COMMISSIONER OF INCOME TAX Vs. ROOPCHAND MANNALAL

JUDGEMENT

(1.) THIS is reference under s. 256 (1) of the IT Act, 1961 (hereinafter referred to as `the Act') made by the Tribunal referring the following question of law stated to be arising out of the Tribunal's order dt. 28th Feb., 1983 passed in I.T.A Nos. 886 and 887 of 1981 for the asst. yrs. 1976-77 and 1977- 78 for the opinion of this Court :

(2.) THE facts leading to this reference are briefly stated this : THE assessee is assessed in the status of HUF. THEre is also a firm of the same name. Assessee disclosed income of Rs. 30,924 fort the asst. yr. 1976-77 and an income or Rs. 20,807 for the asst. yr. 1977-78. THE source of this income was indicated as income form agriculture and property. THE assessee's case was ultimately accepted in appeal by the AAC and the entire income in the two assessment years was treated as income form agriculture and property. THEse amounts were deposited by the assessee in its account in the books of the firm of the same name. Assessee distributed of the HUF and claim partial partition under s. 171of the Act. This claim was refused by the ITO in view of the Expln to s. 171 of the Act. the reason given by the ITO is that the assessee divided income without physical division of property producing the income. THE AAC in appeal upheld the order of the ITO.

(3.) FROM what has been held in substance by the Tribunal in appeal there appears no difficulty in seeing that the division by the members of the HUF of the amount of income of HUF after the same is deposited at the end of the accounting year in the books of the firm as aforesaid amounts to partial partition as defined in cl. (b) of the Expln. to s. 171 of the Act. The Tribunal has rejected the view taken by the ITO and the AAC to the effect that physical division of income without physical division of property producing the income shall not be deemed to be a partition. It is apparent that the income of the HUF after being deposited at the close of the accounting year in the books of the firm was treated ad capital assets of the members of the HUF as has been contended by the assessee counsel before the Tribunal. The division of such capital assets was, therefore, accepted as partial partition as claimed by the assessee.