Section 171(4)

Section 171(4) — the law in short

What the courts have decided on section 171(4), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.171: the fiction that a family assessed as undivided continues until a finding of partition is recorded, the s.171(3) order, and what the Explanation means by "partition" CBDT Circulars & InstructionsCuts both ways
  Our family divided years ago and each of us has been showing his own income since. The Assessing Officer has issued a notice to the HUF for those very years and says the HUF is still alive. Can he do that when we have actually separated?
  Yes, unless and until a finding of partition has been recorded under s.171. Section 171(1) creates a fiction: a Hindu family hitherto assessed as undivided is deemed for the purposes of the Act to continue to be a Hindu undivided family, except where and in so far as a finding of partition has been given under the section. The machinery is s.171(2) and (3) — a claim made at the time of an assessment under s.143 or s.144, an inquiry after notice to all the members, and a finding recorded by the Assessing Officer as to whether there has been a total or partial partition and the date on which it took place. Severance of status is not enough: the Explanation defines "partition" as a physical division of the property where the property admits of a physical division, and expressly provides that a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition.
• Statutory position — s.10(2): a member's receipt out of family income is exempt, but the clause is subject to s.64(2) and is overridden by s.171(4)(b) CBDT Circulars & InstructionsCuts both ways
  My client received money from his family HUF during the year. The Assessing Officer wants to tax it in his hands. Is it exempt, and if so is there anything that can take the exemption away?
  Section 10(2) exempts, in computing the total income of a previous year of any person, "any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Two qualifications sit on the face of the Act and both are routinely missed. The clause opens with the words "subject to the provisions of sub-section (2) of section 64", so where the family's income is itself income the individual is deemed to derive under the conversion rules of s.64(2), the exemption gives him nothing. And s.171(4)(b) imposes joint and several liability on members for tax on the family's income up to the date of a recorded partition expressly "notwithstanding anything contained in clause (2) of section 10".

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.