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TMI Blog1988 (8) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... de on January 5, 1971, and the partial partition made on January 10, 1973, the balance in the name of the assessee remained unchanged in the books of the firm. We are concerned in this case with the assessment for the year 1974-75. In that year, the assessee claimed that to the extent of a sum of Rs. 2,75,000, there was a partial partition in the Hindu undivided family and requested for an order under section 171 of the Income-tax Act, 1961 (hereinafter called "the Act"). The Income-tax Officer rejected this claim. He held that the assessee having thrown his interest in the firm into the common hotch-pot of the Hindu undivided family as indicated above, section 64 of the Act was attracted, and assessed such income in his hands. On appeal, the Appellate Assistant Commissioner upheld the claim of the assessee of partial partition and directed the Income-tax Officer to pass a separate order recognising such partition. However, the other contentions raised by him were rejected, particularly, those based on the provisions of sections 64 (1 ) and 64 (2) of the Act. He preferred a further appeal to the Tribunal. Since the contentions were common in the assessee's appeals for the years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unmarried daughter ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the share of income accruing to the minor Hindu undivided family consisting of the assessee and his wife was includible in the hands of the assessee under section 64(1) read with section 64(2) ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the claim for deduction of interest of Rs. 14,056 ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 64 are applicable also in relation to accretions to the converted property subsequent to the date of conversion of such property ?" Now, we shall take up the first question for consideration. The answer to the problem depends upon the interpretation of section 64 of the Act. Hence, an analysis of the provisions of section 64(2) of the Act is necessary which falls in the following conspectus : (1) The individual must have thrown his self-acquired property into the common stock of the joint family or impressed his self-acquired property with the character of joint fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, such converted property will be deemed to be transferred either to the family or to the members of the joint family as provided in section 64(2)(a) of the Act. He contends that if the transfer is to the family, there is no question of any income being derived from the family property attributable to the interest of the individual in the property of the family as there is no defined share in so far as the individual or minor son and spouse is concerned, and hence section 64(2)(b) and the prior part of section 64(2)(c) of the Act become unworkable. If the deemed transfer in clause (a) of the said section is to the members of the Hindu undivided family, then there is no income derived from family property to be attributed to the individual as set out in clause (b) and there can be no question of partition as set out in the latter part of clause (c). The arguments, in our view, are only a web of sophistry woven to shroud the plain meaning of the provisions of law. The provisions in any enactment will have to be read as an integrated whole in order to understand the scheme. There are three aspects in the various clauses appearing in section 64(2) of the Act. So far as clause (a) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the individual, spouse or any minor son of the individual" in the property of the family. Therefore, the only way of understanding clause (a) is that there is a transfer to the joint family. The argument of Sri Prasad ignores the effect of the Explanation. If this Explanation is dovetailed into the clauses (b) and (c), it means that where the income is derived from the converted property, in so far as it is attributable to the interest of the individual or spouse or minor son of the individual in the property concerned, the consequence would be that there is a notional partition in the family on the last day of the accounting year, and on that basis, fixes the shares of the minor son or the spouse or the individual and calculates the income derived from the converted property. The resultant position is as follows : The scheme of the different clauses appearing section 64(2) is that clause (a) is to overcome the difficulty that conversion of individual property into joint family property to that of the members' interest in the joint family property is taxable as the transferor's income and not as the income of the joint family. The second part of clause (c) deals with a case wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his separate property into joint family property on or after 1st January, 1970, the part of the income from the converted property proportionate to that member's interest in the joint family property is taxable as his income and not as income of the joint family. The words 'in so far as it is attributable to the interest of the individual in the property of the family' occurring in clause (b) of this sub-section were omitted by the Taxation Laws (Amendment) Act, 1975, with effect from 1st of April, 1976. It would be seen that the provisions contained in section 64(2) are very clear and admit of no doubt and the Appellate Tribunal was right in confirming the inclusion of the interest and the share income in the income of the assessee." In our view also, the provisions are absolutely clear and do not admit of any doubt and, therefore, we have no hesitation in answering the first question in the affirmative and against the assessee. The second question is as to the deductibility of the interest paid to members of the Hindu undivided family by the firm, to ascertain the share income from the firm while applying section 64 with respect to the assessee. The Hindu undivided family con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the includibility of the interest income accruing to the smaller Hindu undivided family of the assessee and his wife after partition from his sons: As could be seen from the statement of the case, question No. 4 referred to us is in relation to assessability of the interest income accruing to the smaller Hindu undivided family of the assessee and his wife in the hands of the assessee and not share income, as the share had not been the subject-matter of partition at all. Hence, as submitted by counsel for both the parties, the question is confined to interest income only and we have to answer the same. Sri K. Srinivasan, learned counsel for the Revenue, raised a preliminary point that the question does not arise as the same has not been referred to in the order of the Tribunal while disposing of the appeal. However, it may be seen that at para 16 of the statement of the case, the Tribunal states that this contention was raised before the Tribunal but since this issue had not been dealt with separately, it could be taken as having been decided against the assessee. Sri Prasad, learned counsel for the assessee, contends that the taxable entity in so far as the smaller Hindu undivid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partition. Thus, until a son is born to him again, the assessee has a right to deal with the property thereof as his own. The assessee had thrown his separate property into the common stock on January 5, 1971, which was held by the bigger Hindu undivided family, but a partial partition was effected on January 10, 1973, allotting a portion of the converted property while retaining the bigger Hindu undivided family status in the remaining property. Thus, there is an antecedent history of jointness impressed on the properties allotted at the partition to the smaller Hindu undivided family. In regard to the major son, Jawahar, income from his share is allotted at the partition and a separate assessment has been done in his hands and not clubbed with the assessee. Therefore, similarly, the smaller Hindu undivided family will have to be treated as a separate assessable unit. Hence, we have to hold that the property of the joint family does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner may possess. This income from property allotted on partition to the smaller Hindu undivided family will, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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