What the courts have decided on section 171, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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ITO v Smt N.K. Sarada Thampatty
Supreme CourtHelps department
Our family partitioned by agreement and a civil court passed a partition decree. Can the department still assess us as a Hindu undivided family?
Yes, unless the property was actually divided. The Supreme Court held that the Explanation to section 171 gives partition a special meaning: where property admits of physical division there must be a physical division, and where it does not there must be such division as it admits of, a mere severance of status not being enough. A partition by agreement or by a court's decree therefore does not disrupt the family's status for tax unless it was followed by actual division by metes and bounds. The appeals were allowed and the writ petition dismissed.
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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.
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Kalloomal Tapeswari Prasad (HUF) v CIT
Supreme CourtHelps department
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.
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Kapurchand Shrimal v CIT
Supreme CourtCuts both ways
The assessing officer ignored my partition claim and assessed the family anyway. If the Tribunal finds that illegal, can it simply cancel the assessment and stop there?
No. The Supreme Court held that although an assessment made on a Hindu undivided family without the enquiry the statute requires into a partition claim made in time must be set aside, the Tribunal's duty does not end with declaring the assessment illegal. An appellate authority has the jurisdiction and the duty to correct all errors in the proceedings under appeal and to issue appropriate directions to the authority below to dispose of the matter afresh, unless the statute forbids it. The Tribunal erred in cancelling the assessments without directing fresh ones, and the High Court erred in upholding them.
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Gowli Buddanna v CIT
Supreme CourtHelps department
My father died and I am now the only male member of our family, with my mother and unmarried sisters. Must the family income be assessed on me as an individual?
No. The Supreme Court held that the income continued to be assessable in the status of a Hindu undivided family. What section 3 of the 1922 Act makes an assessable entity is a Hindu undivided family, not a coparcenary, and a joint family may consist of a single male member together with widows and other female members of deceased coparceners. Property of a joint family does not cease to belong to the family merely because it is represented for the time being by a single coparcener. The property here had belonged to the family in the father's lifetime and continued to do so.
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.