Our family divided the income but not the properties. Is that a partition the department must accept?
No. Where the property admits of physical division, dividing the income while leaving the property undivided is not a partition for tax purposes, and mere severance of status under Hindu law is not enough. Until a finding recognising the partition is recorded under s.171, the family is deemed to continue undivided and the income remains assessable in its hands.
Decided by the Supreme Court (Supreme Court of India — R.S. Pathak and E.S. Venkataramiah, JJ. (judgment of the Court delivered by Venkataramiah, J.)) on 1982-01-12, reported as (1982) 133 ITR 690 (SC); 26 CTR 415; 8 Taxman 5; [1982] INSC 1; AIR 1982 SC 1; Civil Appeal Nos. 1370 of 1974 and 1768 of 1975. It bears on section 171, section 2(31) of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
A revenue decision, and the one the department uses whenever a family relies on an arrangement, an arbitration award or separate accounts instead of an order under s.171. It confirms that s.171 applies to a partial partition as much as to a total one, and that the deeming fiction in s.171(1) preserves the existing assessment status until the officer records his finding — so the burden is on the family to obtain the order, not on the officer to disprove the partition.
Binding on every court and authority in India.
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The assessee was a Mitakshara Hindu undivided family at Kanpur; the assessment year was 1964-65. A partial partition of Rs 5,00,000 out of capital of Rs 12,85,423 had been made and accepted in 1951. On 11 December 1963 the family claimed a further oral partial partition of eighteen immovable properties, of a total value of Rs 7,26,120, among ten members — six taking a one-twelfth share each and four a one-eighth share each — who thereafter held them as tenants-in-common, maintaining separate accounts and dividing the net income each year. Asked why the properties had not been divided in definite portions, the family said physical division among ten members was impossible and relied on an arbitrator's award of 15 April 1964 made a decree of the Civil Judge, Kanpur, in which the arbitrator stated the properties did not admit of physical division. The Income-tax Officer, the appellate authority and the Tribunal all rejected the claim, the Tribunal finding on the evidence — market value, situation, size, age, tax payable and tenancy of each item — that the properties could in fact be divided physically into lots. On a reference under s.256(1), the Allahabad High Court answered the first question against the family but the second in its favour, holding the income of the eighteen properties not includible. Both sides appealed by certificate.
The assessee's appeal (Civil Appeal No. 1370 of 1974) was dismissed and the Department's appeal (Civil Appeal No. 1768 of 1975) allowed, with costs to the Department. Section 171 applies to all partitions, total and partial. A transaction is a partition for its purposes only if, where the property admits of physical division, physical division has taken place; division of income without division of the property producing it is not a partition, and mere severance of status under Hindu law is not enough. Where a large number of items is involved they need not each be split: apportioning them equitably, with money payments to equalise shares if necessary, is itself a kind of physical division within the Explanation. On the facts the eighteen properties admitted of such division without loss of utility, and there was no material to show that the family had ever seriously attempted it. Until a finding under s.171 is recorded, the deeming fiction in s.171(1) keeps the family the owner of the property and the recipient of its income, and the income remains assessable in its hands — the High Court's contrary answer to the second question was reversed. Charandas Haridas v. CIT [1960] 39 ITR 202 (SC) was distinguished: there the asset was a right under managing agency agreements whose physical division would have meant dissolving and reconstituting the firms, which was not in the karta's hands, and the family had taken the fullest measure possible.
Section 171 was enacted after the Privy Council in Sir Sundar Singh Majithia v. CIT [1942] 10 ITR 457 and the decisions following it had held that s.25A of the 1922 Act did not reach partial partitions; Parliament said in terms that s.171 applies to partitions total or partial, and defined partial partition as one partial as to persons, as to properties, or both. The assessee argued that the fiction in s.171(1) cannot operate where the family in fact continues undivided after a partial partition of property, since a deeming provision presupposes that the real position differs from the deemed one. The Court rejected that: after a partial partition as to property the members hold the divided property as divided members and the rest as an undivided family, so the family is deemed to continue as owner of the divided property and recipient of its income until a finding under s.171 is given — the real position does differ from the fiction, and there is an occasion for it to operate. On the Explanation, apportionment of a group of properties on an equitable basis, with equalising payments where needed, is a kind of physical division; any other view would be divorced from the realities of life. The argument built on A. Kannan Chetty v. CIT [1963] 50 ITR 601 (Mad.) — that income not actually received by the family cannot be taxed, as with property alienated to a stranger — was rejected, because that decision itself distinguishes an alienation to a stranger from a family dealing with its own property while retaining possession and income, and accepting the plea would nullify the scheme of s.171.
Mere proof of severance of status under Hindu law is not sufficient to treat such a transaction as a partition.
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Handle my notice → Ask a CA on WhatsAppNo. Where the property admits of physical division, dividing the income while leaving the property undivided is not a partition for tax purposes, and mere severance of status under Hindu law is not enough. Until a finding recognising the partition is recorded under s.171, the family is deemed to continue undivided and the income remains assessable in its hands. This was decided by the Supreme Court (Supreme Court of India — R.S. Pathak and E.S. Venkataramiah, JJ. (judgment of the Court delivered by Venkataramiah, J.)) and bears on section 171, section 2(31) of the Income Tax Act 1961. It is reported as (1982) 133 ITR 690 (SC); 26 CTR 415; 8 Taxman 5; [1982] INSC 1; AIR 1982 SC 1; Civil Appeal Nos. 1370 of 1974 and 1768 of 1975. A revenue decision, and the one the department uses whenever a family relies on an arrangement, an arbitration award or separate accounts instead of an order under s.171. It confirms that s.171 applies to a partial partition as much as to a total one, and that the deeming fiction in s.171(1) preserves the existing assessment status until the officer records his finding — so the burden is on the family to obtain the order, not on the officer to disprove the partition. If it applies to you, the first step is this: Establish the date of the claimed partition before you rely on this case: for any partial partition effected after 31 December 1978, s.171(9) denies recognition outright — a bar whose constitutional validity was upheld by a five-judge Bench in Union of India v M.V. Valliappan — so citing Kalloomal as authority that a partial partition can be recognised today would misstate the law.
The assessee was a Mitakshara Hindu undivided family at Kanpur; the assessment year was 1964-65. A partial partition of Rs 5,00,000 out of capital of Rs 12,85,423 had been made and accepted in 1951. On 11 December 1963 the family claimed a further oral partial partition of eighteen immovable properties, of a total value of Rs 7,26,120, among ten members — six taking a one-twelfth share each and four a one-eighth share each — who thereafter held them as tenants-in-common, maintaining separate accounts and dividing the net income each year. Asked why the properties had not been divided in definite portions, the family said physical division among ten members was impossible and relied on an arbitrator's award of 15 April 1964 made a decree of the Civil Judge, Kanpur, in which the arbitrator stated the properties did not admit of physical division. The Income-tax Officer, the appellate authority and the Tribunal all rejected the claim, the Tribunal finding on the evidence — market value, situation, size, age, tax payable and tenancy of each item — that the properties could in fact be divided physically into lots. On a reference under s.256(1), the Allahabad High Court answered the first question against the family but the second in its favour, holding the income of the eighteen properties not includible. Both sides appealed by certificate. The matter was decided on 1982-01-12 by the Supreme Court (Supreme Court of India — R.S. Pathak and E.S. Venkataramiah, JJ. (judgment of the Court delivered by Venkataramiah, J.)). On those facts the Supreme Court held as follows. The assessee's appeal (Civil Appeal No. 1370 of 1974) was dismissed and the Department's appeal (Civil Appeal No. 1768 of 1975) allowed, with costs to the Department. Section 171 applies to all partitions, total and partial. A transaction is a partition for its purposes only if, where the property admits of physical division, physical division has taken place; division of income without division of the property producing it is not a partition, and mere severance of status under Hindu law is not enough. Where a large number of items is involved they need not each be split: apportioning them equitably, with money payments to equalise shares if necessary, is itself a kind of physical division within the Explanation. On the facts the eighteen properties admitted of such division without loss of utility, and there was no material to show that the family had ever seriously attempted it. Until a finding under s.171 is recorded, the deeming fiction in s.171(1) keeps the family the owner of the property and the recipient of its income, and the income remains assessable in its hands — the High Court's contrary answer to the second question was reversed. Charandas Haridas v. CIT [1960] 39 ITR 202 (SC) was distinguished: there the asset was a right under managing agency agreements whose physical division would have meant dissolving and reconstituting the firms, which was not in the karta's hands, and the family had taken the fullest measure possible.
Section 171 was enacted after the Privy Council in Sir Sundar Singh Majithia v. CIT [1942] 10 ITR 457 and the decisions following it had held that s.25A of the 1922 Act did not reach partial partitions; Parliament said in terms that s.171 applies to partitions total or partial, and defined partial partition as one partial as to persons, as to properties, or both. The assessee argued that the fiction in s.171(1) cannot operate where the family in fact continues undivided after a partial partition of property, since a deeming provision presupposes that the real position differs from the deemed one. The Court rejected that: after a partial partition as to property the members hold the divided property as divided members and the rest as an undivided family, so the family is deemed to continue as owner of the divided property and recipient of its income until a finding under s.171 is given — the real position does differ from the fiction, and there is an occasion for it to operate. On the Explanation, apportionment of a group of properties on an equitable basis, with equalising payments where needed, is a kind of physical division; any other view would be divorced from the realities of life. The argument built on A. Kannan Chetty v. CIT [1963] 50 ITR 601 (Mad.) — that income not actually received by the family cannot be taxed, as with property alienated to a stranger — was rejected, because that decision itself distinguishes an alienation to a stranger from a family dealing with its own property while retaining possession and income, and accepting the plea would nullify the scheme of s.171. In the words reproduced by the source cited on this page: "Mere proof of severance of status under Hindu law is not sufficient to treat such a transaction as a partition."
It was decided by the Supreme Court on 1982-01-12 and is reported as (1982) 133 ITR 690 (SC); 26 CTR 415; 8 Taxman 5; [1982] INSC 1; AIR 1982 SC 1; Civil Appeal Nos. 1370 of 1974 and 1768 of 1975. 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 171, 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The assessee's appeal (Civil Appeal No. 1370 of 1974) was dismissed and the Department's appeal (Civil Appeal No. 1768 of 1975) allowed, with costs to the Department. Section 171 applies to all partitions, total and partial. A transaction is a partition for its purposes only if, where the property admits of physical division, physical division has taken place; division of income without division of the property producing it is not a partition, and mere severance of status under Hindu law is not enough. Where a large number of items is involved they need not each be split: apportioning them equitably, with money payments to equalise shares if necessary, is itself a kind of physical division within the Explanation. On the facts the eighteen properties admitted of such division without loss of utility, and there was no material to show that the family had ever seriously attempted it. Until a finding under s.171 is recorded, the deeming fiction in s.171(1) keeps the family the owner of the property and the recipient of its income, and the income remains assessable in its hands — the High Court's contrary answer to the second question was reversed. Charandas Haridas v. CIT [1960] 39 ITR 202 (SC) was distinguished: there the asset was a right under managing agency agreements whose physical division would have meant dissolving and reconstituting the firms, which was not in the karta's hands, and the family had taken the fullest measure possible. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 171, section 2(31) of the Income Tax Act 1961, and was decided by Supreme Court of India — R.S. Pathak and E.S. Venkataramiah, JJ. (judgment of the Court delivered by Venkataramiah, 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. Apply under s.171 and get a finding recorded; do not assume a family arrangement, separate books or an arbitration award produces a partition the officer must accept. Where the properties admit of physical division, put the actual division on record, including any money payments made between members to equalise shares — an equitable apportionment is accepted, an unexplained paper split is not. Do not argue severance of status under Hindu law as the ground for the claim; it was held insufficient on its own.
Still good law. A separate search for later treatment found the decision undisturbed and still relied on for the proposition that tax law imposes stricter requirements for a partition than Hindu personal law. The surrounding statute has however hardened: s.171(9), inserted with effect from partial partitions after 31 December 1978, denies recognition to such partitions altogether, and its constitutional validity was upheld by a five-judge Bench in Union of India v. M.V. Valliappan (27 July 1999), (1999) 238 ITR 1027 (SC), which held the cut-off had a rational nexus with preventing multiple HUFs and that 'hardship or equity has no role to play in determining eligibility to tax'. That finding was checked against a published source, which is linked on this page, on 2026-08-25. 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 disposal was appeal by appeal: the family's Civil Appeal No. 1370 of 1974 was dismissed and the Department's Civil Appeal No. 1768 of 1975 allowed, so the High Court's decision was partly affirmed and partly reversed. Note what the decision does not say. It does not hold that properties incapable of division cannot be partitioned — it holds that these eighteen properties were capable of division, on the Tribunal's finding, and that no serious attempt at division was made. Charandas Haridas v. CIT [1960] 39 ITR 202 (SC), where a division of managing agency commission was accepted because physical division was not in the karta's hands and the family had done all it could, is distinguished rather than doubted, and remains the authority for the genuinely indivisible asset. 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 assessee's appeal (Civil Appeal No. 1370 of 1974) was dismissed and the Department's appeal (Civil Appeal No. 1768 of 1975) allowed, with costs to the Department. Section 171 applies to all partitions, total and partial. A transaction is a partition for its purposes only if, where the property admits of physical division, physical division has taken place; division of income without division of the property producing it is not a partition, and mere severance of status under Hindu law is not enough. Where a large number of items is involved they need not each be split: apportioning them equitably, with money payments to equalise shares if necessary, is itself a kind of physical division within the Explanation. On the facts the eighteen properties admitted of such division without loss of utility, and there was no material to show that the family had ever seriously attempted it. Until a finding under s.171 is recorded, the deeming fiction in s.171(1) keeps the family the owner of the property and the recipient of its income, and the income remains assessable in its hands — the High Court's contrary answer to the second question was reversed. Charandas Haridas v. CIT [1960] 39 ITR 202 (SC) was distinguished: there the asset was a right under managing agency agreements whose physical division would have meant dissolving and reconstituting the firms, which was not in the karta's hands, and the family had taken the fullest measure possible.
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