The family's only income-producing right is the karta's share in a managing agency, which cannot be split among the members. They divided the commission between themselves. Is that a partition the department must accept?
In 1960 the Supreme Court said yes, on facts where no other mode of division existed. The Court held that there is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; that Hindu law does not require the property to be partitioned by metes and bounds in every case if separate enjoyment can otherwise be secured according to the members' shares; that for an asset of this kind there was no other mode of partition open to the parties and the law does not contemplate that a person should do the impossible; and that on a genuine document, not a sham, which effectively divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those assets. The appeal was allowed with costs. READ THE ENTRY'S VALIDITY NOTE BEFORE ACTING ON IT: the assessment years were 1947-48 and 1948-49 under the Indian Income-tax Act, 1922, and the arrangement was a PARTIAL partition.
Decided by the Supreme Court (S.K. Das J, J.L. Kapur J and M. Hidayatullah J (judgment delivered by Hidayatullah J)) on 1960-03-15, reported as Civil Appeal No. 108 of 1957; 1960 AIR 910; 1960 SCR (3) 296; [1960] 39 ITR 202. It bears on section 66(2) of the Indian Income-tax Act, 1922, section 66(1) of the Indian Income-tax Act, 1922, section 171, section 171(9), section 2(31) of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
The reasoning is what has survived, and it is now codified. Clause (ii) of the Explanation to s.171 of the Income-tax Act, 1961 provides that where the property does not admit of a physical division, "partition" means such division as the property admits of — which is exactly the situation the Court was dealing with — while adding that a mere severance of status will not do. Clause (i) codifies the opposite case and is the one that catches most claims: where the property DOES admit of a physical division, a physical division of the income without a physical division of the property producing the income is expressly not a partition. So the practitioner's first question is which limb of the Explanation his asset falls into, and Charandas Haridas is the authority for the proposition that where no other mode of division exists the family is not to be told to do the impossible. The Court's separation of the three bodies of law is also worth keeping: the law of Partnership takes no account of a Hindu undivided family; Hindu law permits a total and also a partial partition binding on the family; and income-tax law looks, for this purpose, to Hindu law and not to the Partnership Act. But the outcome on these facts is no longer available, because what the family did was a PARTIAL partition, and s.171(9) now provides that a partial partition effected after 31 December 1978 is not to be inquired into, that any finding recorded about it is null and void, and that the family continues to be assessed as if it had never happened. A family in Charandas Haridas's position today would lose, not on the reasoning but on the bar. One further limit has to be carried with the reasoning. Kalloomal Tapeswari Prasad (HUF) v. CIT, already in this library, holds that a partition which is good under Hindu law is not for that reason a partition recognised by s.171 — the section imposes its own requirement of division through the Explanation — and ITO v. Smt N.K. Sarada Thampatty, also in this library, holds that a severance of status will not do. Charandas Haridas is authority for the narrow proposition that where the asset admits of no other mode of division the family is not required to do the impossible; it is not authority that a division good under Hindu law must be accepted under s.171, and the two decisions in this library are where that limit is worked out.
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Charandas Haridas was the karta of a Hindu undivided family consisting of his wife, three sons and himself, and was a partner in six managing agency firms in six mills. The income he received as a partner in those managing agencies had in previous years been assessed as the income of the Hindu undivided family. On 31 December 1945, acting for his three minor sons and himself, and with his wife Shantaben, he entered into an oral agreement for a partial partition, giving a one pie share in the managing agency commission from two of the six agencies to his daughter Pratima and dividing the balance, with the shares in the other agencies, into five equal shares between himself, his wife and his sons, the agreement to take effect from 1 January 1946. On 11 September 1946 a memorandum of partial partition recording the oral arrangement was executed. For the assessment years 1947-48 and 1948-49 he claimed the income was no longer that of the Hindu undivided family but the separate income of the divided members. The Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal rejected the claim, the Tribunal holding that the division was of income and not of the assets from which the income was derived, since the managing agency agreements with the managed companies had not changed, and describing the document as "a farce". On a reference obtained under s.66(2) of the Indian Income-tax Act, 1922 the Bombay High Court held on 16 February 1955 that although the Tribunal's finding could not be construed as a finding that the document was not genuine, the method adopted was insufficient, and that the source of income remained united. A companion appeal by Chinubhai Haridas raised identical questions on identical circumstances.
The appeal was allowed and the Revenue was ordered to pay the costs of the two assessees in the Supreme Court and below, with one set of costs in the Supreme Court. The question — whether there were materials to justify the finding that the income in the share of the commission agency of the mills was the income of the Hindu undivided family — was answered in the negative. There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; the division must be effective so as to bind the members, but Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoyment can otherwise be secured according to the shares of the members. For an asset of this kind there was no other mode of partition open to the parties if they wished to retain the property and yet hold it in severalty, and the law does not contemplate that a person should do the impossible. The family having taken the fullest measure possible for dividing the joint interest into separate interests, on a document that was genuine and not a sham and that effectually divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those particular assets.
The Court identified three different branches of law. The law of Partnership takes no account of a Hindu undivided family; Hindu law permits a partition of the family and also a partial partition binding on the family; and income-tax law may treat a particular income either as that of the family or as that of the separated members enjoying separate shares by partition. Just as the karta's becoming a partner does not introduce the other members into the partnership, so the division of the family does not change the partner's position vis-à-vis the other partners. Before the partition, income-tax law takes note of the karta's position as a matter of fact and assesses him not as a partner but as representing the family, and in doing so it looks to Hindu law and not to the Partnership Act. Once the family has disrupted, the position under the partnership continues as before but the position under Hindu law changes: there is then no Hindu undivided family as a unit of assessment in point of fact, and the income which accrues cannot be said to be that of a Hindu undivided family. The Court noted the Privy Council's statements in Pichappa v. Chokalingam, that where a managing member enters into partnership with a stranger the other members do not ipso facto become partners, and in Appovier v. Rama Subba Aiyan on the conversion of the tenancy and the consequent change of status. It rejected the Revenue's suggested alternatives — balloting the managing agencies among the members, which would have required a dissolution and reconstitution of the firms not in the family's hands; allotting the agencies to Charandas Haridas against other property; or appointing a receiver — observing that no answer was attempted to the question what else the family could have done if it wished to partition these assets only and no more. On the facts, the assets stood and continued to stand in Charandas Haridas's name and, viewed through the law of Partnership, the family had no standing either before or after; what had altered was the status of the family.
There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset.
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Handle my notice → Ask a CA on WhatsAppIn 1960 the Supreme Court said yes, on facts where no other mode of division existed. The Court held that there is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; that Hindu law does not require the property to be partitioned by metes and bounds in every case if separate enjoyment can otherwise be secured according to the members' shares; that for an asset of this kind there was no other mode of partition open to the parties and the law does not contemplate that a person should do the impossible; and that on a genuine document, not a sham, which effectively divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those assets. The appeal was allowed with costs. READ THE ENTRY'S VALIDITY NOTE BEFORE ACTING ON IT: the assessment years were 1947-48 and 1948-49 under the Indian Income-tax Act, 1922, and the arrangement was a PARTIAL partition. This was decided by the Supreme Court (S.K. Das J, J.L. Kapur J and M. Hidayatullah J (judgment delivered by Hidayatullah J)) and bears on section 66(2) of the Indian Income-tax Act, 1922, section 66(1) of the Indian Income-tax Act, 1922, section 171, section 171(9), section 2(31) of the Income Tax Act 1961. It is reported as Civil Appeal No. 108 of 1957; 1960 AIR 910; 1960 SCR (3) 296; [1960] 39 ITR 202. The reasoning is what has survived, and it is now codified. Clause (ii) of the Explanation to s.171 of the Income-tax Act, 1961 provides that where the property does not admit of a physical division, "partition" means such division as the property admits of — which is exactly the situation the Court was dealing with — while adding that a mere severance of status will not do. Clause (i) codifies the opposite case and is the one that catches most claims: where the property DOES admit of a physical division, a physical division of the income without a physical division of the property producing the income is expressly not a partition. So the practitioner's first question is which limb of the Explanation his asset falls into, and Charandas Haridas is the authority for the proposition that where no other mode of division exists the family is not to be told to do the impossible. The Court's separation of the three bodies of law is also worth keeping: the law of Partnership takes no account of a Hindu undivided family; Hindu law permits a total and also a partial partition binding on the family; and income-tax law looks, for this purpose, to Hindu law and not to the Partnership Act. But the outcome on these facts is no longer available, because what the family did was a PARTIAL partition, and s.171(9) now provides that a partial partition effected after 31 December 1978 is not to be inquired into, that any finding recorded about it is null and void, and that the family continues to be assessed as if it had never happened. A family in Charandas Haridas's position today would lose, not on the reasoning but on the bar. One further limit has to be carried with the reasoning. Kalloomal Tapeswari Prasad (HUF) v. CIT, already in this library, holds that a partition which is good under Hindu law is not for that reason a partition recognised by s.171 — the section imposes its own requirement of division through the Explanation — and ITO v. Smt N.K. Sarada Thampatty, also in this library, holds that a severance of status will not do. Charandas Haridas is authority for the narrow proposition that where the asset admits of no other mode of division the family is not required to do the impossible; it is not authority that a division good under Hindu law must be accepted under s.171, and the two decisions in this library are where that limit is worked out. If it applies to you, the first step is this: Classify the asset first against the Explanation to s.171: does it admit of a physical division or not? Everything follows from that.
Charandas Haridas was the karta of a Hindu undivided family consisting of his wife, three sons and himself, and was a partner in six managing agency firms in six mills. The income he received as a partner in those managing agencies had in previous years been assessed as the income of the Hindu undivided family. On 31 December 1945, acting for his three minor sons and himself, and with his wife Shantaben, he entered into an oral agreement for a partial partition, giving a one pie share in the managing agency commission from two of the six agencies to his daughter Pratima and dividing the balance, with the shares in the other agencies, into five equal shares between himself, his wife and his sons, the agreement to take effect from 1 January 1946. On 11 September 1946 a memorandum of partial partition recording the oral arrangement was executed. For the assessment years 1947-48 and 1948-49 he claimed the income was no longer that of the Hindu undivided family but the separate income of the divided members. The Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal rejected the claim, the Tribunal holding that the division was of income and not of the assets from which the income was derived, since the managing agency agreements with the managed companies had not changed, and describing the document as "a farce". On a reference obtained under s.66(2) of the Indian Income-tax Act, 1922 the Bombay High Court held on 16 February 1955 that although the Tribunal's finding could not be construed as a finding that the document was not genuine, the method adopted was insufficient, and that the source of income remained united. A companion appeal by Chinubhai Haridas raised identical questions on identical circumstances. The matter was decided on 1960-03-15 by the Supreme Court (S.K. Das J, J.L. Kapur J and M. Hidayatullah J (judgment delivered by Hidayatullah J)). On those facts the Supreme Court held as follows. The appeal was allowed and the Revenue was ordered to pay the costs of the two assessees in the Supreme Court and below, with one set of costs in the Supreme Court. The question — whether there were materials to justify the finding that the income in the share of the commission agency of the mills was the income of the Hindu undivided family — was answered in the negative. There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; the division must be effective so as to bind the members, but Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoyment can otherwise be secured according to the shares of the members. For an asset of this kind there was no other mode of partition open to the parties if they wished to retain the property and yet hold it in severalty, and the law does not contemplate that a person should do the impossible. The family having taken the fullest measure possible for dividing the joint interest into separate interests, on a document that was genuine and not a sham and that effectually divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those particular assets.
The Court identified three different branches of law. The law of Partnership takes no account of a Hindu undivided family; Hindu law permits a partition of the family and also a partial partition binding on the family; and income-tax law may treat a particular income either as that of the family or as that of the separated members enjoying separate shares by partition. Just as the karta's becoming a partner does not introduce the other members into the partnership, so the division of the family does not change the partner's position vis-à-vis the other partners. Before the partition, income-tax law takes note of the karta's position as a matter of fact and assesses him not as a partner but as representing the family, and in doing so it looks to Hindu law and not to the Partnership Act. Once the family has disrupted, the position under the partnership continues as before but the position under Hindu law changes: there is then no Hindu undivided family as a unit of assessment in point of fact, and the income which accrues cannot be said to be that of a Hindu undivided family. The Court noted the Privy Council's statements in Pichappa v. Chokalingam, that where a managing member enters into partnership with a stranger the other members do not ipso facto become partners, and in Appovier v. Rama Subba Aiyan on the conversion of the tenancy and the consequent change of status. It rejected the Revenue's suggested alternatives — balloting the managing agencies among the members, which would have required a dissolution and reconstitution of the firms not in the family's hands; allotting the agencies to Charandas Haridas against other property; or appointing a receiver — observing that no answer was attempted to the question what else the family could have done if it wished to partition these assets only and no more. On the facts, the assets stood and continued to stand in Charandas Haridas's name and, viewed through the law of Partnership, the family had no standing either before or after; what had altered was the status of the family. In the words reproduced by the source cited on this page: "There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset." The decision followed or applied Pichappa v. Chokalingam — the statement of the law by Mayne, approved by the Privy Council, relied on; Appovier v. Rama Subba Aiyan — relied on.
It was decided by the Supreme Court on 1960-03-15 and is reported as Civil Appeal No. 108 of 1957; 1960 AIR 910; 1960 SCR (3) 296; [1960] 39 ITR 202. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 66(2) of the Indian Income-tax Act, 1922, section 66(1) of the Indian Income-tax Act, 1922, section 171, section 171(9), section 2(31), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the Revenue was ordered to pay the costs of the two assessees in the Supreme Court and below, with one set of costs in the Supreme Court. The question — whether there were materials to justify the finding that the income in the share of the commission agency of the mills was the income of the Hindu undivided family — was answered in the negative. There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; the division must be effective so as to bind the members, but Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoyment can otherwise be secured according to the shares of the members. For an asset of this kind there was no other mode of partition open to the parties if they wished to retain the property and yet hold it in severalty, and the law does not contemplate that a person should do the impossible. The family having taken the fullest measure possible for dividing the joint interest into separate interests, on a document that was genuine and not a sham and that effectually divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those particular assets. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 66(2) of the Indian Income-tax Act, 1922, section 66(1) of the Indian Income-tax Act, 1922, section 171, section 171(9), section 2(31) of the Income Tax Act 1961, and was decided by S.K. Das J, J.L. Kapur J and M. Hidayatullah J (judgment delivered by Hidayatullah J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where it does not, use this decision to resist the argument that only a division by metes and bounds counts, and put on record what other modes of division were considered and why each was impossible. Expect the department to suggest alternatives, as the Revenue did here — balloting the assets, allotting them to one member against other property, appointing a receiver. Be ready to say why each was not open to the family. Establish that the document is genuine and not a pretence, and that it is effective as between the members. That was the finding on which the Court's conclusion rested. Before relying on the case at all, check the date and the completeness of the division. If it is a partial partition after 31 December 1978, s.171(9) defeats the claim whatever this decision says, and a total partition is the only route left. Remember that the Act construed here was the Indian Income-tax Act, 1922, which contained no equivalent of the Explanation to s.171 or of s.171(9).
Superseded by amendment. This label is applied to the RESULT on these facts, not to the reasoning, and the distinction matters. The reasoning — that where an asset admits of no physical division the family may divide it in the only way it admits of, and that the law does not require the impossible — is now codified in clause (ii) of the Explanation to s.171 of the Income-tax Act, 1961, which I transcribed on this pass from six departmental editions. What is no longer available is the outcome, because what this family did was a PARTIAL partition, and s.171(9), inserted by the Finance (No. 2) Act, 1980 w.e.f. 1 April 1980 and upheld by a five-Judge Bench in Union of India v. M.V. Valliappan (27 July 1999), provides that a partial partition effected after 31 December 1978 shall not be inquired into, that any finding recorded about it is null and void, and that the family shall continue to be assessed as if no such partial partition had taken place. Note also that clause (i) of the same Explanation now expressly excludes a physical division of income without a physical division of the property producing the income, so the reasoning cannot be extended to an asset that DOES admit of physical division. The Act construed in the judgment was the Indian Income-tax Act, 1922, and neither the Explanation nor sub-section (9) existed when it was decided. I did not carry out a citator check for later judicial treatment of this decision. The reader should also consult Kalloomal Tapeswari Prasad (HUF) v. CIT and ITO v. Smt N.K. Sarada Thampatty, both already in this library and both decided under the Explanation to s.171; they, and not this decision, govern what division the section requires. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full — header, ACT and HEADNOTE blocks, counsel, the whole of Hidayatullah J's judgment including the operative portion of the memorandum of partial partition, and the disposal "Appeal allowed" — at https://indiankanoon.org/doc/1095533/?type=print, and the central passage was read a second time at https://indiankanoon.org/docfragment/1095533/. The judgment carries NO paragraph numbers in either rendering, so no paragraph locator is given; I established the absence of numbering by having the whole document transcribed in one piece. The HEADNOTE printed on the source page is the law reporter's editorial writing, not the Court's, and nothing has been quoted from it. Note one inconsistency in the record as printed: the memorandum recites that on partition "each of us become absolute owner of his one-fifth share", while the passage quoted from Appovier v. Rama Subba Aiyan speaks of six distinct equal shares — the six there being the shares in Appovier's own facts, not this family's, and the point is not one the Court had to resolve. The two Hindu undivided families before the Court were Charandas Haridas's (wife, three sons and himself) and Chinubhai Haridas's (wife, son and himself); the Court confined its statement of facts to the first. The statutory comparison drawn in 'why_it_matters' and in the validity note is this library's own, taken from the departmental text of s.171 read on the same pass, and is NOT attributed to the Court, which was construing the Indian Income-tax Act, 1922 twenty years before s.171(9) existed. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the Revenue was ordered to pay the costs of the two assessees in the Supreme Court and below, with one set of costs in the Supreme Court. The question — whether there were materials to justify the finding that the income in the share of the commission agency of the mills was the income of the Hindu undivided family — was answered in the negative. There is nothing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset; the division must be effective so as to bind the members, but Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoyment can otherwise be secured according to the shares of the members. For an asset of this kind there was no other mode of partition open to the parties if they wished to retain the property and yet hold it in severalty, and the law does not contemplate that a person should do the impossible. The family having taken the fullest measure possible for dividing the joint interest into separate interests, on a document that was genuine and not a sham and that effectually divided the income and in the circumstances the assets, there was factually no Hindu undivided family in respect of those particular assets.
TaxSphere, “Charandas Haridas v. CIT — where an asset admits of no other mode of division, dividing the income divided the asset; and why s.171 would decide the same facts differently today”, https://taxnotice.vittsphere.com/caselaw/case/charandas-haridas-v-cit-dividing-an-asset-that-admits-of-no-physical-division/ (validity last checked 2026-09-09)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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As karta and father I divided some family shares between myself and my minor sons. Can the officer refuse to record the partial partition because the shares are unequal?
The department is ignoring a partial partition my client's family made in April 1979, even though the Income-tax Officer recognised it and gave the family the benefit of it in that very assessment year. Is there any authority that the recognition once given must stand?
Our family made a partial partition in the early 1980s — we divided some of the properties but stayed joint as to the rest — and the Assessing Officer has recognised it in past assessments. He is now assessing the whole income in the HUF's hands and says the partial partition never counted. Is he right?
The Assessing Officer rejected my explanation for cash credits. Must he then prove where the money actually came from before taxing it?
