1984 (1) TMI 58 - HC - Income Tax

Summary

Issues:
- Interpretation of partial partition claim under section 171 of the Income Tax Act, 1961 regarding a property at 18, Golf Links, New Delhi.

Detailed Analysis:

The case involved a Hindu Undivided Family (HUF) with three coparceners owning immovable properties, including a house at 18, Golf Links, New Delhi, and a deposit with a firm. The HUF claimed partial partition of the house property and a portion of the deposit in the assessment year 1974-75. The claim was based on the division of income from the property without a physical division due to the property being occupied by the Hungarian Embassy as a tenant. The Income Tax Officer (ITO) accepted the partition of the deposit amount but rejected the claim regarding the immovable property, stating that physical division was possible. The Appellate Authority and the Tribunal upheld this decision, leading to a reference under section 256(1) of the Income Tax Act, 1961.

The counsel for the assessee argued that the house property could not be physically divided, supported by a Government-approved valuer's opinion. It was contended that under sub-clause (ii) of clause (a) of the Explanation to section 171, the property should be considered partially partitioned due to its inability for physical division without losing utility. However, the Tribunal relied on a decision by the Allahabad High Court, affirmed by the Supreme Court, stating that physical division is necessary for partition under section 171. As the property was found capable of physical division, the claim for partial partition was rejected.

The court concurred with the Tribunal's decision, emphasizing that the property could be physically divided despite the valuer's opinion. Since there was no actual partition of the property, the claim for partial partition was not valid under sub-clause (i) of clause (a) of the Explanation to section 171. Therefore, the Appellate Tribunal was deemed correct in denying the assessee's claim for partial partition of the property at 18, Golf Links, New Delhi, as it did not fall under either clause (a)(i) or (a)(ii) of section 171.

In conclusion, the court answered the reference by affirming the Tribunal's decision, stating that the claim for partial partition was rightly rejected. Each party was directed to bear their own costs in the matter.