2005 (8) TMI 46 - HC - Income Tax

Whether Tribunal was legally correct in holding that the Assessing Officer was not right in applying the provisions of subsection (9) of section 171 of the Income-tax Act and also in directing him to record the finding relating to the partition as claimed by the assessee? - held that the proviso to section 6 creates a fiction for the purpose of the said section. It sets out the mode of devolution of interest in coparcenary property. It comes into operation only after the death of the coparcener and only for the limited purpose of laying down the succession. In the result we answer the above question referred to us in the negative i.e. in favour of the Revenue and against the assessee

Summary

Issues:
Interpretation of section 171 of the Income-tax Act regarding partition claim for assessment year 1985-86.

Analysis:
The case involves a dispute regarding the application of subsection (9) of section 171 of the Income-tax Act in relation to a claimed partition of a Hindu undivided family (HUF) for the assessment year 1985-86. The dispute arose after the death of the karta of the HUF, Sri Charan Dass, and subsequent distribution of assets among family members. The Assessing Officer initially considered it a partial partition and declined to acknowledge the partition under section 171(9) of the Income-tax Act. The matter was then taken to the Tribunal by the assessee, where the Tribunal relied on section 6 of the Hindu Succession Act to determine that a complete partition had indeed taken place as claimed by the assessee. The Tribunal cited the Supreme Court judgment in Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum to support its decision.

The Supreme Court's interpretation in Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum is crucial in understanding the legal principles governing the determination of shares in coparcenary property. The Court emphasized the significance of Explanation 1 to section 6 of the Hindu Succession Act, which deems the interest of a coparcener to be the share that would have been allotted to him in a notional partition immediately before his death. The Court clarified that this fiction must be maintained throughout the process of determining shares, and the share of heirs must be ascertained as if a partition had indeed taken place during the deceased's lifetime.

The judgment further distinguishes between the legal fiction created by Explanation 1 and the actual disruption of joint Hindu family status. It highlights that the legal fiction freezes the share of a female heir in coparcenary property upon the death of a coparcener, without automatically leading to the partition of the joint Hindu family. The Court's analysis underscores the importance of maintaining the fiction for determining shares, regardless of the actual occurrence of a partition in reality.

In considering the applicability of previous court decisions, the High Court examined the judgment in CIT v. Smt. Meera Prem Sundar (HUF) and CIT v. Dharam Pal Singh (HUF) to conclude that there was no partition or disruption of the Hindu undivided family as per Explanation 1 to section 6 of the Hindu Succession Act. The Court also distinguished the Division Bench judgment in Late Girdhari Lal v. CIT, emphasizing that it dealt with a different legal issue regarding self-acquired property succession under section 8 of the Hindu Succession Act, not directly relevant to the present case. Another Division Bench judgment in CED v. Smt. S. Harish Chandra was cited to highlight the fiction created by the proviso to section 6 for the purpose of determining succession in coparcenary property.

Ultimately, the High Court ruled in favor of the Revenue and against the assessee, stating that there was no partition as per Explanation 1 to section 6 of the Hindu Succession Act. The decision clarified the legal principles governing the determination of shares in coparcenary property and emphasized the importance of maintaining the legal fiction created by the relevant provisions of the law.