A NATESAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred under section 66(2) of the Indian Income-tax Act :

(2.) THE assessee and his sons were members of a Hindu undivided family but the family did not own any property in common. This was a joint family without property. THE assessee, however, owned large extent of properties and was carrying on several businesses. On December 8, 1955, he executed a document styled as a deed of partition, in and by which wet and dry lands, houses and sites belonging to him exclusively as separate self-acquired properties were divided and specific items allotted to each one of his sons, one of whom was a major and the other three were minors. He himself did not take any share in that division. On December 31, 1955, he caused entries to be made in his capital account relating to his business by which credit of various sums of money was given to his wife, sons and daughters in the manner set out below :

(3.) IN order to attract this provision of law, the assessee should be proved to have transferred his assets to the minor child (not being a married daughter) directly or indirectly. Was there such a transfer of assets is the only question that arises for decision in this case. According to the assessee, there was no transfer of assets as required by that section. Shortly put, his case is that the amount that stood to his credit in the business accounts on December 31, 1955, because impressed with the character of joint family asset, though the business was his separate business and the income earned therefrom was his separate property. It is contended that it acquired a joint family character by reason of the conduct of the assessee as evidenced by the partition deed dated December 8, 1955, and the entries in the account books which we shall advert to immediately. If the assessee is well founded in his submission that the transfer of credits in favour of his minor children was not really a transfer but was only the result of a partition of a joint family asset, it is obvious that he cannot be caught within the mischief of section 16(3) (a) (iv). It is now well settled that a partition under the Hindu law of joint family assets does not operate as a transfer inter vivos, as it is only the ascertainment of shares of coparceners, who at the time of the partition, are admittedly the persons having an interest in the properties. If, on the other hand, it were to be found that the business assets did not become joint family properties but remained only as separate and self-acquired properties of the assessee, it is equally clear that there was a transfer of assets within the meaning of section 16(3) (a) (iv) and that it would not cease to be a transfer merely because the assessee chose to describe it as the effect of a partition.The partition deed dated December 8, 1955, was one between the assessee and his sons. One of his sons, Sankaran, was a major on that date. He represented his minor brothers in that partition arrangement. The following is the recital from that document :