JUDGMENT Prakash Krishna, J.
1. The Income Tax Appellate Tribunal, New Delhi has referred the Knowing two questions 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.
(1) Whether on the facts and in the circumstances of the case , the Income Tax Appellate Tribunal was legally correct to hold that on the death of Shri Prem Sundar a deemed partition had taken place which is recognized for all purposes and the property which was hitherto the HUF property no longer remains the property of HUF?"
(2) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct to hold that Section 171(9) has no applicability to the present case.?
2. The dispute relates to the assessment year 1982-83 and 1983-84.
3. Briefly, stated the facts giving rise to the present reference are as follows :-
There was a Hindu undivided family comprising of Sri Prem Sundar as Karta, his wife Smt. Meera Prem Sundar and his minor son Master Sunil Prem Sundar. Sri Prem Sundar expired on 23rd June, 1978. The assessee claimed that on account of death of Karta, her right in HUF property was defined and as per provisions of Section 6 read with Explanation 1 of the Hindu Succession Act, it was not necessary for her to claim any partition in the property of the HUF as per Section 171(9) of the Income Tax Act. The assessee claimed to be governed by the Mitakshara Coparcenary Law. The claim of the assessee was ultimately accepted by the Tribunal. The controversy involved according to the assessee in the present reference is covered by the judgment of Supreme Court in the case of Gurupad Khandappa Megdum v. Hirabai Khandappa Megdum and Ors. (1981) 129 I.T.R.-440.
4. We have heard Sri A.N. Mahajan, learned Standing Counsel for the Department and Sri Suyash Agrawal, learned counsel for the assessee/respondent.
5. Section 6 of the Hindu Succession Act provides devolution of interest in coparcenery property. It says that when a male Hindu dies after commencement of the Hindu Succession Act his interest in a Mitakshara coparcenery property shall devolve by the survivorship upon the surviving members of the coparcenery property and not in accordance with the Hindu Succession Act. But it is subject to a proviso which provides that if the deceased had left him surviving a family relative specified Clause I of the schedule or a male relative specified in that clause, claims, through such female relative, the interest of the deceased in the Mitakshara coparcernery property shall devolve by the testament or intestate succession as the case may be under the Hindu Succession Act and not by survivorship. Explanation 1 to Section 6 of the Hindu Succession Act quoted below is the provision on which the assessee successfully relied upon before the Tribunal.
6. Explanation 1 to Section 6 of the Hindu Succession Act reads as follows :-.
"For the purpose of this Section interest of Hindu Mitakshara coparcener shall he deemed to he share in the property that would have been allotted to him if a partition of a property had taken place immediately before his death irrespective of whether he was entitled to claim or not"
7. The Section deals with the succession and has bearing on other branches of Hindu law, such as joint family, adoption and maintenance and lays down rules of far reaching consequences. The assessee on the basis of the aforesaid explanation submitted before the Tribunal that where a coparcener dies the Mitakshara coparcenery ancestral property becomes disrupted and there is a deemed partition between the surviving coparceners. The basis contention of the assessee is that on account of Explanation 1, which provides deemed partition, 1/3rd share of deceased is liable to be excluded and is not taxable for the purpose of computation of capital gains at the hands of the assessee/respondent (HUF). In order to examine the validity of this submission, it is necessary to refer to some of the relevant features of Hindu Undivided Family and to consider the effect of the provisions of Section 6 of the Hindu Succession Act on such family. Under the Hindu law, an undivided Hindu family is ordinarily joint not only in estate but in food and worship, but it is not necessary that the joint family should own the joint family property. There can be a joint family without joint family property. A Hindu coparcener is a narrower body than the joint family. Only males acquire by birth an interest in the joint and coparcenery property be members of coparcenery or coparceners. A male member of a joint family and his sons, grand sons and great grand sons constitute a coparcenery. A coparcener acquires right in the coparcener property by birth but his right can be definitely ascertained only when a partition takes place. When the family is joint, the extent of share of a coparcener can not be definitely ascertained since it is always capable of fluctuating. It increases by the death of coparcener and decreases on the birth of a coparcener. A joint family, however, may consists of female members. It may consist of male member, his wife, his mother and unmarried daughters. It has been held by the Supreme Court in the case of Gowli Buddhanana v. CIT (1966) 60 ITR 293 and Sitabai v. Ram Chandra 1970 AIR SC 343 that the Hindu joint family may consists of a single male member his wife and daughters. It is not necessary that there should be two male members who constitutes a joint family vide N.B. Narendranath v. CWT (1969) 74 ITR 190 (SC) Under Mitakshara Hindu Law there is continuity of ownership and unity of possession of joint family property with all the members of coparcenery but in a coparcenery governed by Dayabhag Law, there is no unity of ownership of coparcenery property with the members thereof. To put it differently every coparcener in Dayabhag Law takes a defined share in the property and he is owner of that share. It is also well known that females can also be the members of Hindu joint family.
8. The question now is whether Clause 1 heirs of the schedule of a deceased coparcener ceases to be the member of a family after the death of a coparcener. The Supreme Court in Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum and Ors. AIR 1978 SC 1239 = 129 ITR 440 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 18-A (9) (b) of the Indian Income Tax Act 1922 was given by it in CIT v. Teja Singh ( AIR 1959 SC 352). 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. Fins bury 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 Section 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."
9. 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 (AIR 1978 SC 1239) 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 plaintiff's 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."
10. 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. ( 1987 ) 163 ITR 31, 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.
11. 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.
12. There is another aspect of the matter, which requires consideration. The Supreme Court in the case of Kallu Mal Tapeshwari Prasad (HUF) v. CIT (1982) 133 ITR 690 has held that to claim a partition within four corners of the Income Tax Act, certain additional requirements as provided under Section 171 of the Act are required to be fulfilled. Interpreting Section 171 of the Act it has been held by it that Hindu Law does not require that the property in every case be partitioned by metes and bound or physically into different portions to complete a partition. Disruption of status can be brought about by any of the modes recognized under Hindu Law and it is open to the parties to enjoy their share of the property as tenants in common in any manner known to law according to their desire. But the Income Tax Law introduced certain additional conditions of its own to give effect to the partition under Section 171 of the Act. A transaction can be recorded as a partition under Section 171 only if, where the property admits of a physical division, a physical division of the property has taken place. In such a case merely physical division of the income without a physical division of a property producing income can not be treated as a partition. Even where the property does not admit of a physical division, then such division, as the property admits of, should take place to satisfy the test of partition under Section 17. Mere proof of severance of status under Hindu Law is not sufficient to treat such a transaction as a "partition" within the meaning of Section 171 of the Act. Meaning thereby a transaction may be treated as severance of status under Hindu Law but not a partition under the Income Tax Act as physical division of the property is necessary under the Act. In the case in hand there is no iota of evidence, nor there is any such plea that after the death of the original Karta a severance or partition by metes and bound had taken place in the joint Hindu family properties. On the contrary, it has been claimed by the assessee that it is not necessary for her to claim any partition in the HUF property Under Section 171(9) of the Act. Therefore, it is crystal clear that there was no partition amongst the surviving members of the Hindu undivided family after death of the Karta and Under Section 171 of the Act, there is no severance of statute of HUF.
13. In view of the above discussion, we are unable to agree with the order of the Tribunal that there is a deemed partition and disruption of Hindu undivided family as per Explanation 1 to Section 6 of the Hindu Succession Act. Our view also finds support from the judgment of Gujarat High Court in Commissioner of Income Tax v. Balu Bhai Nanu Bhai (HUF) (1996) 220 ITR 334. The up shot of the above discussion is that the order of the Tribunal can not be given approval.
14. Accordingly, we answer the above questions 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.