1983 (12) TMI 101 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of the claim of partition under section 171(3) of the Income-tax Act, 1961.
2. Validity and interpretation of the registered deed dated 16-12-1969.
3. Assessment of the HUF status and income distribution post-partition.

Detailed Analysis:

1. Rejection of the claim of partition under section 171(3) of the Income-tax Act, 1961:
The primary issue in this case is the rejection of the assessee's claim for partition under section 171(3) of the Income-tax Act, 1961. The Income Tax Officer (ITO) rejected the claim, and this decision was upheld by the Assistant Appellate Commissioner (AAC). The ITO's enquiry included examining the statements of Harbans Lal, Rajbans Lal, Chander Shekhar, and Kalpana, and a letter from Kanta Devi confirming the partition dated 16-12-1969. Despite these submissions, the ITO rejected the claim for detailed reasons provided in his order, which were later confirmed by the AAC.

2. Validity and interpretation of the registered deed dated 16-12-1969:
The assessee argued that the deed dated 16-12-1969, though termed as a 'gift deed', was essentially a deed of partition. The counsel for the assessee emphasized that the intention behind the deed should be considered, citing various legal precedents to support this view. The revenue, however, argued that the partition was bogus and that a valid partition must involve a division by metes and bounds, not just the sharing of income. The Tribunal, after reviewing the facts and submissions, concluded that the deed dated 16-12-1969 indeed represented a partition. The Tribunal noted that the deed earmarked shares for the two wives and three sons of Nathu Mal, indicating a clear intention to partition the properties.

3. Assessment of the HUF status and income distribution post-partition:
The Tribunal acknowledged that the HUF of Nathu Mal continued to be assessed in the status of HUF till 1973-74, despite the registered deed of 16-12-1969. The Tribunal found that the rental income from the properties was credited to the firm's accounts and distributed among the coparceners, which supported the assessee's claim of partition. The Tribunal also considered the statements of Harbans Lal, Rajbans Lal, and Chander Shekhar, which unequivocally admitted the partition and indicated their respective shares. The Tribunal concluded that the continued assessment of the HUF's property income until 1973-74 and the crediting of rental income in the firm's accounts did not invalidate the partition claim.

Conclusion:
The Tribunal, after considering all the facts and submissions, reversed the AAC's decision and accepted the assessee's claim of partition under section 171. The Tribunal emphasized that the substance of the transaction, the intention behind the deed, and the cumulative effect of all the facts supported the conclusion that a partition had indeed occurred. Consequently, the assessee's appeal was allowed.