1949 (12) TMI 34 - HC - Income Tax

Summary

Issues Involved:

1. Validity of the division of businesses by the father under Hindu law despite unequal distribution.
2. Recognition of partition under Section 25A of the Income-tax Act in the absence of physical division of immovable properties and jewels.
3. Interpretation of "partition in definite portions" under Section 25A of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of the division of businesses by the father under Hindu law despite unequal distribution:

The first question is whether the division of the businesses brought about by the father in exercise of his superior power is valid and effective notwithstanding the unequal nature of the division. Under Hindu law, specifically the Mitakshara law, the father has the undoubted right and privilege of effecting a partition between himself and his sons, whether they are majors or minors, without their consent. This division may be between himself and his sons or even between the sons inter se. However, the partition so made must be fair and equal. The Tribunal's view that the partition was void due to its unequal nature was incorrect. The partition remains valid until it is repudiated by the major sons or set aside by the minors upon attaining majority. Therefore, the division of the businesses was effective.

2. Recognition of partition under Section 25A of the Income-tax Act in the absence of physical division of immovable properties and jewels:

The next question is whether there is a partition of the immovable properties and the jewels which can be recognized under Section 25A. Section 25A provides that if the joint family property has been partitioned among the various members or groups of members in definite portions, the family will be deemed to have been partitioned for the purpose of the Act. In the present case, the division of the houses consisted of allotting to each member a third share in the houses which the family owned exclusively and a third share in the fractional share which the family owned in houses jointly along with others. However, the jewels were not divided and were merely held in common. Since the jewels and some immovable properties were not physically divided, the partition could not be said to be complete and therefore could not be recorded under Section 25A.

3. Interpretation of "partition in definite portions" under Section 25A of the Income-tax Act:

The interpretation of "partition in definite portions" under Section 25A has been the subject of several decisions. It is clear that the partition should be a complete partition of the properties. The section requires a physical division of the property where possible. In the case of businesses, a physical division is not feasible, and a division by suitable entries in the books is sufficient. However, for immovable properties and movables like jewels, a physical division is necessary. In the present case, the houses were divided into shares, but the jewels were not divided. Therefore, the partition did not satisfy the requirements of Section 25A.

Conclusion:

The judgment concluded that the Tribunal's finding that there was no partition within the meaning of Section 25A was correct. The division of businesses was valid under Hindu law despite being unequal, but the partition of immovable properties and jewels was incomplete as per the requirements of Section 25A. Therefore, the family could not be deemed to have been partitioned for the purposes of the Income-tax Act. The assessee was directed to pay the costs of the Income-tax Commissioner, fixed at Rs. 250.