Case: Apoorva Shantilal Shah Vs. The C.I.T. Gujarat-I

physical division of the income without physical division of the Property producing the income shall not be deemed to be a partition ; or (ii) where the property does not admit of a physical division then such division as the property admits of, but a mere severance 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 Hindu undivided family, or the properties belonging to the Hindu undivided family, or both It may be noted that the following further provision was included in the said section as sub-s. (9) by the Finance (No. 2) Act, 1980, w.e.f. 1st April, 1980 (9) Notwithstanding anything contained in the foregoing provisions of this section, where a partial partition has taken place after the 31st day of December, 1978, among the members of a Hindu undivided family hitherto assessed as undivided (a) no claim that such partial partition has taken place shall be inquired into under sub-section (2) and no finding shall be recorded under sub-section (3) that such partial partition had taken place and any finding recorded under sub-section (3) to that effect whether before or after the 18th day of June, 1980, being the date of introduction of the Finance (No. 2) Bill, 1980, shall be null and void ; (b) such family shall continue to be liable to be assessed under this Act as if no such partial partition had taken place (c) each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under this Act by the family in respect of any period whether before or after such partial partition ; (d) the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition; and the provisions of this Act shall apply accordingly. This sub-s. (9) was not in existence at the relevant time and has no retrospective operation and it is of no material consequence in deciding the present case The aforesaid provisions of the I.T. Act, as they stood at the material time, clearly recognise partial partition. The definition of partial partition in Expln. (b) makes it clear that partial partition as regards the persons constituting the HUF or as regards properties belonging to the HUF, or both, is recognised 17. In the present case, the partial partition of the shares belonging to the HUF cannot, therefore, be said to be bad either under the Hindu law or under the Indian I.T. Act. We must, therefore, hold that the High Court went wrong in deciding that partial partition of the joint family properties of the Hindu joint family by the father was, invalid and could not be recognised under the I.T. Act. The subsequent amendment of s. 171 by the inclusion of sub-s. (9) does not require any consideration as the said sub-section was not in existence in the relevant assessment year and is only operative from 1st April, 1980. 18. The other question which falls for determination is whether the partition can be said to be bad as at the time of the partition there was no equal division of the shares by the father amongst himself and his minor sons and a part of the shareholding had not been distributed to the father or to the father and mother jointly. We may point out that the AAC has found that at the time of division of the shares, the shares had been distributed equally taking into consideration the shares which had earlier been distributed amongst the parties. In our opinion, a partial partition of any joint family property by the father between himself and his sons does not become invalid on the ground that there has been no equal distribution amongst the co-sharers. It is expected that the father who seeks to bring about a partial partition of joint family properties will Act bona fide in the interest of the joint family and its members, bearing in mind, in particular, the interests of the minor sons. If, however, any such partial partition causes any prejudice to any of the minor sons and if any minor son feels aggrieved by any such partial partition, he can always challenge the validity of such partial partition in an appropriate proceeding and the validity of such partial partition will necessarily have to be adjudicated upon in the proceeding on a proper consideration of all the facts and circumstances of the case. Till such partial partition has been held to be invalid by any competent court, the partial partition must be held to be valid. It is not open to the I.T. authorities to consider a partial partition to be invalid on the ground that shares have not been equally divided and to refuse to recognise the same. It is undoubtedly open to the ITO before recognising the partition to come to a conclusion on proper enquiry whether the partition is genuine or not. If the ITO on enquiry comes to a finding that the partition is sham or fictitious, he will be perfectly within his right to refuse to recognise the same. In the instant case, there is no finding that the partial partition is sham or fictitious or that the partial partition is not a genuine one and has not been acted upon. As there is no finding that the partial partition is sham or fictitious or not a genuine one, on enquiries made by the ITO, and as the partial partition is otherwise valid under the Hindu Law, the partial partition has necessarily to be recognised under the provisions of s. 171 of the I.T. Act and the assessment must be necessarily made on the basis that there is partial partition of the said sharesIn the result, the appeal succeeds.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We may point out that the AAC has found that at the time of division of the shares, the shares had been distributed equally taking into consideration the shares which had earlier been distributed amongst the parties. In our opinion, a partial partition of any joint family property by the father between himself and his sons does not become invalid on the ground that there has been no equal distribution amongst the co-sharers. It is expected that the father who seeks to bring about a partial partition of joint family properties will Act bona fide in the interest of the joint family and its members, bearing in mind, in particular, the interests of the minor sons. If, however, any such partial partition causes any prejudice to any of the minor sons and if any minor son feels aggrieved by any such partial partition, he can always challenge the validity of such partial partition in an appropriate proceeding and the validity of such partial partition will necessarily have to be adjudicated upon in the proceeding on a proper consideration of all the facts and circumstances of the case. Till such partial partition has been held to be invalid by any competent court, the partial partition must be held to be valid. It is not open to the I.T. authorities to consider a partial partition to be invalid on the ground that shares have not been equally divided and to refuse to recognise the same. It is undoubtedly open to the ITO before recognising the partition to come to a conclusion on proper enquiry whether the partition is genuine or not. If the ITO on enquiry comes to a finding that the partition is sham or fictitious, he will be perfectly within his right to refuse to recognise the same. In the instant case, there is no finding that the partial partition is sham or fictitious or that the partial partition is not a genuine one and has not been acted upon. As there is no finding that the partial partition is sham or fictitious or not a genuine one, on enquiries made by the ITO, and as the partial partition is otherwise valid under the Hindu Law, the partial partition has necessarily to be recognised under the provisions of s. 171 of the I.T. Act and the assessment must be necessarily made on the basis that there is partial partition of the said sharesIn the result, the appeal succeeds. The judgment and order of the High Court are hereby set aside. The partial partition is held to be valid and the ITO is directed to recognise the same and to proceed to make the assessment on the basis that there has been a partial partition of the said shares between the parties.