1982 (1) TMI 95 - AT - Income Tax

Summary

Issues:
1. Validity of partial partition in a Hindu Undivided Family (HUF) with only one male member.
2. Interpretation of the concept of family arrangement or settlement in the context of partial partition.
3. Conflict of views between High Courts on the permissibility of partial partition in HUF with only one coparcener.

Analysis:
The case involves an appeal against the Commissioner of Income Tax's (CIT) order under section 263 regarding the validity of a partial partition in an HUF with only one male member. The HUF derived income from various sources, and there were two partial partitions confirmed by a memorandum. The CIT considered the ITO's order erroneous, stating that a partial partition in a family with only one male member was not permissible. The CIT directed the ITO to evaluate if the memorandum could be treated as a family arrangement or settlement, leading to the current appeal.

The main contention revolved around the permissibility of a partial partition in an HUF with only one male member. The appellant argued that conflicting views existed among High Courts on this issue. The Punjab & Haryana High Court supported the concept of family arrangement, while the Madras High Court held that no partition was possible with only one coparcener. The Andhra Pradesh High Court also had a relevant decision on this matter.

The Tribunal noted the conflicting views of High Courts but focused on whether the partial partition could be deemed a family arrangement. Citing the Punjab & Haryana High Court's precedent and Supreme Court decisions, the Tribunal concluded that the transaction in question could be considered a family arrangement. The Tribunal found no infirmity in the arrangement and held that the claim was valid as a family arrangement. The Tribunal rejected the argument that the matter should be referred back to the ITO for further evaluation, as the facts supported the conclusion that it was indeed a family arrangement.

Ultimately, the Tribunal set aside the CIT's order and reinstated the ITO's decision, allowing the appeal in favor of the assessee. The judgment emphasized the validity of the partial partition as a family arrangement, highlighting the importance of the specific facts and the absence of any unfairness or lack of bona fides in the arrangement.