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TMI Blog1991 (7) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed both to income-tax and wealth-tax. It is also not in dispute that for some of the assessment years immediately preceding the asst. yr. 1983-84 (now before us), Jawahar Palaniappan was assessed in the status of 'HUF'. 5. In the course of the assessment proceedings for the asst. yr. 1983-84, a claim was made on behalf of the assessee that there had been a partition of the family consisting of Jawahar Palaniappan and his minor son Master Ranjit Annamalai. According to the assessee, the said partition was evidenced by what has been labelled "Memorandum of complete partition affirming the oral partition of assets effected on 31st Aug., 1982". On the strength of the said memorandum, the assessee required the Assessing Officer to record a finding to the effect that the family had been partitioned. 6. The Assessing Officer rejected the assessee's claim of total partition for the following reasons: (i) During the Calendar Years 1975 to 1982, an aggregate sum of Rs. 1,47,402 had been paid as and by way of premia on certain life insurance policies taken in the name of Jawahar Palaniappan and the said amount had not been partitioned. (ii) Therefore, the case, was one of partiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... niappan only. (iii) Even according to the ITO, the money representing the premia paid had gone out of the balance-sheet of the HUF. (iv) In any event, the ITO had not led any evidence to show that the intention of the HUF was to treat the premia paid as one of its assets. (v) Therefore, the ITO was not justified in coming to the conclusion that this was not a case of total partition but of a partial partition. (vi) Without prejudice to the foregoing, s. 171(9) having been struck down by the jurisdictional High Court in the case of M.V. Valliappan (1988) 67 CTR (Mad) 289: (1988) 170 ITR 238 (Mad), the partial partition must be recognised. 11. As regards the Memorandum dt. 31st Aug., 1982, the position taken by the assessee was that, recording as it did not oral partition that had taken place earlier in the day, the memo did not require registration. In this regard, particular emphasis was placed on the fact that not only the heading and the resultant portion of the document made it clear that it was recording the fact that oral partition had taken place earlier in the day, but also on the fact that the document was executed in the presence of witnesses. 12. The said argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee, strongly supported the impugned orders of the first appellate authority. According to him, the family did not treat the premia paid on the life insurance policies in question as one of its assets. This will be clear from the fact that the said asset is not included in the balance-sheet of the assessee. It should, therefore, follow that the intention of the family was that the said asset must belong to Jawahar Palaniappan. In this regard, he referred to and relied upon the decision of the Andhra Pradesh High Court in the case of Narayanlal P. Lahoti vs. CED (1968) 68 ITR 849 (AP). 19. In any event, contended Shri Ramamani, having regard to the bona fide intention of the members of the family to partition the family properties and having further regard to the fact that the life insurance premia paid is an insignificant part of the total value of the properties held by the HUF, the said amount must be ignored and it must be held that there was a total partition of the family. In this regard, he referred to and relied upon the Orissa case of Rangalal Modi vs. CIT (1950) 18 ITR 383 (Ori) and the Supreme Court case of Badriprasad Jagan Prasad vs. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so in view of the fact that the case before us does not contain any evidence to show that the intention of the family was to treat the policy amount as belonging not to the family but to the members of the family. 24. But the matter does not rest there. The ITO had taken the line that the aggregate sum of Rs. 1,47,402 as and by way of premia during 1975 to 1982 represented the value of the asst. This is not the correct view to take. The correct view is to take into account the surrender value of the policies as on 31st Aug., 1982 and the surrender value will invariably as less than the actual premia paid because a major part of the premia is naturally adjusted towards the cover provided by the life insurance policies. Therefore, we would be justified in going on the footing that the surrender value of the policies in question will be but a fraction of the sum of Rs. 1,47,402. 25. When we compare the said fraction with the total value of the assets of the family, which is in the neighbourhood of Rs. 51 lakhs, it would be seen that, even assuming that the surrender value of the policies belonged to the family and such value was omitted to be partitioned, only an insignificant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of the facts found by him in the course of the inquiry, to pass an order whether there has been a partition of the joint family property as claimed. If at the end of the inquiry he gives a finding that there has been a partition of the point family property, then an assessment will be made in accordance with the provisions of s. 171(4). If, on the contrary, the ITO gives a negative finding, then the Hindu family "shall be deemed for the purposes of this Act to continue as an HUF" and will be assessed as such. The same result will follow if there is no claim of the type referred to in s. 171(2) of the Act. 31. Now for the purposes of giving a finding as to whether there had been partition of the joint family property, the ITO may in the course of the inquiry contemplated by s. 171(2) of the Act, call for proof, direct or indirect, of the alleged partition. The evidence tendered may be documentary or parol or circumstantial. What is necessary under the scheme of the Act is that on the appreciation of the proof tendered before him as also the other facts that he might collect in the course of the inquiry, the ITO must give a finding whether the joint family properties had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be brought about by a document. 36. The significant legal effect of such severance of joint status is that joint tenancy of the family properties is converted into a tenancy in common of those properties. This conversion may lead to the next step namely division of the joint family properties by metes and bounds. But until such decision by metes and bounds takes place, the person who has severed his joint status remains a tenant in common. 37. The second sense in which partition is used in Hindu Law connotes a partition by metes and bounds. Partition, in this sense, entails the division of joint family properties by metes and bounds and the allocation of specific properties or parcels to individual coparceners. For this purpose, the consent of all the coparceners is necessary. Even so, the coparceners may orally agree to divide the properties by metes and bounds; or again, they may reduce the terms to the agreement to writing. 38. It may here be highlighted that the severance of the joint status of the members of the coparcenary resulting in their joint tenancy in the properties of the family being converted into tenancy in common, with its attending legal consequences, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar case, partition takes place in the second sense referred to above (i.e., in the sense that the properties of the joint family are divided by metes and bounds and allotted to the various members of the erstwhile coparcenary) and if in the course of such division a document is prepared setting out the terms of the division, then such a document must be compulsorily registered under s. 17(b) of the Act and unless so registered, it will not be received as evidence to prove either the partition or the terms thereof. (c) The essential distinction between the documents referred to at (a) and (b) above has been lucidly brought out by Spencer, J. in his opinion in the case of Saraswatamma vs. Paddayya AIR 1923 Mad 297. The learned Judge observed : "...I think that documents which are instruments of partition, as defined in s. 2(15), Stamp Act, that is, instruments whereby co-owners of any property divide or agree to divide such property in severality, are required by s. 17, Registration Act, to be registered when the property to be divided is immovable property over Rs. 100 in value and if they are not so registered they cannot by reason of s. 49 be admitted as evidence of the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coparcenary to a separated member having a defined share in the ancestral property may be effected orally or it may be brought about by a document. If the document does not evidence of any partition by metes and bounds, that is to say, the partition in the latter sense, it does not come within the purview of s. 17(1)(b) because so long as there has been no partition in that sense, the interest of the separated member continues to extend over the whole joint property as before. Such a transaction does not purport or operate to do any of the things referred to in that section. Hence, in so far as the documents referred to above are evidence of partition only in the former sense, they are not compulsorily registrable under s. 17 and would, therefore, not come within the mischief of s. 49 which prohibits the reception into evidence of any document "affecting immovable property'. It must, therefore, be held that those documents have rightly been received in evidence for that limited purpose". (d) There may be instances where after orally agreeing to partition joint family properties by metes and bounds and after giving effect to the oral agreement, the parties may choose to draw up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per se is not conclusive of the matter. If the factum of partition of family properties pursuant to an oral agreement is established with reference to independent proof, then the time interval is not relevant at all. On the contrary, if the alleged oral partition is not proved with reference to independent evidence, the so-called note or memo recording a prior partition is rendered a partition deed proper on that count alone. Having said this, we must add that in cases where it is claimed that the joint family properties were partitioned pursuant to an oral agreement, the time interval assumes significance in this sense that the interval must be long enough to show that the subsequent conduct of the divided coparceners was in consonance with the claim of oral partition. In this connection reference may be made to the Madras case of Subbarao vs. Mahalakshmamma AIR 1930 Mad 883. In that case, it was alleged that there was an oral partition and that the "share list" (Ex. 8) introduced in evidence was nothing more than a note or memorandum recording the factum of prior partition. On an examination of the facts and circumstances of the case, the Madras High Court held that Ex. 8 coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 17. Indeed had it been a registered document and tendered in proof of Sambayya's title to his share in the property I have no doubt that any Court would accept it as such. In these circumstances I am clearly of opinion that under s. 49, Registration Act it must be excluded in so far as it is evidence of a transaction affecting immovable property". 42. On the other extreme, we have the Andhra Pradesh case of Yendapalli Venkataraju vs. Yendapalli Yedukondalu AIR 1958 AP 147. In that case the question was whether Ex. C-1 therein was a deed of partition properly so called. There, in 1941, a Hindu father allotted certain properties to his sons. The properties were also delivered to them and partitioned amongst the four sons. For lists were prepared in that regard. The said allotment was made by the father with a view to avoiding complications in future. The sons also addressed Ex. C-1 to the father recording the factum of allocation of the said properties to them. 43. The question was whether Ex. C-1,unregistered as it was, could be received in evidence. 44. On an examination of the facts and circumstances of the case, the Court found that Ex. C-1 could not be regarded as a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time interval, other types of evidence are almost completely ruled out. We are not, therefore, prepared to accept the assessee's contention that the said memo was indeed a memo recording the factum of an earlier oral partition. 48. Further, as we see it, read as a whole, the so-called memorandum indeed came to be prepared in the course of and formed an essential part of the process of dividing the joint family property. In other words, there is no ground to suppose that the partition had already taken place by an oral agreement as alleged and was complete when the document was executed. 49. Thus before us, we have a case to which the ratio of the Madras decision in the case of Subbarao vs. Mahalakshmamma squarely applies, that is to say, the so-called memorandum is a deed of partition proper and, as such, it needed to be registered under s. 17(b) of the Registration Act. Since the document was not so registered, it cannot be received in evidence of the factum of the alleged partition of joint family properties. 50. In this regard, we may contrast the said so-called memorandum with the regular partition deed which was prepared on 1st May, 1968 to effect partition of the joint ..... X X X X Extracts X X X X X X X X Extracts X X X X
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