1973 (11) TMI 10 - HC - Income Tax

Which would be the date of partition When an award by arbitrator dividing immovable property of the family by metes and bounds was not registered but a subsequent partition deed was registered - Whether Tribunal was right in law in giving effect to the claim of partial partition under section 171 of the Income-tax Act 1961 with effect from January 1 1961 as against the decision of the departmental authorities that the claim was fit to be allowed with effect from February 2 1962 ? - hold that on the facts and in the circumstances of this case the Tribunal was not right in law in giving effect to the claim of partial partition under section 171 of the Act with effect from January 1 1961. The decision of the departmental authorities that the claim was fit to be allowed only with effect from February 2 1962 was correct.

Issues Involved:
1. Compliance with Section 171 of the Income-tax Act, 1961.
2. Material evidence for the claim of partial partition effective from January 1, 1961.
3. Interpretation of the deed of partition dated February 2, 1962.

Detailed Analysis:

1. Compliance with Section 171 of the Income-tax Act, 1961:
The Tribunal was tasked with determining whether the assessee complied with Section 171 of the Income-tax Act, 1961, which deals with the recognition of partial partitions within a Hindu undivided family (HUF). The Tribunal concluded that the provisions were complied with by the assessee, effective from January 1, 1961, based on an award dated January 1, 1961, and a deed of partition dated February 2, 1962. However, the High Court found that the partition was effectively carried out only by the registered deed of partition dated February 2, 1962, and not by the unregistered award.

2. Material Evidence for the Claim of Partial Partition Effective from January 1, 1961:
The Tribunal's decision was based on the award by the arbitrator and the subsequent deed of partition. The High Court scrutinized these documents and concluded that the award, being unregistered, could not legally effect a partition of immovable properties. The High Court emphasized that for a partition to be recognized under Section 171, it must be proved by documentary evidence such as a registered deed of partition or a registered award. The Tribunal misinterpreted the documents, as the deed of partition explicitly indicated that the partition was effected on February 2, 1962.

3. Interpretation of the Deed of Partition Dated February 2, 1962:
The High Court analyzed the deed of partition and found that it clearly stated the properties were partitioned and allotted to the respective parties only from February 2, 1962. The recitals in the deed did not support the claim that the partition by metes and bounds had taken place on January 1, 1961. The High Court noted that the deed of partition, being a registered document, had the legal effect of partitioning the properties from its date of execution. The High Court also pointed out that the award, being unregistered, could not have the legal effect of partitioning the properties.

Conclusion:
The High Court concluded that the Tribunal erred in law by recognizing the partial partition effective from January 1, 1961. The correct effective date of the partial partition, as per the registered deed of partition, was February 2, 1962. Therefore, the reframed question was answered in the negative, against the assessee and in favor of the revenue. The Tribunal's decision was overturned, and the departmental authorities' decision to recognize the partition from February 2, 1962, was upheld. There was no order as to costs.

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