1997 (2) TMI 7 - SC - Income Tax

Partition of the joint family property - Though for the purpose of the HUF, section 6 of the Hindu Succession Act, 1956, would govern the rights of the parties but in so far as income-tax law is concerned, the matter has to be governed by section 171(1) - Whether one sixth-income from the computation of income of the assessee-Hindu undivided family could be excluded pertaining to the minor son as Maharaja - Held, no

Summary

Issues Involved:
1. Applicability of Section 171 of the Income-tax Act, 1961, in cases involving inheritance under Section 6 of the Hindu Succession Act, 1956.
2. Whether the income from the Hindu undivided family (HUF) property should include the 1/6th share of the minor son.

Issue-Wise Detailed Analysis:

1. Applicability of Section 171 of the Income-tax Act, 1961:
The primary issue was whether Section 171 of the Income-tax Act, 1961, applies in cases where inheritance occurs under Section 6 of the Hindu Succession Act, 1956. The Tribunal had held that the case did not involve a partition as contemplated under Section 171, and thus, no claim for partition was necessary. The High Court upheld this view, relying on its earlier decision in Kalloomal Tapeshwari Prasad v. CIT [1973] Tax LR 697. However, the Supreme Court reversed this decision, stating that Section 171 applies to all partitions, whether total or partial, and that a finding must be recorded under Section 171 by the Income-tax Officer. The court emphasized that a Hindu undivided family (HUF) continues to be assessed as such unless a finding of partition is recorded under Section 171. This interpretation aligns with the Supreme Court's earlier rulings in Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690, ITO v. Smt. N. K. Sarada Thampatty [1991] 187 ITR 696, and R. B. Tunki Sah Baidyanath Prasad v. CIT [1995] 212 ITR 632.

2. Inclusion of the 1/6th Share of the Minor Son in HUF Income:
The second issue was whether the 1/6th share of the minor son, inherited under Section 6 of the Hindu Succession Act, should be excluded from the HUF's income. The Tribunal and the High Court had ruled in favor of the assessee, excluding the 1/6th share from the HUF's income. The Supreme Court, however, disagreed, stating that unless a finding of partition is recorded under Section 171, the entire income from the HUF property, including the 1/6th share of the minor son, should be included in the HUF's total income. The court noted that the absence of an order under Section 171 does not mean that the estate should be deemed to belong to the HUF. Instead, the HUF should be deemed the owner of the property and the recipient of the income for tax purposes until a partition is officially recognized under Section 171.

Conclusion:
The Supreme Court concluded that Section 171 of the Income-tax Act, 1961, governs the assessment of HUF income, even in cases involving inheritance under Section 6 of the Hindu Succession Act, 1956. The court reversed the High Court's decision, ruling in favor of the Revenue. The entire income from the HUF property, including the minor son's 1/6th share, should be included in the HUF's total income unless a partition is officially recognized under Section 171. The appeals were allowed accordingly, with no order as to costs.