1985 (9) TMI 134 - AT - Income Tax

Summary

Issues:
1. Claim for partition of Hindu Undivided Family (HUF) under section 171 of the Income-tax Act, 1961.
2. Claim for registration of a firm constituted by coparceners of the HUF.
3. Inclusion of firm's income in the assessment of the HUF.

Analysis:

Claim for Partition of HUF:
The case involved a claim for partition of the HUF under section 171 of the Income-tax Act, 1961. The deceased karta's sons claimed a complete partition, asserting that the residential house was settled in favor of the widow and other assets were divided. However, the assessing officer rejected the claim due to lack of sufficient evidence of partition, especially regarding the house property. The Tribunal noted that the daughters had relinquished their rights, and the sons had executed a document settling the property with the mother. However, this document was not registered and lacked credibility. The Tribunal held that there was no complete partition of movable and immovable properties, thus upholding the lower authorities' decision to reject the claim for partition.

Claim for Registration of Firm:
The assessee contended that a firm was constituted post-partition, but the assessing officer rejected the firm's registration due to the property being part of the HUF assets. The Tribunal concurred, stating that since the coparceners constituted the firm with HUF property, it was invalid. Citing legal precedents, the Tribunal emphasized that coparceners could not be both coparceners and partners simultaneously. The Tribunal upheld the rejection of firm registration, as the income belonged to the HUF and should be included in its assessment.

Inclusion of Firm's Income in HUF Assessment:
The Tribunal reiterated that since no valid firm was constituted post-partition, the income rightfully belonged to the HUF and should be included in its assessment. Relying on legal precedents, the Tribunal emphasized that the partnership business was essentially the joint family business, and registration was rightly rejected. Consequently, the Tribunal upheld the lower authorities' decisions to include the firm's income in the HUF assessment.

In conclusion, the appeals were dismissed, affirming the lower authorities' decisions regarding the partition claim, firm registration, and inclusion of the firm's income in the HUF assessment.