Section 171(9)

Section 171(9) — the law in short

What the courts have decided on section 171(9), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Union of India v. M.V. Valliappan — a five-Judge Bench upholds s.171(9), and holds that a partial partition after the cut-off has no significance even if an earlier assessment recognised it Supreme CourtHelps department
  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?
  No — the Supreme Court has held the opposite, and by a Constitution Bench. In Union of India v. M.V. Valliappan the Court allowed the Revenue's appeals, set aside the judgments of the Madras and Karnataka High Courts which had struck down s.171(9) of the Income-tax Act, 1961 and s.20A of the Wealth-tax Act, 1957, and dismissed the writ petitions challenging the sub-section. Dealing directly with the argument that a partial partition of 13 April 1979 had been recognised in the assessment year and the benefit given to the assessee, the Court held that this "has no significance in view of crystal clear language used in the sub-section that partial partition taking place after the cut off date is not to be inquired into and if inquired the findings would be null and void."
• Apoorva Shantilal Shah v CIT Supreme CourtHelps taxpayerSuperseded by amendment
  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?
  No. The Supreme Court held that a father may effect a partial partition of joint family property between himself and his minor sons, in exercise of his superior right as father or as patria potestas, and that such a partition is valid under Hindu law. It does not become invalid because the shares are unequal; an aggrieved son may challenge it, and until a competent court holds it invalid it stands. The officer may enquire whether the partition is genuine and refuse recognition if it is sham, but cannot refuse it for unequal division. The appeal was allowed.
• 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 Supreme CourtHelps taxpayerSuperseded by amendment
  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.
• Statutory position — s.171(9): a partial partition effected after 31 December 1978 is not recognised, and the family goes on being assessed as if it had never happened CBDT Circulars & InstructionsCuts both ways
  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?
  He is right. Section 171(9) provides that where a partial partition has taken place after the 31st day of December, 1978 among the members of a Hindu undivided family hitherto assessed as undivided, no claim that it took place shall be inquired into under s.171(2), no finding shall be recorded under s.171(3), and any finding recorded to that effect — whether before or after 18 June 1980, the date of introduction of the Finance (No. 2) Bill, 1980 — shall be null and void. The family continues to be liable to be assessed under the Act as if no such partial partition had taken place. Sub-section (9) was inserted by the Finance (No. 2) Act, 1980 with effect from 1 April 1980.

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.