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TMI Blog1996 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ded family was, along with his wife, a partner representing the Hindu undivided family. During the course of the assessment for the assessment year 1975-76 of the Hindu undivided family a claim under section 171 of the Act was made that on October 1, 1973, there was a partial partition in respect of a sum of Rs. 1,00,000 out of the capital of the Hindu undivided family invested in the said firm and a memorandum dated October 2, 1973, was executed. The sum of Rs. 1,00,000 was partitioned as under : "1. Rs. 20,000 to Sandeep Kumar and Prabha Rani. 2. Rs. 20,000 to Sushil Kumar and Manish Kumar. 3. Rs. 20,000 to Km. Vanita. 4. Rs. 20,000 to Km. Anuradha. 5. Rs. 20,000 to Km. Nellu." Sandeep Kumar and Manish Kumar were the minor son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the partial partition in question was under Hindu law not valid? 3. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the partial partition in question was bad in law even independently of requirement of Hindu law as to there being minimum two adult co-partners?" In Income-tax Reference No. 158 of 1983, the reference has been made at the instance of the aforesaid Hindu undivided family. The grievance of the Hindu undivided family arises from the quantum assessment order in which the interest paid to the aforesaid five persons/group of persons was included in the income of the Hind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er provisions of section 40(b) of the Income-tax Act, 1961?" We have heard Sri Rakesh Kumar Agarwal and Sri Pramod Kumar Jain, learned counsel for the assessee, and Sri Shekhar Srivastava, learned standing counsel for the respondent. As stated above, the first question referred by the Tribunal in Income-tax Reference No. 157 of 1983 arising out of I. T. A. No. 4127(Del) of 1979 does not arise out of the order of the Tribunal as it was not the case of either party at any stage of the proceedings that the joint Hindu family in which a partial partition was alleged to have taken place was not assessed to tax under the Act. We, therefore, decline to answer the said question. As regards question No. 2, we find that the Tribunal's reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta and on division as aforesaid stood deposited with the firm in their individual accounts in the sums of Rs. 20,000 each. Thus, there was a complete and effective partition. The partition would have been of no effect if the partnership firm had disputed the arrangement and declined to give effect to the arrangement in the family. In Brij Mohan Lal Rameshwar Lal v. CIT [1971] 82 ITR 173, this court held that a partial partition of capital invested in a partnership firm could be made. It was observed that whether a particular asset of a family is capable of partial partition or not will depend upon the nature of the asset and it may be that a business or a share cannot be divided partially but it does not follow that no single item can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of Rs. 20,000 each to the three daughters and the transfer having been effectuated would operate as a gift and the partition could not be rejected on that ground. For the above reasons, we answer question No. 2 reproduced above in favour of the assessee holding that the Tribunal was not justified in holding that the partial partition in question was not valid under the Hindu law. As regards question No. 3 the ruling that was the basis of the Tribunal's decision, namely, CIT v. Seth Gopaldas (HUF) [1979] 116 ITR 577 (MP) has been overruled by the Supreme Court in Apoorva Shantilal Shah v. CIT [1983] 141 ITR 558, in which it was held that where a family consisted of a father and his minor sons, the father was entitled to effect p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y order in the case of the firm there is any change in the amount of profit allocated to the assessee. In Income-tax Reference No. 247 of 1983 arising out of the order dated May 18, 1982, passed by the Tribunal in I. T. A. No. 4251 (Del.) of 1979, the assessee is the partnership firm, Sushil Kumar and Sons, that has been assessed as registered firm under the Act. By virtue of the partition referred to above, sums of Rs. 20,000 each were credited to the accounts of the aforesaid persons and a sum of Rs. 1,00,000 was debited to the account of the partner, namely, Sushil Kumar, the karta of the joint Hindu family. Since the partition was held to be invalid in the case of the Hindu undivided family the interest paid on the aforesaid five depo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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