Tolaram Bijoy Kumar Vs. Commissioner of
Income Tax, Assam  INSC 30 (14 February 1978)
BEG, M. HAMEEDULLAH (CJ) BEG, M. HAMEEDULLAH
(CJ) BHAGWATI, P.N.
CITATION: 1978 AIR 504 1978 SCR (2) 834 1978
SCC (2) 98
Hindu Undivided Family business, Partition
of--Nature & character of the share of the property of a coparcener after
partition--Whether assessable as individual property or as H.U.F.--Income Tax
The income from the business of Nathmal
Tolaram carried on by Narmal was assessed as Hindu Undivided Family income till
1950. After the death of Narmal in 1945, the business was partitioned w.e.f.
6th April 1949 and by a deed of partnership executed on 7th April 1949, the
business carried on at two places, Dhubri and Gauripore, was converted by his
three sons Srinivas, Nathmal & Tolaram, into a partnership business. In
this deed, it wits admitted that the business had been carried on previous to
the partition as Hindu Undivided Family business. On an application u/s 25A of
the Income Tax Act, 1922 the said partition was recorded and registered in the
files of the tax authority on 17th August 1954. On 28-3-1959, the firm of M/s.
Nathmal Tolaram was dissolved and a new firm Nathmal Tolaram (Petrol Depot)
came into existence. In the assessment year 1959-60, Tolaram claimed that his
share in this partnership business should be assessed separately as his
individual income. His claim was rejected by the Income Tax Officer, but wag
accepted in appeal. However a similar claim for the relevant assessment year
1960-61, to separate assessment of income derived from the partnership business
in petrol amounting to Rs. 21,746/- , was rejected by the Income Tax Officer.
On further appeals, the Appellate Assistant Commissioner and the Tribunal
affirmed the order of the Income Tax Officer. The High Court also answered the
reference in favour of Revenue.
HELD : Partition only cuts off the claim of
the dividing coparceners. When a coparcener receives his share of the joint
family property on a partition, such property in the hands of the coparcener
belongs to the Hindu Undivided family as the share of the property is taken by
him only as representing his branch. The status of such coparcener on partition
is not that of an individual. [837 A-D] In the instant case, the share of
Tolaram in the partnership which came into being on the partition of the Hindu
Undivided Family could not be regarded as his separate property. It became the
property of the Joint Hindu Family of Tolaram and his sons since the business
prior to the partition of the Hindu Undivided family was assessed as joint
family business and the partition deed signed by Tolaram and others itself
contained a recital to that effect. [838 B-C] N.V. Rarendranath v. Commissioner
of Wealth Tax, Andhra Pradesh, 74 I.T.R.190; followed.
Chiranjilal v. Commissioner of Income Tax,
(1965) 56 I,.T.R.
P. 715 @ 722 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1980 of 1972.
Appeal by Special Leave from the Judgment and
Order dated 26-5-1972 of the Assam & Nagaland High Court in I.T.R. No. 6 of
B. B. Ahuja and S. K. Nandy, for the
T. A. Ramachandran and R. N. Sachthey, for
835 The Judgment of the Court was delivered
by BEG, C.J.-The appellant, a Hindu Undivided Family, is before us by special
leave through its Karta Tolaram. The statement of the case shows that Narmal,
who died in the year 1945, left three sons : Srinivas, Nathmal and Tolaram.
Narmal had carried on an Hindu undivided family
business started roundabout 1925. It appears that the name of the business was
changed to Nathmal Tolaram from 1936-37 and that the income of the business was
assessed as Hindu Un- divided Family income since then. The previous records do
not seem to be very clear, but, from the year 1942 to 1950, the income of this
business was certainly assessed as Hindu Undivided Family income. It was
partitioned with effect from 6th April, 1949. After the partition, the business
carried on at two places, Dhubri and Gauripore, was converted into a
partnership business evidenced by a deed of partnership executed by the three
brothers on 7th April, 1949. In this deed, it was admitted that the business
bad been carried on previous to the partition as Hindu Undivided Family
On 19th September, 1950, an application was
made under section 25A of the Income-tax Act, 1922, to record and register the
partition. This was done on 17th August, 1954.
On 28th March, 1959, the firm of M/s. Nathmal
Tolaram was dissolved and a new firm Nathmal Tolaram (Petrol Depot) came into
existence. In the assessment year, 1959-60 Tolaram claimed that his share in
the partnership business should be assessed separately as his individual
income. His claim was rejected by the. Income-tax Officer, but was accepted in
We then come to the relevant assessment year
1960-61, when Tolaram made a similar claim to separate assessment of income
derived from the partnership business in petrol amounting to Rs. 21,746/-, The
Income-tax Officer rejected this claim. The Appellate Assistant Commissioner
also, on an appeal, after reviewing the entire set of facts and circumstances
in the light of fresh materials which were available, affirmed the order of the
Income-tax Officer rejecting the claim of the appellant. The Income-tax
Tribunal and then the High Court also affirmed this position.
The appellant, however, obtained special
leave to appeal from the judgment of the High Court deciding the following
question framed before it against the appellant :
" Whether on the facts and in the
circumstances of the case, the Tribunal was justified in holding that the share
income of Rs. 21,746/- from Messrs Nathmal Tolaram (Petrol Depot) was
assessable in the hands of the assessee family"? The position seems to be
clear in law. The following passage in Mulla's Hindu Law, Fourteenth Edition,
at p. 278 has be- en quoted and relied upon by the High Court :
"228. Property jointly acquired.-(I)
Where property has been acquired in business by persons constituting a joint
Hindu family by their joint labour, the question arises whether the property so
acquired is joint family property, or whether 836 it is merely the joint
property of the joint acquirers, or whether it is ordinary partnership
property. If it is joint family property, the male issue of the acquirers take
an interest in it by birth (s. 221, sub. s. (1). If it is the joint property of
the acquirers, it will pass by survivorship, but the male issue of the
acquirers does not take interest in it by birth (s. 221, sub. s. 2).
If it is partnership property, it is governed
by the provisions of the Indian Partnership Act, 1932, so that the share of
each of the joint acquirers will pass on his death to his heirs, and not by
(2) If the property so acquired is acquired
with the aid of joint family property, it becomes joint family property.
(3) If the property so acquired is acquired
without the aid of joint family property, the presumption is that it is the
joint property of the joint acquirers, but this presumption may be rebutted by
proof that the persons constituting the joint family acquired the property not
as members of a joint family but as members of an ordinary trade partnership
resting on contract, in which case the property will be deemed to be
In the case before us the finding of fact was
that the property was not acquired as partnership property under a contract,
but the partnership business was originally prior to partition Hindu Undivided
Hence, there was no room for applying the
principle that members of a joint Hindu family had not acquired the business as
members of a joint family but in a separate capacity as individual partners
under a contract.
The High Court rightly relied upon N. V.
Narendranath v. Commissioner of Wealth tax, Andhra Pradesh,(1) where this Court
bad observed :
"In the present case the property which
is sought to be taxed in the hands of the appellant originally belonged to the
Hindu undivided family belonging to the appellant, his father and his brothers.
There were joint family properties of that Hindu undivided family when the partition
took place between the appellant , his father and his brothers and these
properties came to the share of the appellant and the question presented for
determination is whether they ceased to bear the character of joint family
properties and became the absolute properties of the appellant. As pointed out
by the Judicial Committee in Arunachalam's case (1957 A.C.
540) it is only by analysing the nature of
the rights of the members of the undivided family, both those in being and
those yet to be born, that it can be determined whether the family property can
properly be described as "joint property of the undivided family. Applying
this test it is clear, though in the absence (1) 74 I.T.R. 190.
837 of male issue the dividing coparcener may
be properly described in a sense as the owner of the properties, that upon the
adoption of a son or birth of a son to him, it would assume a different
quality. It continues to be ancestral property in his hands as regards his male
issue for their rights had already attached upon it and the partition only cuts
oft the claim of the dividing coparceners.
The father and his male issue still remain
joint. The same rule would apply even when a partition had been made before the
birth of the mate issue or before a son is adopted, for the share which is
taken at a partition by one of the coparceners is taken by him as representing
his branch. Again, the ownership of the dividing coparcener is such "that
female members of the family may have a right to maintenance out of it and in
some circumstances to a charge for maintenance upon it".
See Arunachalam's case. It is evident that
these are the incidents which arise because the properties have been and have
not ceased to be joint family properties. It is no doubt true that there was a
partition between the assessee, his wife and minor daughters on the one hand
and his father and brothers on the ,other hand. But the effect of partition did
not affect the 'character of these-properties which did not cease to be joint
family properties in the hands of the appellant. Our conclusion is that when a
coparcener having a wife and two minor daughters and no son receives his share
of the joint family properties on partition, such property in the hands of the
coparcener belongs to the Hindu undivided family of himself, his wife and minor
daughter and cannot be assessed as his individual property. It is clear that
the present case falls within the ratio of the decision of this Court in Gowli
Buddanna's case (60 I.T.R. 293) and the Appellate Tribunal was right in holding
that the status of the respondent was that of a Hindu undivided family and not
that of an individual".
Learned Counsel for the appellant had relied
on Chiranji Lal v. Commissioner of Income tax, U.P.,(1) where a Division Bench
of the Allahabad High Court had observed (at p. 722) "Once a partial
partition is accepted as being genuine and not a colourable or sham
transaction, the share of capital of each such coparcener thereafter ceases to
be joint family asset and becomes his individual asset de hors the family, and
thereafter it is not possible to say that the nucleus for the new partnership
business came from the Hindu undivided family funds. The share income derived
by the investment of such funds in a partnership business cannot be included in
the assessment of the Hindu undivided family, unless it can be shown that the
individual members who derived the share income had blended it with the income
of the smaller Hindu undivided family or were nominees or benamidars for their
family. No attempt has been made by the department to (1)  56 I.T.R. p.
715 @ 722.
838 prove any such thing. There was thus no
material whatsoever for the finding of the Tribunal that the nucleus in respect
of the capital which was duly divided in the books of the firm after partial
partition still continued to be the nucleus of the funds belonging to the
larger or the smaller joint family".
In the case before us there is no difficulty
in determining the character of any nucleus of divided property. The business
prior to the partition of the Hindu undivided family was assessed as joint
family business for a number of years without any protest by Tolaram. The
partition deed signed by Tolaram and others itself contained a recital that the
business was a joint family business. The finding of fact reached by the
Tribunal that the business was, until partition, a joint family business could
not be said to be unreasonable or perverse. If that be so, the share of Tolaram
in the partnership which came into being on the partition of the Hindu
Undivided Family could not be regarded as his separate property. It became the
property of the joint Hindu family of Tolaram and his sons. This is the finding
of fact, quite reasonably arrived at by the Tribunal, which the High Court had
Consequently, me are unable to accept the
arguments put forward by Mr. Ahuja with considerable persistence before us. We
dismiss this appeal. But, in the circumstances of the case, we make no order as