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Issues Involved:
1. Assessment of Income Post-Partition 2. Application of Section 25A of the Indian Income-tax Act, 1922 3. Interpretation of Hindu Law on Joint Family Property Detailed Analysis: 1. Assessment of Income Post-Partition The primary issue is whether the income earned from businesses between July 30, 1941, and October 20, 1941, should be included in the total income of the Hindu undivided family (HUF) for the assessment year 1942-43. The Tribunal found that the businesses, initially joint family businesses, were allotted to individual members on July 30, 1941, and were separately carried on by them thereafter. The Tribunal opined that since there was no completed partition until October 16, 1941, the assessee, as the karta, was liable to be assessed for the entire year. The Court, however, disagreed with the Tribunal. It held that once assets are irrevocably transferred to individual members, the income derived from those assets becomes the individual income of those members. The Court emphasized that there is nothing in Hindu law preventing members from holding separate property, and such income should not be considered joint family income. 2. Application of Section 25A of the Indian Income-tax Act, 1922 Section 25A deals with the assessment of income when a joint family is partitioned. The Tribunal's view was that Section 25A requires a complete partition for the income to be assessed individually. However, the Court clarified that Section 25A is a machinery section and not a charging section. It does not alter Hindu law but provides a mechanism for assessing income when a joint family ceases to exist. The Court referred to the Privy Council's decision in Majithia's case, which held that individual members could hold separate property even if the joint family status continued. The Court also cited Bansidhar Dhandhania's case, where it was held that income from businesses allotted to individual members should be treated as their individual income, even if the immovable properties were not partitioned. 3. Interpretation of Hindu Law on Joint Family Property The Court examined the principles of Hindu law, particularly the concept of partition and the rights of individual members. It noted that Hindu law allows members to hold separate property and that such property ceases to be joint family property once it is allotted to individual members. The Court found that the Tribunal's interpretation was incorrect, as it failed to recognize the legal possibility of partial partition. The Court emphasized that the essence of Section 25A is to assess income received by the joint family as such. If the income is derived from assets that have been individually allotted and are no longer joint family property, it should not be taxed as joint family income. The Court concluded that the income from the businesses, which were individually allotted and operated by the members, should not be considered joint family income. Conclusion The Court answered the reference in the negative, stating that the profits and gains of the several businesses for the period from July 30, 1941, to October 20, 1941, were not rightly included in the total income of the Hindu undivided family. The Commissioner was ordered to pay the costs of the reference.
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