M CHOCKALINGAM CHETTIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(2) of the Indian Income-tax Act, 1922, and the following question has been referred "Whether, on the facts and in the circumstances of the case, there was any material to hold that the partial partition was not true and whether the inclusion of the income of the Iyer Merah Estate and the disallowance of the interest paid to the daughters of the assessee as karta are justified in law ?" *The assessee is a Hindu undivided family represented by its karta, Sri M. Chockalingam Chettiar. During the assessment proceedings for the year 1957-58, the assessee claimed that there was a complete partition of the family assets on 13th April, 1956, and, therefore, sought recognition of that partition by filing an application under section 25A of the Act. It was the assessee's case that under the said partition the rubber estate called Iyer Merah Estate has been given to the karta's two minor sons, Meyyappan and Muthappan, aged five and three years, respectively, in addition to the transfer of cash of Rs. 1, 31, 001 to both of them. It was also claimed that in the same partition $ 60, 000 was given to each of the three minor daughters of the karta. In support of its case that there was a complete partition of the joint family properties on April 13, 1956, the assessee relied on the relevant entries made in its account books, and also on an affidavit of the karta dated 7th January, 1958, attested by the Commissioner of Oaths, Malaya.

(2.) THE Income-tax Officer made the requisite enquiry under section 25A and found that except the entries in the account books of the assessee and the affidavit above referred to, there was no other evidence to support the alleged partition. Taking into account the fact that the assets of Iyer Merah Estate and the cash transferred to the minor sons had continued to be under the control and management of the karta, even subsequent to the alleged partition, he took the view that the partition set up by the assessee cannot be true. In that view, be rejected the assessee's claim for recognition of the partition under section 25AAfter rejecting the claim of partition put forward by the assessee, the Income-tax Officer considered the return of income filed by the assessee. In that return, the assessee had not included the income from the said Iyer Merah Estate, but he had claimed allowance for interest on the amounts said to have been transferred both to the two minor sons as also to the three minor daughters as part of the partition arrangement. As the Income-tax Officer had rejected the assessee's claim of partition as a result of the enquiry under section 25A, he not only included the income from the Iyer Merah Estate amounting to $ 40, 002 in the income of the family, but also disallowed the assessee's claim for interest of Rs. 11, 830-1-6, in respect of the amount standing in the names of the two minor sons and of $ 16, 383 in respect of the amount standing in the names of the three minor daughtersTHE assessee, thereafter, filed two appeals, one against the order of assessment and the other against the order refusing to recognise the partition under section 25A. But later, the assessee withdrew its appeal against the order under section 25A though it contended in the appeal against the assessment order that the alleged partition dated April 13, 1956, was true and genuine, and that, in any event, the properties and cash transferred to the minor sons and daughters of the karta should be excluded from the assets of the joint family. In support of this new case of partial partition the assessee again relied upon the entries in the account books of the family in which the particulars of the partition had been stated and also on the fact that separate accounts had been opened in the names of the minor children. It also relied upon the declaration made by the karta before the Commissioner of Oaths, Malaya, to the effect that he and his minor sons had become divided on and from April 13, 1956, and also a statement made by Srimathi Sigappi Achi, the mother of the minor children, to the effect that she has been acting as the guardian of the minor children subsequent to the partition. THE Appellate Assistant Commissioner, however, without going into the question of the truth of total or partial partition pleaded by the assessee, but relying on the decision in Meyyappa Chettiar.v Commissioner of Income-tax, held that the Income-tax Officer was not justified either in including the income from the Iyer Merah Estate in the total income of the family or in rejectiong the assessee's claim for interest on the amounts transferred to the minor childrenAggrieved against this order of the Appellate Assistant Commissioner, the revenue went before the Tribunal, contending that the Appellate Assistant Commissioner was not justified in excluding the income from Iyer Merah Estate and allowing deduction for the interest paid on the amounts transferred to the minor children and that, in fact, there was no relevant and acceptable material to prove that the partition alleged was true and genuine.

(3.) THERE will be no order as to costs.