COMMISSIONER OF INCOME-TAX Vs. SHYAM LAL AGRAWAL

JUDGEMENT

(1.) THE following two questions are referred to this Court under the Income -tax Act: (i) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that there was a valid partial partition of the assessee's HUF which consisted of only one male member ? (ii) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in accepting the claim of the assessee for deduction of interest paid to the members of his family ?

(2.) THE facts as mentioned in the referring order is as follows: . The assessees were two HUFs namely, Sri Shyam Lal Agrawal (HUF) and Sri Raj Kumar Agrawal (HUF). The Shyam Lal Agrawal (HUF) is consisted of Shyam Lal Agrawal, his wife and two minor sons. The Raj Kumar Agrawal (HUF) consisted of Raj Kumar Agrawal, his wife and his minor daughter. . The assessees filed applications on 21 -10 -1977 before the Income -tax Officer ('the ITO') alleging that there has been a partial partition on 1 -1 -1976. The ITO by two separate orders dated 9 -1 -1980 rejected the claim of partial partition. He also disallowed the claim of the salary paid by the HUF to the Karta and interest paid to the family members. . The assessee filed an appeal. The Appellate Assistant Commissioner, Income -tax Allahabad by two separate orders dated 31 -3 -1980 allowed the appeal. He accepted the partial partition and allowed the salary paid to the Karta as well as interest paid to the family members. . The revenue filed an appeal. Both the appeals were dismissed by the com mon order dated 24 -4 -1981. . The Commissioner, Income -tax Allahabad filed an application for referring the question of law to this Court. This application has been allowed on 11 -3 -1982 and the above mentioned questions have been referred for consideration of this Court.

(3.) THE Shyam Lal Agrawal (HUF) is consisted of himself, his wife and two minor children. The Supreme Court in Apoorva Shantilal Shah (HUF) v. CIT : [1983]141ITR558(SC) ' has held as follows: We ... hold that a partial partition of properties brought about by the father between himself and his minor sons cannot be said to be invalid under the Hindu Law and must be held to be valid and binding....