Holding

Section 171(1) of the Income Tax Act governs the assessment of a Hindu Undivided Family, and in the absence of a partition recorded under that section the HUF is deemed to own the entire property and its income, so the minor’s share cannot be excluded.

Summary

Maharani Raj Laxmi Devi, after adopting a minor son and the death of her husband, claimed HUF status and excluded the minor's one‑sixth share—acquired under Section 6 of the Hindu Succession Act—from the HUF's taxable income for AY 1966‑67 to 1970‑71. The Income Tax Officer held that, absent a partition order under Section 171(1) of the Income Tax Act, the HUF remained intact and the share could not be excluded. The Tribunal reversed, saying no partition was required, and the High Court upheld the exclusion. The Supreme Court held that for income‑tax purposes the matter is governed by Section 171(1); without a recorded partition the HUF is deemed to own the whole property and its income, so the minor’s share cannot be excluded. Consequently, the appeal by the Revenue was allowed.

Issues considered

Whether the one‑sixth share inherited by the minor son under Section 6 of the Hindu Succession Act can be excluded from the income of the Hindu Undivided Family for tax purposes.
Whether Section 171(1) of the Income Tax Act applies to a diminution of HUF assets arising solely from statutory inheritance without a partition order.

Legislation cited

Hindu Succession Act, 1956s. 14(1), s. 6
Income Tax Act, 1961s. 171(1)

Subjects

Hindu Undivided FamilypartitionSection 171Income TaxHindu Succession Actminor heirassessment yearinheritance

Judgment

A THE ADDITIONAL COMMISSIONER OF INCOME TAX,
LUCKNOW
v.
MAHARANI RAJ LAXMI DEVI

FEBRUARY 11, 1997
B I .

(S.C. AG~AWAL AND K.S. PARIPOORNAN, JJ.]

Income Tax Act, 1961 : Section 171(1).

C Income Tax--HUF-AYs. 1966-67 to 1970-71--Partition of
HUF-Diminution of HUF assets-After death of the karta, HUF comprises
of his widow and minor son--The said minor son inherited I/6th of the share
of the deceased in HUF property under S.6 of Hindu SuccessionAct-Held
: Partition of HUF for the purpose of assessment governed by S.171 (1) of
the Income Tax Act and not by Hindu Succession Act-In absence of
D compliance with S.171(1) of the Income Tax Act, the I/6th income of minor " ~-
son could not be excluded in computing HUF's income-S.6 of Hindu
Succession Act would govern rights of parties only and not the assess-
ment-flindu Law-Hindu Succession Act, 1956, S.6.

E The assessee was being assessed as an individual up to and including
the Assessment Year 1964-65. The assessee adopted a minor as his son.
After the said adoption the status of the assessee was taken as that of the
Hindu Undivided Family (HUF). After the death of the assessee, the HUF
comprised of his widow as the karta and the minor son. The said minor
son inherited 1/6th of the share of the deceased in the HUF property under
F Section 6 of the Hindu Succession Act, 1956. For the assessment years
1966-67 to 1970-71 the respondent-assessee filed returns after excluding
the 1/6th share belonging to the minor son.

The Income Tax Officer (ITO) held that the Income Tax Act was a
separate, distinct and complete statute in itself and under the Act a change
G in HUF status could b~ effected only by claiming partition either partial
or complete and that such partition could become operative if a claim of
partition had been preferred and after examining the evidence produced,
an order under Section 171 accepting the claim of partition had been
accepted by the ITO, and that in the case of the assessee both the elements
H were missing. The ITO, therefore, held that the assessee HUF continued
1172
'
AUDL COMMNR OF INCOME TAX, LUCKNOW v. MAHARANI RAJ LAXMIDEVI 1173

..., to· be as it was before. However, the Income Tax Appellate Tribunal A
reversed the said view and held that the case of the assessee was not of a
partition as contemplated in Section 171 and, therefore, no claim was
necessary and absence of an order under Sectionl71 did not mean that the
whole estate should be deemed to belong to the assessee HUF. The
Tribunal further held that assuming that the assessee's case came under

-
B
Section 171 the estate of the assessee HUF having been diminished in
terms of Section 6 of the Hindu Succession Act, 1956 but with regard to
-1· which an order accepting the claim for partial partition had not been
made, the income from such property could not be included in the com-
putation of the income of the HUF. The High Court answered the reference
in favour of the assessee and against the Revenue. Hence this appeal.
' .
c
Allowing this appeal, this Court

HELD : 1. It is no doubt true that in Kallomal Tapeswari Prasad and
Smt. N.K Sarada Thampatty this Court was dealing with cases of partial
D
"'· partition by way of voluntary act of the parties which was directly covered
by Section 171 of the Income Tax Act, 1961. ButR.B. Tunki Sah Baidyanath
Pd. w11s a ·case where a claim was made on the basis of statute, viz., the
provisions of Section 14(1) of the Hindu Succession Act, 1956, and it was
held that Section 171 of the Income Tax Act would govern the matter
insofar as income tax law is concerned. For the same reason, though for E
the purpose of Hindu Undivided Family, Section 6 of the Hindu Succession
Act would govern the rights of parties but insofar as income tax law is
concerned the matter has to be governed by Section 171(1) of the Income

- 'f Tax Act. Hence, the l/6th income pertaining to the minor son could not be
excluded in computing the Hindu Undivided Family's income. [1180-C-D] F
Kalloomal Tapeswari Prasad (HUF) v. CIT, 1973 Tax law Reports
697; ITO v. Smt. N.K Sarada Thampatty, (1991) 187 ITR 696 and R.B. Tunki
Sah Baidyanath Pd. v. CIT, (1995) 212 ITR, relied on.

A. Kannan Chetty v. CIT, (1963) 50 ITR 601 (Mad), held overruled G
by Kallomal Tapeswari Prasad (HUF) v. CIT, 1973 Tax Law Reports 697
- "Y and Smt. N.K. Sarada Thampatty (1991) 187 ITR 696.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1415-19
(NT)_ of 1979. H
1174 SUPREME COURT REPORTS [1997] 1 S.C.R.
A From the Judgment and Order dated 22.4.78 of the Allahabad High
Court in I.T.R. No. 372 of 1975.

P.A. Choudhary, B.S. Ahuja and B.K. Prasad for the Appellant.

Janendra Lal for the Respondent.
B
The Judgment of the Court was delivered by

These appeals, by special leave, arise .out of a reference made by the
Income Tax Appellate Tribunal, Allahabad Bench, (hereinafter referred to
as 'the Tribunal') under Section 256(1) of the Income Tax Act, 1961
C (hereinafter referred to as 'the Act') whereby the following questions was
referred for the opinion of the Allahabad High Court :-

"Whether on the facts and in the circumstances of the case 1/6th
income from the computation of income of the assessee - Hindu
Undivided Family - could be excluded pertaining to the minor son
D. as Maharaja?"

By the impugned judgment the High Court has answered the said
question against the Revenue and in favour of the assessee. The High Court
has placed reliance on its earlier decision in Mis Kalloomal Tapeswari
E Prasad v. The Commissioner of Incorne tax, 1973 Tax Law Reports 697.
Briefly stated the facts are as follows.

Maharaja P.P. Singh of Balrampur was being assessed as an in-

-
dividual up to and including the assessment year 1964-65. He had no issue
of his own. On December 28, 1963, he adopted Maharaja Dharmendra
F Pratap Singh, who was a minor, as his son. After the said adoption the
status of Maharaja P.P. Singh was taken as that of the Hindu Undivided
Family (for short 'HUF'). Maharaja P.P. Singh died on June 20, 1964.
Thereafter his wife,· Maharani Raj Laxmi Devi, became the karta of the
HUF consisting of herself and the aforesaid minor son, Maharaja Dhar-
mendra Pratap Singh. For the assessment year 1966-67 the assessee filed a
G return declaring the total income of the HUF as Rs. 28935. Subsequently
she filed another return showing the total income as Rs. 25,288. The
difference between the original and revised returns was explained on the
basis that the revised return had· been filed by the HUF after excluding
1/6th share belonging to the minor son, Maharaja Dharmendra Pratap
H Singh, as an individual because according to Section 6 of the Hindu
ADDLCOMMNROFINCOMETAX,LUCKNOWv.MAHARANIRAJIAXMIDEVJ 1175

Succession Act, 1956, 1}3rd share of Late Maharaja P.P. Singh in the HUF A
property developed on his two heirs Maharaja Dharmendra Pratap Singh
(minor son) and Maharani Raj Laxmi Devi (wife). The Income Tax Officer
held that the Act is a separate, distinct and complete statute in itself and
under the Act a change in the HUF status can be effected only by claiming
partition either partial or complete and that such partition could become B
operative if a claim of partition has been preferred and after examining the
evidence produced, an order under Section 171 accepting the claim of
partition has been accepted by the Income Tax Officer, and that in the case
of the assessee both the elements were missing. He, therefore, held that
the assessee HUF continued to be as it was before. The said view was
followed by the Income Tax Officer in the assessments for the subsequent C
assessment years 1967-68 to 1970-71. The said view of the Income Tax
Officer was upheld in appeal by the Appellate Assistant Commissioner. On
further appeal the Tribunal reversed the said view and held that the_ case
of the assessee was not of a partition contemplated in Section 171 and,
therefore, no claim was necessary and absence of an order under Section D
171 does not mean that the whole estate should be deemed to belong to
the assessee HUF. The Tribunal following the decision of the Allahabad
High Court in the case of Mis kalloomal Tapeswari Prasad (supra), further
held that assuming the assessee's case came under Section 171 the estate
of the assessee HUF having been diminished in terms of Section 6 of the
Hindu Succession Act, 1956 but with regard to which an order accepting E
the claim for partial partition has not been made, the income from such
property could not be included in the computation of the income of the
HUF. The Tribunal referred the question abovementioned to the High
Court for its opinion and the said question was answered by the High Court
in favour of the assessee and against the Revenue. The High Court has F
followed its decision in the case of Mis Kal/oomal Tapeswari Prasad
(supra). Hence this appeal.

Shri ·P.A. Choudhary, the learned senior counsel appearing for the
Revenue, has argued that the High Court was in error in upholding the
view of the tribunal that Section 171 of the Act was not applicable in the G
present case. Shri Choudhary has pointed out that the decision of the High
Court in Mis kalloomal Tapeswari Prasad (supra) on which reliance has
"<"
. been placed by the High Court in the impugned judgment has been
reversed by this Court in Kal/oomal Tapeswari Prasad (HUF) v. Commis-
sioner of Income Tax, Kanpur, (1982) 133 ITR 690, and the said decision H
1176 SUPREME COURT REPORTS [1997] 1 S.C.R.
A has been followed in the later decisions in The Income Tax Officer, Calicut
v. Smt. N.K Sarada Thampatty, (1991) 187 ITR 696, and RB. Tunki Sah
Baidyanath Pd. v. Commissioner of Income Tax, Bihar-I; Patna, (1995) 212
ITR 632.

B Shri J anender Lal, the learned counsel for the assessee, has sought
to distinguish the aforementioned decisions of this Court on the ground
that in those cases partial partition was claimed to have been effected and
they fell within the ambit of Section 171 of the Act. The submission is that
in the present case there was inheritance of the share of late Maharaja P.P.
Singh by his widow and minor son under Section 6 of the Hindu Succession
C Act, 1956 and that in such a case where on account of inheritance by virtue
of statute there is a diminution of the assets of the HUF Section 171 of the
Act has no application.

In Kalloomal Tapeswari Prasad (HUF) v. CIT, (supra) there was a
D partial partition in respect of 18 immovable properties which were divided
amongst 10 members of the family. There was no actual division of the
properties because it was felt that physical division of each of the 18
properties into 10 portions was not possible. The Income Tax Officer did
not, however, accept that division of properties was not possible and, while
considering the claim of the assessee under Section 171 of the Ad, he did
E not accept the case of the assessee that there was a partial partition for the
purpose of S~ction 171 of the Act. The said view was affirmed by the
Appellate Assistant Commissioner and the Tribunal. The Tribunal referred
two questions for the opinion of the Allahabad High Court. The first
question was whether the Tribunal was right in holding that the properties
p in dispute were capable of division in definite portion amongst 10 copar-
coners as contemplated in Explanation (a)(i) to Section 171 of the Act. The
second question was whether the Tribunal was justified in holding that the
income from the properties in dispute which were accepted to have been
partitioned under the Hindu Law but with regard to which an order
accepting the claim of partial partition was not made was liable to be
G included in the computation in the income of the assessee, a HUF. The
High Court answered the first question in the affirmative and upheld the
view of the Tribunal that it was possible to divide the properties in question ~ -,
physically into different lots so that each member could take his rightful
share in them. The High Court, however, answered the second question in
H favour of the assessee and held that the income accruing from 18 immov-
--j

ADDL COMMNR OF INCOME TAX, LUCKNOW v. MAHARANI RAJ LAXMI DEVI 1177

able properties after the partial partition was not liable to be included in A
~
the computation of the income of the HUF. This Court, whife agreeing
· with the answer given by the High Court on the first question, did not agree
with the view of the Allahabad High Court on the second question. On
interpretation of the provisions of Section 171 of the Act this Court has
held:-
B
"Where there is no claim made that a partition - total or partial -
had taken place or where it is made and disallowed a Hindu '
•+ Undivided Family which is hitherto being assessed as such will
have to be assessed as such notwithstanding the fact that a partition
had in fact taken had place as per Hindu Law. A finding to the c
effect that partition had taken place has to be recorded under
Section 171 by the Income Tax Officer.

[p. 704)

"We have already held that Section 171 of the Act applied to all D
.... partitions - total or partial - and that unless a finding is recorded
under Section 171 that a partial partition has taken place the
income from the properties should be included in the total income
of the family by virtue of sub-section (1) of Section 171 of the Act."
E
[p. 901]

This Court has taken note of the decision of the Madras·High Court
in A. Kannan Chetty v. ,Commissioner of Income Tax, (19632_. 50 ITR 601,
-.· wherein it was observed :
F
"For instance, .if the Karta of the family effects an alienation or
even makes a gift, insofar as the taxing department is concerned,
it is the income of the members of the Hindu Undivided Family
that can be assessed and, if by reason of any alienation, whether
it is binding on the members of the joint family or not, an item of
G
property ceases to be in the hands of the joint family, it would not
be open to the department to say that they would ignore such an

- ..,.. alienation, notwithstanding that the possession of the properties
and its income may pass to the hands of the stranger."

This Court did not agree with these observations and said : H
1178 SUPREME COURT REPORTS (1997) 1 S.C.R.

A "As long as a finding is not recorded under Section 171 holding
that a partial partition had taken place, the Hindu Undivided
Family should be deemed for the purposes of the Act to be the

B
owner of the property which is the subject matter of partition and
also the recipient of the income from such property. The assess-
ment should be made as such and the tax assessed can be recovered
-
as provided in the Act."

The same view was reiterated in ITO v. Smt. N.K Sarada 171ampatty,
(supra). It was a case where a preliminary decree for partition had been
mad~ out but the final decree had not been passed and no division of the
C properties by metes and bounds had taken place.

In R.B. Twiki Sah Baidyanath Pd. v. CIT, Bihar:l, Patna, (supra) the
Hindu Undivided Family consisted of Rai Bahadur Tunki Sah, the Karta,
his wife Budhi Devi, son Baidyanath Prasad and daughter-in-law Godawari
D Devi. Rai Bahadur Tunki Sah died in 1955 and on his death BaidY.anath
Prasad became the Karta of the Hindu Undivided Family. Budhi Devi, ,•
widow of Rai Bahadur Tunki Sah, was entitled to a limited interest in the
property under the provisions of the Hindu Women's Right to Prciperty
Act, 1937. After the coming into force of the Hindu Succession Act, 1956,
her limited interest turned into an absolute one and she acquired absolute
E ownership rights under Section 14(1) of the said Act. Budhi Devi died in
1960 or thereabout and her share was inherited by her only son Baidyanath
Prasad. Baidyanath Prasad and his wife Godawari Devi adopted Nand
Kumar as their son sometime in 1961. On may 3, 1969, Baidyanath Prasad
executed a registered gift deed in respect of his share in the property which
F he had inherited from his mother to his adopted son Nand Kumar which
gift was accepted by the Gift Tax Officer. During the assessment year
1970-71 and 1971-72 the Income Tax Officer, while assessing the Hindu
Undivided Family and Nand Kumar, accepted the contention of the asses-
see that only 50 per cent of the income from the property and business was
assessable in the hands of the Hindu Undivided Family and the balance in
G the hands of the adopted son Nand Kumar. In the subsequent years
1972-73 to 1975- 76 the Income Tax Officer rejected the assessee's conten-
tion that the income was liable to be divided 50 : 50 between the Hindu
Undivided Family and adopted son Nand Kumar and assessed the entire
income as income of the Hindu Undivided Family. Tlie said view of the
H Income Tax Officer was upheld by the Appellate Assistant Commissioner
ADDL. COMMNR. OF INCOME TAX, LUCKNOW v. MAHARANI RAJ LAXMI DEVI 1179
... ~

·•~ but the Tribunal held that only 50 per cent of the income should be A
assessed as income of the Hindu Undivided Family leaving the balance 50
per cent to be assessed as income of the adopted son Nand Kumar. The
High Court, on reference, reversed the view taken by the Tribunal and
upheld the view taken by the Appellate Assistant Commissioner. Before
this Court the question for consideration was whether compliance with the
B
provisions of Section 171 of the Act was necessary. This Court has laid
down:
""
"Sub-Section (1) of Section 171 in terms provides that a Hindu
family hitherto assessed as undivided shall be deemed for the
purposes of this Act to continue to be a Hindu Undivided Family, c
except where and insofar as a finding of a partition has been given
under this section in respect of the Hindu Undivided Family. On
a plain reading of this sub-section it becomes clear that a Hindu
family which is assessed as undivided has for the purposes of the
. Act to be deemed to continue as such unless there is a evidence
of partition and finding is recorded to that effect under the Act in D
respect of such family. The section creates a deeming fiction of
of
continuing the HUF except where a finding partition has been
given in respect of the HUF concerned. Before this finding is
recorded an inquiry has to be undertaken on the question whether
there has been a total or partial partition of the joint family E
property and if there has been any such partition, the date on which
it took place."
T
[p. 635]

"In the instant case, admittedly, no inquiry was undertaken on the F
question whether there had been a total or partial partition of the
joint family property and if yes the date on which it had taken
place. That being so, in view of the language of Section 171(1), the
HUF would be liable to be taxed as undivided notwithstanding the
effect of Section 14(1) of the Hindu Succession Act."
G
~
Reliance has been placed by the Court on the decisions in Kalloomal
Tapeswari Prasad (HUF) v. CIT, (supra) and ITO v. Smt. N.K. Sarada
'1
17iampatty, (supra). On behalf of the assessee it was urged that in view of
J the language of Section 14(1) of the Hindu Succession Act, 1956 the widow
acquired an absolute right by statute and, therefore, if the view urged by H
1180 SUPREME COURT REPORTS [1997] 1 S.C.R.
~
...
A the Revenue was accepted as correct, it would be setting the clock back to
the position as existed prior to Hindu Succession Act, 1956, which could
not be the intention of the Legislature. The said contention was rejected ...
by the Court by referring to the decision of the Madras High Court in A.
Kannan Chetty v. CIT, (supra) holding that an alienation by the karta of
the family in favour of a stranger could not be ignored by the department
B and the observations of this Court in Kalloomal Tapeswari Prasad (HUF)
v. CIT, (supra) disagreeing with the said view of the Madras High Court
were reaffirmed. *'
It is no doubt true that in Kalloomal Tapeswari v. CIT, (supra) and
c cases of partial partition by way of voluntary act of the parties which is
ITO v. Smt. N.K. Sarada 17iampatty, (supra) this Court was dealing with

directly covered by Section 171 of the Act. But R.B. Tunki Sah Baidyanath
Pd. v. CIT, (supra) was a case where a claim was made on the basi.:; of
statute, viz., the provisions of Section 14(1) of the Hindu Succession Act,
1956, and it was held that Section 171 of the Act would govern the matter
D insofar a·s income t:ix law is concerned. For the same reason, it must be "
held that though for the purpose of Hindu Undivided Family, Section 6 of
the Hindu Succession Act, 1956 would govern the rights of the parties but
insofar as income tax law is concerned the matter has to be governed by
Section 171(1) of the Act.
E For the reasons aforementioned, the questio~ referred to the High
Court must, therefore, be answered in favour of the Revenue and against
the assessee and it is so answered. The appeals are allowed accordingly.
No order as to costs.
.,..

v.s.s. Appeals allowed.