession or vacation, the Income-
tax Officer shall make an assessment of the total income
received by or on behalf of the joint family as such, as
F if no partition had taken place, and each member or
group of members shall, in addition to any income-tax -('"""I
for which he or it may be separately liable and not-
withstanding anything contained in sob-section (I) of
section 14, be liable for a share of tbe tax on the
income so assessed according to the portion of the
G joint family property alloted to him or it; and the
Income-tax Officer shall make assessments accordingly
on the various members and groups of members
in accordance with the provisions of section 23 :

H
Provided that all ~he members and groups of mem-
bers whose joint family property has been partitioned
l:ALLOOM.l.L v. C.I T. (Venkataramiah, J.) 21

shall be liable jointly has severally for the tax A
-t·
assessed on the total income received by or on behalf
of the joint family as such.

(3) Where such an order has not been passed in
respect of Hindu family hitherto assessed as undivided,
such family shall be deemed, for the purposes of this B
Act, to continue to be a Hindu undivided family".

Section 25-A of the 1922 Act as it stood then (subsequent
modifications in it being immaterial for the purposes of this case)
came up for consideration by the Judicial Committee of the Privy
Council in Sir Sunder Singh Majithia v. The Commissioner of c
Income-tax, C.P. and U.P.(') The Privy Council held that section
25-A[ of the 1922 Act provided that if it be found that the family
property bad been partitioned in definite portions, assessment might
be made, notwithstanding section 14(1) on each individual or group
in respect of bis or its share of the profits made by the
D
undivided family, while holding all the members jointly
and severally liable for the tax. It was further held that if, however,
though the joint Hindu family bad come to an end, it be found that
its property bad not been partitioned in definite portions then the
family was to be deemed to continue-that is, to be an existent
Hindu family upon which assessment could be made on its gains of E
the previous year. But it was of. the view that section 25-A bad
nothing to say about any Hindu undivided family which continued
in existence never having been disrupted. Such a case was held to
fall outside sub-section (3) of sectiOn 25-A and in effect, it held that
the said section did not apply to cases of partial partition.

In (Jordhandas T. Manga/das v. Commissioner of Income-tax,
F
Bombay,(') Kania, J. (as be then was) who agreed with Beaument,
C.J. explained the scheme of section 25-A of the 1922 Act (as it
stood then) in his concurring judgment thus :

"It is material to bear in mind the scheme of the
Income-tax Act, in the first instance. Under sections 2 G
and 3 the different units stated therein are' liable to be
taxed as such. One of them is a joint Hindu family.
In order to avoid double taxation, Section 14 lays down

(I) [1942] 10 I.T.R. 457. H
(2) [1943] 11 I.T.R. 183.
22 SUPREME COURT REPORTS (1982) 3 s.c.1

.A that when the individual member is being assessed,
his income as a member of a joint family ~should not
be assessed again. Then comes the stage, what
happens when a family, which has once been so
assessed, comes to a partition. To meet that con-
tingency, Section 25-A has been enacted. In the sec-
B tion, as it existed before the amendment of 1939, in
terms the Income-tax Officer required proof, (i) that a
separation of the members of the joint family bad
taken place and (ii) that the joint family property had
been partitioned amongst the various members or
groups of members in definite portions. On being satis-
c fied on those points he had to record an ·order to that
effect. The effect of such a recording was that the joint
family income would be assessed and recovered in
terms of sub-section (2). In the absence of such order, 1
under sub-section (3) the joint family continued to be
assessed as before."
D
The same view was followed in Waman Satwappa · Kalghatgi
v. Commissioner of Income-tax(') and in M.S.M.S. Meyyappa
Chettiar v. Commissioner of Income-tax, Madras.(")

E This Court had to consider the true meaning of section 25-A
of the 1922 Act in Lakhmichand Baijnath v. Commissioner of
Income-tax, West Bengal.(') Venkatarama Aiyar, J. speaking for
the Court observed in the above case thus :-

"Now, when a claim is made under section 25-A, the
F points to be decided by the Income-tax Officer are
whether there bas been. a partition in the family, and
if so, what the definite portions are in which the divi-
sion had been made among the members or groups of
members. The question as to what the income of the
family assessable to tax under section 23 (3) was would .r
G be foreign to the scope of and enquiry . under section
25-A. That section was, it should be noted, intro·
duced by the Indian Income-tax (Amendment) Act,
1928 (3 of· 1928) · for removing a defect which the

ff (I) (1946] 14 l.T.R. 116.
(2) [1950] 18 I.T.R. 586.
(3) [1959] 35 I.T.R. 416.
ltALLOOM~L v. C.l.T. (Venkataramiah, J.) 23

. working of the Act as enacted in 1922 had disclosed. A
Under the provisions of the Act as they stood prior
to the amendment, when the assessee was an undivided
family, no assessment could be made thereon if at the
time of the assessment it had become divided, because
at that po(nt of time, there was no undivided family
in existence which could be taxed, though when the
B
~ income was received in the year of account the family
was joint. Nor could the individual membe.rs of the
~1 ,.\' ', family be taxed in respect of such income as the same

- is exempt from tax under section 14 (1) of the Act.
The result of these provisions was that a joint family
c
which had become divided at the time of assessment
escaped tax altogether. To remove this defect, sec-
tion 25-A enacted that until an order is made under
that section, the family should be deemed to continue
as an undivided family. When an order is made under
,; that section, the family sh.mid be deemed to continue D
as an undivided family. When an order is made under
that section, its. effect is that while the tax payable
on the total income is apportioned among the divided
members or groups, all of them are liable for the tax
payable on the total income of the family. What
that tax is would depend on the assessment of income E
in proceedings taken under section 23, and an order
under section 25-A would have no effect on that
assessment.''

- r
The above view was reiterated by this Court in Ka/wa Deva-
dattam and Ors. v. Union of India and Ors.(') in Additional In.come-tax
Offi~er, Cuddapah v. Thimmayya and Anr.(') and in Joint family of
Udayan Chinubhai etc. v. Commissioner of Income-tax, Gujarat.(')
F

· The substance of all these decisions was that under section 25-A of
the 1922 Act a Hindu undivided family which had been assessed to
tax could be treated as undivided and subjected to tax under the-Act
in that status unless and \lntil an order was made under section 25-A G
(!)and ifin the course of the assessment proceedings it is claimed
by any of the members of the Hindu undivided family th11t there

(I) [1963) 491.T.R. (SC} 165. K
(2) [196S]'55 I.T.R. 666.
(3) [1967] 63 I.T.R. 416.
24 SUPREME COURT REPORTS (1982] 3 s.c.R.

has been total partition of the family property resulting in physi-
T
cal division· thereof as it was capable of, the assessing authority
should hold an enquiry and decide whether there had been such a
partition or not. If he held that such a partition had taken place,
he should proceed to make an.assessment of the total income of the
family as if no partition had taken place and then proceed to appor-
B tion the liability as stated in section 25·A amongst the individual
members of the family. If no claim was made or if the claim where
it was made was disallowed after enquiry, the Hindu undivided
family would continue to be liable to be assessed as such. This was
the legal position under the 1922 Act.
c The law relating to assessment of Hindu undivided j family,
however, underwent a change when the Act came into force.
Section 171 of the Act which corresponds to section 25-A of the
1922 Act reads thus :

"171. (I) A Hindu family hitherto assessed as undivided
D
shall be deemed for the purposes of this Act to
continue to be a Hindu undivided family, except
where and in so far as a finding of partition
has been given under this section in respect of the
'
Hindu undivided family.
E
(2) Where, at the time of making an assessment under
section 143 or section 144, it is claimed by or on·
behalf of any member of a Hindu family assessed
as undivided that a partition, whether total or
partial, has taken place. among the members of
F such family, the Income-tax Officer shall make an
inquiry tbereinto after giving notice of the inquiry
to all the members of the family. ·

(3) On the completion of the inquiry, the Income-tax
Officer shall record a finding as to whether there
G has been a total or par\ial partition of the joint
family property, and, if there has been such a
partition, the date on which it has taken place.

'; (4) Where a finding of total or partial partition has
H been recorded by the Income-tax Officer under
kALLOOMAL· v,. C1l.'I'. ( Venkat«romlalr, i.)

this section; and th.e partition. took place during A
the previous year :

(a) the total income or the joint family in respect
or the period up to the-date of partition shall
be assessed ai ir no partition had taken place;
and
8

(b) each member or group or members shall, in
· addition to any tax for which he or it may be
separately -liable a~d n~twithstanding ·any-
thing contained in clause (2) or section IO,
be jointly and severally liable for the tax on
C·
the income so assessed.
(5) Where a finding or total or partial partition has
bten· recorded-· by the· Income-tax Officer under
thM section; and the• pactition took place arter the
expiry of the• previous year, the total income or D
tilt previo111· year. or the joint farnily shall be·
assessed as if no partition·haMaken place, and the
provisions of clause (b) of sub-section (4) shall, so
fir a•·may·bei apply to the case.

(6) Notwithstanding anything contained in this section
E
if-the .Income.tax. Oftlcer· findthafter completion of
the assessment of a Hindu undivided family that
the family has already effected a partition, whether
total or partial, the Income-fax, Ofllcer shall proce-
ed to recover the tax, from every person who was a
member of the family before and partition, and
F
every such person· shall< be jointly and severally
liable for- the tax on the<income·so a!l6essed.

(7) For the purposes. of this. section, the several
liability of any member or group. of members
G
thereunder shall· be computed according to the
portion of. the jqirit family property allotted
to him or it at the· partition, whether total -0r
partial.

(Ii). The provisions of tbi~ section shall, so far as may .
H
·+ be, apply in-relation to the levy.and colleotion,of
[1982] :i s.c.fl.

A any penalty, interest, fine or other s.um in respect
of any period up to the date, of the partition,
whether total or partial, of a Hindu undivided
family as they apply in relation to the levy and
collection of tax in .respect of any such period.
Explanation- In this section-
B
(a) "partition" means-

(i) where the property admit of a physical
<livision, a physical division of the pro- r •
perty, but a physical division of the
c 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 admits of a
physical division then such division as
D the p~operty admits of, · but a mere seve-
rance 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
E Hindu undivided family, or the properties
belonging to the Hindu undivided family, or
both."

Section 4 (I) of the Act which levies the charge of income-tax
states that where any Central Act enacts that income-tax shall be
F charged for any assessment year at any rate or rates, income-tax at
that rate or those rates shall be charged for that year in accordance
with, and subject to the provisions of, the Act in respect of the total .l
income of the previous year or previous years, as the case may be,
of every person. The expression 'person' is defined in section 2 (31)
of the Act as including within its meaning a Hindu undivided family.
G
In order to. avoid double taxation of the same income under the Act,
any sum received by an individual ~s a member of a Hindu undivided
family where such sum has been paid out of the income of the family
is required by section 10 (2) of the Act not to be included in compu-
H ting the total income of a previous year of any person. This require-
ment, however, is subject to section 64 (2) of the Act with effect
from April I, 1971. Then follows section 171 of the Act which
kAi.tooMAL v. C i.T. (Venkataramiqh, 1.)

provides for the assessment after partition of a Hindu undivided A
family.

Under Hindu law partition may be either total or partial. A
partial partition may be as regards persons who are members of the
family or as regards properties which belong to it. Where there has B
been a partition, it is presumed that it was a total one both as to the
parties aad property but when there is a partition between brothers,
there is no presumption that there has been partition between one
<
.\ of them and his descendants. It is, however, open to a party who
' alleges that the partition has been ·partial either as to persons or as
to property to establish it. The decision on that question depends on c
. proof of what the parties intended whether they intended the parti-
tion to be partial either as· to persons or as to properties or as to
both. When there is partial partition as to property, the family
ceases to be undivided so far as properties in respect of which such
partition has taken place but continues to be undivided with regard
to the remaining family property. After such partial partition, the D
rights of inheritance and alienation differ accordingly as the
property in question belongs to the members in their divided or un-
.. divided capacity.. Partition can be brought about (l) by a father
during his lifetime between himself and his sons by dividing proper·
ties equally amongst them, (2) by agreement or (3) by a suit or
arbitration. A declaration of intention of a coparcener to become
E
divided brings about severance of status. As observed by the Privy
Council in Appovier v. Rama Subba Aivan(1)" when the members
of an undivided family agree among ihemselves with regard to a
particular property, that it shall thenceforth be the subject of owner-
ship, in certain defined shares, then the character of undivided
F
property and joint enjoyment is taken away from the subject-matter
so agreed to be dealt with, and in the estate each member thence-
forth a definite and certain share, which he may claim the right
to receive and to enjoy in severalty, although the property itself
has not been actually severed arid ·divided". A physical division
of the property which is the subject-matter of partition G
is not necessary to complete the process of partition
in so far as that item of proper4y is concerned under Hindu Jaw. The
parties to the partition may enjoy the property in question as te~aots
in common. In Approvier's case (supra)· the Privy Council further
laid down that "if there be a conversion of the joint tenancy of an H
(l) [1866] 11 MIA 75.
28 SUl'RBMB Couat, RBPOllTS [1!182] 3 s.c.ll.

undivided .family into a tenancy in common of the members of that
undivided family, the undivided family becomes a divided family•
with reference to the property that is the subject of that agreement,
and that is a separation in interest and in right, although not
immediately followed by de facto actual division of the subject·
matter. This may, at any time, be claimep by virtue of the separate
B right."

It is thus clear that Hindu Jaw does not require that the pro·
perty must in every case be partitioned by metes and bounds or -- ..
physically into different portions to complete a partition. Disrup·
lion of status can be brought about by any of the modes referred
c to above and it is open to the parties to enjoy their share of pro·
perty as tenants-in-common in any manner known to law accord-
ing to their desire. But the income-tax law introduces certain con-
ditions of its own to give effect to the partition under section 171 of
the Act. ·

Section 171 of the Act applies to a case Vi here there is a Hindu
undivided family which had been assessed as such under the Act
until a claim is made under section 171(2) that there has been a
partition-total or partial in it. The partition contemplated under
section 171 of the Act may be either total or partial. Here there is
a departure made f.om section 25A of the 1922 Act which wa.s
E
concerned with a total partition only. In sub-sections (2) to (5)
and (8) of section 171 of the Act, the word 'partition' is qualified
by words 'total or partial'. The Explanation to section 171 of the·
Act to which we shall revert again also defines the expression
'partial partition' as meaning a partition which is partial as regards
F the persons constituting the Hindu undivided family, or the pro-
perfies belonging to the Hindu undivided family, or both. Sub-
section (2) of section 171 provides that where at the time of mak-
ing an assessment under section 143 or section 144 of the Act it is
claimed by or on be1ialf of any member of a Hindu undivided
family assessed as undivided that a partition, whether total or par-
G tial, has taken place among the members of such family, the Income-
tax Officer shall make an inquiry into the said claim after giving
notice to all the members of the family, On the completion of the
inquiry, the Income-tax Officer is required by sub-section (3) of
section 171 to record a finding as to whether the claim of partition,
H total or partial is true or not and if tl. ere has been such a· partition,
the date on which it has taken pla, e. Sub-section (4). of section
171 states that when a finding of total or partial partition bas been
KALLOOMAL v. c.E.T. ( Venkatar~miah, J.) 29

·+ recorded by the Income-tax Officer and the partition had taken A
place during the previous year the total income of the joint family
in respect of the period upto the date of partition shall be assessed
as if no partition had taken place and each member or group of
members shall in addition to any tax for which he or it may be
separately liable and notwithstanding anything contained in clause
' B
(2) of section 10 be jointly and severally liable to the tax on the
income so assessed Where the finding recorded is that the parti-
tion had taken place after the expiry of the previous year then the
joint family has to be assessed under sub.section .(5) of section 17 J
as if no partition had taken place and the tax shall be recoverable
mutatis mutandis as provided in clause (b) of sub-section (4) there-
of. The several liability of a member or a group of the undivided
c
family has .to be determined under sub-section (7) of section 171
according to the share of family property allotted to him or to
the group, as the case may be. Sub-section (8) of section 171 ex-
tends the above rules of assessment and liability to levy and collec-
tion of any penalty, interest, fine etc. payable by the family upto D
the date of partition. Sub-section (6) of section 171 which contains
-11- non ob&tante clause empowers the Income-tax Officer to recover
the tax due from a family from e.very member of the family before
the partition even if he finds after the completion of assessment that
the family has undergone a partition already. The true effect of
this provision is discussed in Govinddas & Ors. v. Income-tax Officer E
& Anr, (1)

Now we come to sub-section (I) of section 171 of the Act
which contains a 'deeming' provision. It says that a Hindu family
hitherto assessed as undivided shall be deemed for the purposes of

~· the Act to continue to be a Hindu undivided family except where F
' and.in.so far•as a finding of partition has been recorded in respect
of.it under.section· 171. Partition referred to here can obviously
include a partial partition also either as regards the persor;s consti-
tuting .the undivided family or the properties belonging to it or
both, in view ·of the provisions contained in the other sub-sections
in and the Explanation to section 171. Where there is no claim
G
that a partition-total or partial had taken place made or where it is
made and disallowed a Hindu undivided family which is hitherto
being assessed as such will have to be assessed as such notwith-
standing the fact a i:>art\tion had jq fapt taken place H
, (I) (1976] 103 ITR 123.

/
30 SUPREME COURT REPORTS [1982] 3 s.c.R.
•
A as per Hindu law. A finding to the effect that partition had taken -r··
place has to be recorded under sectionjl 71 by the Income-tax Officer.
He can record such a finding only if the partition in question satis-
fies the definition of the expression 'partition' found in Explana-
tion to section 171. A transaction can be recognised as a partition
·under section 171 only if, where the property admits of a physical
B division, a physical division of the property has taken place. In '
such a case mere physical division of the income without a physical
division of the property producing income cannot be treated as a
partition. · Even where the property does not admit of a physical
division theri. such division as the property admits of should take
place to satisfy the test of a partition under section 171. Mere
c proof of severance of status under Hindu law is not sufficient to
treat such a transaction as a partition. If a transaction does not
satisfy the above additional conditions it cannot be treated as a
partition under the Act even though under Hindu law there has
,.
been a partition total or partial. The consequence will be that the
undivided family will be continued to be assessed as such by
D reason of sub-section (1) of section 171.

At this stage one contention urged on behalf of the assessee •
needs. to be considered. It is asserted on behalf of the assessee ·that
the fiction contained in section 171 ( 1) of the Act does not at all
apply to an undivided family which continues to be in fact an un-
E divided family even after a partial partition as regards some of its
properties had taken place. The argument is that a 'deeming' pro-
vision can operate only where the real state of affairs is different
from what the law deems as existing and it can not where the real
state of affairs is the same as the one which law by a fiction treats
as existing. It is urged that since the undivided family in fact con-
F tinues ev :n after a partial partition as regards property, there is no
need to enact a rule declaring that it shall be deemed to continue
as an undivided family. Hence section 171(1) of the Act cannot
be construed as being applicable to such a case. In other words;·
it is urged that where all the members of an undivided family con-
G tinue to be members of such family owning the remaining proper-
ties which are yielding income after a partial partition as regards
some properties has taken place, the undivided family is liable to be
assessed as such only in respect of the income derived by it from
the remaining items of property owned by it and the income derived
H properties which have gone out of the ownership of the family by
reason of the partial partition should be excluded from the total
jncome of the family. Reliance is placed on the following obser•
KALLOOMAL v. C.I.T. (Venkataramiah, J.) 31

A
+ vations of the Privy Council in the case of Sir Sunder Singh
Majithia (supra) where sub.section (3) of section 25·A of the
1922 Act arose for consideration :

"!he section has nothing to say about t4e Hindu un-
divided family which continues in existence never having
' been disrupted. Such a case is outside sub-sectiori (3) B
because it is not within the section at all. No sub-section
is required to enable an undivide'1 family which has never
,.
been .broken up to be deemed to continue. But it need
not have the same assets or the same income in each year
and it can part with an item of its property to its indivi-
dual members if it takes the proper steps." c
It is not necessary to make any comment on these observa-
\ions as they had held the field until the Act came into force with
section 171 inserted in it. The Parliament enacted section 171
a(ter taking note of the above decision and several other decisions
fqllowing it which had taken the view that a partial partition did
not fall within the scope of section 25-A. It expressly stated in
section 171 of the Act that the said provision was applicable to
bo.th kinds of partitions-total or partial, It has also defined par-
tial partition as one which is partial as regards persons constituting·
the undivided family or .as regards the properties belonging to the
E
undivided family or both. Virtually the preseat provision· deals
with all kinds of partitions the nature .of which sometimes may be
difficult to predicate correctly. Take a joint family consisting of a
father, his sons and grandsons as shown in the following genealo-
gical tree :
F
A
I
I
I I I
I I I
B c D G
• I I I
I I I
I
E
I
F
I
I I
G H
I I '1 I
J
H
.~ When a partition takes place in the above family there may
be a partition when all of them-A. B, C,. D, E, F, G, H,. I and
~ . J.
L
32 SUPRBMI! COURT 4UlPOR1S •(1982) 3 S.C-ll.

A become divided each of them taking •.hit rightfill sharc in• ther·fitnily
property. 'In this case there is ·a total ·partition. The llellOlld
kind of partition may be amongst four "groups, the first· coaslitiug
of A only, the second consisting of B, E and F, the third consisting
of C, G and H and the fourth consisting of D, land J . each croup
taking one fourth share in all the pto"perties a:tid the<brao.bh of B,
8. the branch of C, and the branch of D continuing af utidivided
families. The third kind of partition may be a pittition where
any one of the three· ·branches the branch of ''B, or •
the branch of C, or the branch of · D separates from
)'
the rest of the family taking its share thus te1Ulting in two undivided
families one_ family which bas gone out of the family and the other
c consisting of the remaining members. In these cases the l)llrtition
can be call:d partial both as regards persons and as regards proper-
ties. The next kind of part'ition may be one where al£ the- members
divide amongst themselves only Sollie of the family propcrtles'arld
continue as- members of an undivided family owning the remainitig
family properties. This is called a partial partition "as regrids
D •
property. Even here the division of the property whieb is· sub~t
matter of partial partition may be groupwise also. In the case ofa
partial partition as regards property, one· thing noticeable is that
after such partition, the properly whieh is the subject· matter of
partition is held by the members Of the family as tenants-in'common
E and the rest of the family properties continue to be held by them as
members of the undivided family. This is the very principle \i/hich-
is expounded by the Privy Council in Appovler' s case (supra) in lhc
two passages extracted above.

After a partial partition as regards property, the property
divided is held by the members of the undivided family as divided
members with all the incidents flowing therefrom and. the property ·
not so 1divided as member; or an undivided family. The fiction
enacted in section 171(1) of the Act con, therefore, operate in such
a case also because the family whihb has become divided as regards ·
the• property which is the subject-matter of partial partition is
G deemed to continue as the owner of that property and the recipient
of the income derived from it except where and in so far as a finding
•
of partition has been given under section I 71. In such a- case it is
obvious the real state of affairs is in · fact different from what is
created by the fiction and it cannot be said that there is no occasion
H
for the fidtion -to operate. Thal'is the true meaning ,of 'Rllli<>n 171
(I) 'of' the' Act. ! Iaivicw i>f'the°'8ubstaatial · cllanses: thatrare1"roa1ilt
• ICALLOOMAL v.. -0.1.T, (Jl~lfkalaromiah, J.)

about in section 171, we find it · impos&ible to accept the contention
that the fiction in section 171 (I) or the Actdoes not operate in the
case of partial partitions as regards property where the composition
ofthefamily has remained unchanged.

The answer to the first question referred to the High Court by
the Tribunal depends upon the true construction of sub-clause (i) of
claU!ie (a)''of the l!xplanatio11 to eeetion ·171• of the Act. The subject
rnltt.er of partial partition as I1ietitioned"earlier, consisted of eighteen
• •items of i!llml>table property. 'The value ·of each of them is given in
. the ellrlier ·p'1't of: this •judgment. Under the •partial partition in
.question, six penons ·were "allo'ttdd I/ £2th share each in these .c
:eJgtiteen:proptrtie1fand four pei'lk!ds•were·allotted ]/8ih share each.
>The; totlll value of the'i!i&h~n properties \\tas 1Rs. 7;26, 120. Six of
the membera•were, therefore,• entitled to ·properties of the value of
'Rs. fiO;SIO/" each atid four orthdtn wewentitllid' to properties or the
valueiof Rs. 91),705-eaeh. Before the Tribunaltwo snbmissions were
made on •behalf of the astessee in support of the ple1fthat the arrange D
··ment· entered into ·llmongsf the parties· providing · for division of the
·income of the · properties in ~uestioo without Teiorting to physical
<livisioo of the properties was a partition ·as defined by the Bxplana-
don to section 171 of· the Act. The first'Sublllission was that the
-.Votd 'protierty' occurring in clause .(a) (i} of the Bxplanation to
set'!ion 171 refettc!d to an individual item of property which is E
'divided and not to all the properties ·which are divided at the parti-
tion-total or partial-arid hence as it · had been accepted by the
Department that each of the eighteen items •of property· could not
be divided conveniently oiiito 1en portion·without destroying its utility
ii had to 'be held 'that 'the properties · did not admit of physical F
'division. The secdrid sublllissi~ whicb"Was urged in the alternative
.was that even if it was pos~ble to distribute 1he said properties
eqliitlibly-amotlgst · the 'shares· by asking them· to make necessary
·m<mbtary adjustment to equalise the shares as the Explanation to
seetion 171 did not contemplete·any .such monetary adjustment, the
a.ssessee could nbt 'be denied under section 171 the recognition of the ·G
'ji&.rtial p$rtition which ·bad taken place as per Hindu law.' In support
·of this plea the a'ssessee depended •upon' the opinion Of the arbitrator
'Tandon, on the · basis ·of wlrose award the decree had been passed
·atld also the evidence bf Lakshman Swaroop tendered before the
'Appellate Assistant ComttliSsiotier. Taking into consideration all H
'the ma:te-rillf'herore them·and having tegard to the shares allotted to
each of the members, the ma,r]\et vi1lue, sitqation 1 si~e ;and the a~e
34 SUPREME COURT REPORTS [1982] 3 S.C.R.

A of each of the items of the,-property in question, the tax payable in
respect of each of them and also the fact whether an item of pro-
perty is in the occupation of a tenant or .not, the Tribunal came to
the conclusion that it was possible to divide the properties in
question physically into different lots so 'that each member could
take his rightful share in them. The High Court also has expressed
B the same opinion.

On the facts and in the circumstances. of the case, we approve
of the above view of the High Court. We feel that the properties
involved in this case admit\ed of physical division into the required
number of shares and such division would not have adversely affected
•
c their utility. It is common knowledge that in every partition under
Hindu law unless the parties agree to enjoy the properties as tenants
in-common, the need for division of the family properties by metes
and bounds arises and in that process physical division of several
items of property which admit of such physical division does take
place. It is not necessary to divide each item into the number of
D shares to be allotted at a partition. If a large number of items of •
property are .there, they are usually .apportioned on an equitable
basis having regard to all relevant factors and if necessary by a•king
the parties to make payments of money to equalise the shares. Such
apportionment is also a kind of physical division of the properties
contemplated in the Explanation to section 171. Any other view
E will be one divo1ced from the realities of life. The case before us Is
not a case where it was impossible to make such a division. Nor is
it shown that the members were not capable of making payment of -~

any amount for equalisation of shares. We are of the view that
there is ·no material iµ the case sb,owing that the assessee ever
seriously attempted to make a physical division of the property as
F required by law. All that was attempted was to rely upon the
arbitrator's award and Lakshman ·swaroop's evidence which were
rightly held to be insufficient by the Tribunal to uphold the claim of
the assessee. The assessee cannot derive any assistance from the
decision of this Court in Charand1s Haridas Anr. v. Commis-
sioner of Income-tax, Bombay North. Kutch and Saurarhtra, Ahmeda-
G . bad, and Anr.(1) There the item of asset which had to be partitioned
was the right in certain managing agency agreements. The Court
upheld the arrangement of division of commission amongst the
members among whom the said right was divided as a partition
satisfying the test laid down by the income-tax law as it was of the
H view that any physical division ol that right meant the dissolution of

(I) (1960) 39 I.T.R. 203.
KALLOOMAL v. C.l.T. (V'enkataramiah, J.) 35
A
the managing agency firms and their reconstitution which was not
altjgether in the hands of the 'karta of the family. The Court also
was satisfied that the family took the fullest measure possible for
dividing the joint interest into separate interests. In the present
case we are satisfied that no such attempt to divide the properties
was made. This case clearly falls under sub-clause (i) of clause (a) B
of the Explanation to section 171 of the Act but does not satisfy the
requirement of that sub-clause as no physical division of the proper-
ties was made even though they could be conveniently so divided.
Sub-clause (ii) thereof does not apply to this case at all. We, there-
fore, agree with the answer given by the Higli Court to the first
question in the affirmative. The appeal of the assessee is, therefore, c
liable to be dismissed.

Having held that the assessee was not entitled to claim a
partial partition had taken place under section 171, the High Court
. fell into an error in holding that the income of the properties which D .
were the subject matter of partial partition could not be included in
the total income of the assessee by relying upon the decisions which
had been rendered on the basis of seetion 25-A of the 1922 Act
which had been construed as not being applicable to partial parti-
tio'!s. We have already held that section I'll of the Act applies to
all partitions-total and partial-and that unless a finding is record-
E
ed under section 171 that a partial partition has taken place tbe
income from the properties should be included in the total income of
the family by virtue of sub-section (I) of section 171 of the Act. To
put it in other words what would have been the position of a Hindu
undivided family which had claimed in an assessment proceedings
under the l 922 Act. that a total partition had taken place and had
F
(ailed to secure a finding to that effect in its favour under section
25-A thereof would be the position of a Hindu undivided family
which has failed to substantiate its plea of partial partition as regards
property under section 17 l of the Act. The property which is the
subject-matter of partial partition would continue to be treated G
as belonging .o the family and its income would continue to be
included in its total income until such a finding is recorded. That
is .the true effect of section 171 (l}. · It was, ·however, urged
on the analogy of the income from a family property alienated
by a karta in favour ofa stranger that the income which was not H
iJ,Ctually. received by the f<111!ilY' col!ld not be taxed l!nd in support
-. ,-
of
36 ·SUPRBMB COURT lllll'ORTS (1982) 3 s.c.11.

A this plea reliance was placed on a decision of the Madras High
Court 'in A. Kannan Chetty v. Commissioner of Income-tax, Madras(!)
In. that decision it is observed thus : •

'.'For instance, if the karta.of a f!lmily effects an alieoa·
B tion or even makes ,a gift. in so far as tho tuing
department is concerned it is the income of the members
of the Hindu undivided family that can be assessed,
and if by reason of an alienation, whether it is binding
upon the members of the joint family or not, an item
of property ceases to be in the hands of the joint
c family, it would not be open to the department to say
that they would ignore such an alienation, notwith·
standing that the possession of the properties and its
income may pass into the hands of a stranger. It may
be different in cases where the joint \family deals with
one or more items of property or converts it into a
.n different estate retaining both possession and income
in its own hands. That may properly be a case
where the departm~nt may ignore such a transac-
tion."

E
It is significant that in the passage extracted above the Madras
High Court has distinguished the case of an alienation in favour of
a stranger from the case where the joint family deals with one or
more items of property or converts it into a different estate retaining
both possession and income in its own hands. We do not consider
F that such a plee is available to the assessee because the acceptance
of such a plea would lead to the nullification of the scheme of
section 171 of the Act itself. As long as a finding is not recorded
under section 171 holding that a partial partition had taken place
the Hindu undivided family should be deemed for the purposes of
the Act to be the owner of the property which is the subject matter
G of partition and also the recipient of the income from such property.
The assessment should be made as such and the tax assessed can be
recovered as provided in the Act. Io the circumstances, the decision
of the High Court on the 'second question has to be reversed. We
accordingly record our answer to the second question in the affir-
H mative and in favour of.the Department.

. (IJ [19631 SO {.T.R.. 601, .
ltALLOOMAL V. C.I.T. ('Venkataramiah, J,) 37
In the reeult, CiviLAppeal. No. 1370. of 1914is dismissed and A.
+ Civil Appeal No. 1768 of 1975 is.l!llowed. The assessee shall pay the
costs of the Department. Hearing fee one set.

N.V.K. Civil Appeal 1370(1974
dismissed and Civil B
Appeal 1768/1975 allowed.
(

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