Law:

Section:

Section 171 of the Income-tax Act, 1961 - Hindu undivided family - Assessment after partition - Widower assessee and his only son partially partitioned HUF capital in family firm and converted it into a partnership - Assessee transferred part of his individual capital account to credit of a newly opened HUF account in his name in same reconstituted firm as between him as karta of HUF, his son's HUF and son's wife - Whether assessee's share income from reconstituted firm belonged to his HUF - held, on facts, yes Facts The assessee's family, consisting of himself, his only son and son's wife, was carrying on a cloth business in the name of AB. On 25-10-1955, a partial partition took place whereby the capital was divided between the assessee and his son in equal shares and the business was converted into a partnership one. On 15-10-1964, the assessee became partner in two firms AB and BN. In the firm AB, he debited his individual capital account with Rs. 50,000 and credited the same in a newly opened account in his name as karta of HUF and transferred the balance capital account of Rs. 30,309 to his account in BN. Next day the firm AB was reconstituted, under a fresh partnership deed, as between the assessee (as karta of HUF of self and his son), the smaller HUF of his son and the son's wife. This reconstituted firm AB was granted registration for the assessment year 1966-67 and continuation of registrations for the assessment years 1967-68 to 1971-72. The assessee claimed that his share income from this firm for the above assessment years as also 1972-73 should be assessed in the hands of his HUF and not on him as individual, as he had impressed his share capital of Rs. 50,000 with HUF character. The ITO rejected the claim and assessed the share income in his hands as individual. While the AAC accepted the assessee's claim, the Tribunal allowed the departmental appeal. On reference, the assessee contended that the property received on partial partition was his separated property and that, as he was still a coparcener of the HUF in respect of the other properties, he could impress his separate property with HUF character. The revenue argued that, for blending a…

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