1983 (3) TMI 1 - SC - Income Tax

As there is no finding that the partial partition is sham or fictitious, 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 u/s 171 - order of the HC are set aside - 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

Issues Involved:
1. Whether the father can effect a partial partition between himself and his minor sons of joint family properties under the Mitakshara school of Hindu law.
2. Whether the partial partitions in question were valid under Hindu law and the Income-tax Act, 1961.
3. Whether the Income-tax Department can challenge the exercise of patria potestas by a Hindu father in respect of coparcenary property, making a partial partition.

Analysis:

Issue 1: Father's Right to Effect Partial Partition
- The principal issue was whether the father, in exercise of his right as patria potestas or otherwise, can effect a partial partition between himself and his minor sons of joint family properties governed by the Mitakshara school of Hindu law.
- According to the High Court, the father under Hindu law has no power or authority to effect any partial partition of the joint family properties between himself and his minor sons. The High Court held that partial partition was unknown to ancient Hindu law and was only recognized later by custom and judge-made law.
- However, the Supreme Court disagreed, holding that if a father can bring about a complete partition of the joint family properties, he should also be able to effect a partial partition. The court emphasized that the father's superior right or patria potestas should be exercised bona fide and in the best interest of the family.

Issue 2: Validity of Partial Partitions
- The Income-tax Officer (ITO) initially refused to recognize the partial partitions, arguing that the remaining shares were not allotted entirely to the remaining coparcener or jointly to the father and his wife.
- The Appellate Assistant Commissioner (AAC) allowed the appeal, holding that the partial partitions were genuine and did not require court sanction even if some parties were minors. The AAC also noted that unequal distribution would not affect the validity of the partitions.
- The Tribunal reversed the AAC's decision, stating that the partial partitions were outside the framework of Hindu law and thus invalid under section 171 of the Income-tax Act, 1961.
- The Supreme Court concluded that partial partitions are permissible under Hindu law, citing previous judgments and legal texts that recognize the father's right to effect partial partitions. It held that the partial partition of shares in question was valid under both Hindu law and the Income-tax Act.

Issue 3: Competence of Income-tax Department to Challenge Patria Potestas
- The High Court had answered in the affirmative, stating that the Income-tax Department could challenge the exercise of patria potestas by a Hindu father in respect of coparcenary property.
- The Supreme Court disagreed, noting that the Income-tax authorities could only refuse to recognize a partition if it was sham or fictitious. Since there was no finding that the partial partition was not genuine, the ITO was directed to recognize the partial partition and proceed with the assessment accordingly.

Conclusion:
- The Supreme Court allowed the appeal, setting aside the High Court's judgment. It held that a partial partition of properties brought about by the father between himself and his minor sons is valid under Hindu law and must be recognized under the Income-tax Act, 1961.
- The ITO was directed to recognize the partial partition of the shares and make the assessment on that basis.
- The judgment emphasized the importance of the father exercising his rights bona fide and in the best interest of the family, with the minor sons having the right to challenge any unfair partition upon reaching majority.

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