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Refusal to accept partial partition of HUF and taxation of capital gains on sale of lands. Analysis: The appeals were filed by three different assessees, HUFs, against the order of the AAC Kolhapur Range, Kolhapur, regarding the refusal to accept the partial partition of the HUFs and taxing the capital gains on the sale of lands. The main contention in all appeals was that there was a partial partition of the HUFs, and the capital gains should be assessed in the hands of the members of the HUFs equally. The appellants argued that due to government restrictions, the partial partition could not be registered, and only the share income should have been taxed, not the whole family income. The facts revealed that the non-agricultural land was sold by each assessee to a buyer. The Kartas of the HUFs filed individual returns, and protective assessments were made in the hands of individuals. The assessees claimed that the lands were already partially partitioned before the sale deeds were executed, supported by a memorandum of partition. However, the ITO held that the lands were not partitioned as per the alleged memorandum, as there was no registration or physical partition of the property among coparceners. The assessees presented a memorandum of partial partition, indicating a genuine intention to partition the lands but were unable to do so due to legal restrictions. The coparceners agreed to distribute the sale proceeds equally among themselves. The ITO and AAC refused to accept the partial partition, citing the lack of registration and physical division of the property. The assessees argued that the intention to partition was clear, and legal provisions prevented them from effecting a physical partition. The Tribunal reviewed the lower authorities' orders and considered the Orissa High Court rulings, which allowed for partition of immovable property by oral agreement and recognized the legal effects of such partitions. The Tribunal disagreed with the Departmental representative's argument and held that the coparceners had a genuine intention to partition the lands, but legal restrictions prevented them from registering the partial partition. Therefore, the Tribunal directed the ITO to accept the partial partition and allowed the appeals, ruling in favor of the assessees.
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