JUDGMENT R.K. Agarwal and Prakash Krishna, JJ.
1. The Income Tax Appellate Tribunal, New Delhi has referred the following question of law under section 256(1) of the Income Tax Act, 1961 (here in after referred to as the Act) for opinion to this Court.
"Whether in view of the facts and circumstances of the case, the ITAT was legally correct in holding that the Assessing Officer was not right in applying the provisions of Sub section (9) of Section 171 of the I.T. Act and also in directing him to record the finding relating to the partition as claimed by the assessee?
2. The dispute relates to the assessment year 1985-86.
3. Briefly, stated the facts giving rise to the present reference are as follows :-
4. M/s Charan Das (HUF) consisted of Sri Charan Das Karta, Smt. Kans Rani wife of Karta and two sons namely, Sri Somnath and Sri Chandra Mohan. The wives and children of Sri Somnath and Chandra Mohan were also members of said HUF. Sri Charan Das made a will dated 30th April, 1984. The relevant portion of the will is reproduced below :-
" I further bequeath my total interest in my coparcenary property that I may be possessed of at the time of my death to the Hindu Undivided Family consisting of my sons Sh. Om Nath Ghai & Shri Chandra Mohan Ghai, my wife, wives of Shri Som Nath and Shri Chandra Mohan Ghai & their children as members."
5. Sri Charan Dass expired on 28.5.84. After his death all assets of HUF were ascertained and collected in the books of account of the firm, M/s Veer Industries in which the said HUF was the partner. On 29th March, 1985, the assets of the HUF were distributed by making entries in the books of account of M/s Veer Industries. An application was filed before the assessing officer requesting him to record a finding of complete partition under section 171 of the Income Tax Act. The assessing officer held that it was a case of partial partition and refused to recognize the partition in view of Sub section 9 of Section 171 of the Income Tax Act. The matter ultimately reached to the Tribunal at the instance of the assessee. The Tribunal in appeal took the view that in view of Section 6 of the Hindu Succession Act a complete partition has taken place as claimed by the assessee. The Tribunal has placed reliance upon a judgment of the Supreme Court in the case of Gurupad Khandappa Megdum v. Hirabai Khandappa Megdum and Ors. 129 ITR 440.
6. Heard the counsel for parties.
7. The Supreme Court in Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum and Ors. has interpreted Section 6, its proviso and Explanation 1 with a view to ascertain the share of the deceased's widow in the coparcener property. In this case the joint Hindu family consisted of Karta, his wife, two sons and three daughters. On the death of Karta his widow claimed 7/24 share in the joint Hindu family property in which her husband had coparcenery interest. The Supreme Court observed that for the purpose of determining the share of the plaintiff (widow), two things becomes necessary to determine, first her share in her husband's share and second her husband's own share in the coparcenery property. The proviso to Section 6 contains the formula of fixing the share of the applicant, while Explanation 1 contains a formula for reducing the share of the deceased. Interpreting the scope and width of Explanation 1, the Supreme Court has observed that fiction created by Explanation 1 has to be given its due and full effect as the fiction created by Section 18A(9)(b) of the Indian Income Tax Act 1922 was given by it in CIT v. Teja Singh . The relevant portion is quoted below :-
"In our case it is not necessary, for the purposes of working out the fiction to assume and supply a missing link which is really what was meant by Lord Asquith in his famous passage in East End Dwelling Co. Ltd. v. Finsbury Borough Council, 1952 AC 109 (132). He said : If you are bidden to treat an imaginary state of affairs as real, you must also imagine as real the consequences and incidents which if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it; and if the statute says that you must imagine ascertain state of affairs, it cannot be interpreted to mean that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
In order to ascertain the share of heirs in the property of deceased coparcener it is necessary in the very nature of things, and as the very first step, to ascertain the share of the deceased in the coparcenary property. For, by doing that alone can ;one determine the extent of the claimant's share. Explanation 1 to S. 6 resorts to the simple expedient, undoubtedly fictional, that the interest of a Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of that property had taken place immediately before his death. What is therefore required to be assumed is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. That assumption, once made, is irrevocable. In other words, the assumption having been made once for the purpose of ascertaining the share of the deceased in the coparcenary property, one cannot go back on that assumption and ascertain the share of the heirs without reference to it. The assumption which the statute requires to be made that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one's imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased. The allotment of this share is not a processual step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional partition. "
8. The above case is a sheet anchor of the assessee's contention, as noticed by the Tribunal. On a close reading of the aforesaid case law, we find that in para 11 of the report the Supreme Court clarified the matter by making explicit observation that it is not concerned as to whether in reality a partition had taken place between the plaintiff's husband and his sons. The relevant portion is quoted below :-
"Whether a partition had actually taken place between the plaintiffs husband and his sons is besides the point for the purposes of Explanation 1. That Explanation compels the assumption of a fiction that in fact " a partition of the property had taken place", the point of time of the partition being the one immediately before the death of the person in whose property the heirs claim a share. "
9. The real controversy in the above case before the Supreme Court was about the extent of the share of the widow in the coparcenary property. It was not concerned as to whether a partition takes place immediately after the death of a member of a coparcenary of the coparcenary property. Therefore, this case can not be treated as an authority for the proposition that a partition takes place in the joint Hindu family, as soon as a male coparcener dies. In the case in hand, the question involved is that whether there is necessarily a disruption of joint Hindu family immediately after the death of a coparcener. The above case was examined by the Supreme Court in a subsequent judgment in the State of Maharashtra v. Narayan Rao Sham Rao Deshmukh and Ors. , wherein it has been observed that its judgment in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum and Ors. (supra) is an authority for the proposition that when a family member who inherits an interest in the joint family property under Section 6 of the Hindu Succession Act files a suit for partition expressing her willingness to go out of the family, she would be entitled to get both the interest she has inherited and the share which would have been mostly allotted to her as stated in Explanation 1 to Section 6 of the Hindu Succession Act. But it has been observed by the Apex Court itself "it can not be an authority for the proposition that she ceases to be a member of the family on the death of male member of the family whose interest in the family property devolves on her without her volition to separate herself from the family" Further it has been held that the ownership of a defined share in the family property by a person need not be treated as a factor which would militate against his being a member of a family.
10. Thus, the gist of the aforesaid pronouncements of the Supreme Court is that there is no ipso facto partition of a joint Hindu Family properties immediately after the death of a male coparcener having coparcenary interest of Mitakshara school in the coparcenary property. The fiction given by Explanation 1 has nothing to do with the actual disruption of status of Hindu undivided family. It freezes or quantify the share of a female heir in the coparcenary property on account of death of a coparcener at the relevant point of time.
11. We have considered the aforesaid judgment of the Hon'ble Supreme Court in great detail in I.T.R. No. 95 of 1992, Commissioner of Income Tax, Meerut v Smt. Meera Prem Sundar (HUF) decided on 1st April, 2005 and I.T.R. No. 263 of 1991, Commissioner of Income Tax, Agra v. Dharam Pal Singh (HUF) and have come to the conclusion that there is no partition and disruption of Hindu Undivided Family as per Explanation 1 to Section 6 of the Hindu Succession Act.
12. Learned counsel for the assessee has placed reliance upon a Division Bench judgment of this Court in the case of Late Girdhari Lal v. Commissioner of Income Tax 2004 UPTC 197A, we find that the controversy involved therein was different one and the said case has no application to the controversy involved in the present case. In that case it is no where held that after the death of Karta a partition takes place or there is disruption of Hindu Undivided Family. In that case the High Court was concerned with the interpretation of Section 8 of the Hindu Succession Act. Section 8 of the Hindu Succession Act deals with the succession of self acquired property. Section 6 of the Hindu Succession Act deals with the case of determination of share of Male Hindu when he dies. Under the Hindu Law the self acquired property and joint Hindu Family Property are not treated at par. Therefore, the reliance placed upon the judgment of Late Girdhari Lal (supra) is misplaced one. We find that another Division Bench of this Court in the case of Controller of State v. Smt. S. Harish Chandra has held that proviso to Section 6 creates a fiction for the purpose of said Section. It sets out the mode of devolution of interest in coparcenary property. It comes into operation only after the death of coparceners and only for the limited purpose of laying down succession.
13. In the result, we answer the above question referred to us in the negative i.e. in favour of the Revenue and against the assessee. There shall be no order as to costs.