Law:

Section:

Section 171 of the Income-tax Act, 1961 (Corresponding to section 25A of the Indian Income-tax Act, 1922) - Hindu undivided family - Assessment after partition - Assessment years 1955-56 to 1957-58 - Whether where a partial partition has been effected among members of HUF, income from assets to extent there has been division ceases to be income of family and should no longer be assesseed in hands of karta - Held, yes - Whether, on partition, interest of HUF in a firm can be divided by making necessary entries in books of account - Held, yes FACTS The assessee 'K' was a karta of HUF consisting of himself and his son, 'B". Pursuant to an agreement, dated 14-6-1954, there was complete partition of the family. For the assessment years 1955-56 to 1957-58, the assessee sought that certain income should be excluded as not income of the HUF. The sources of income of the family were taken to be : 1 a dwelling house, 2 Government promissory notes, and 3 shares the family had in three partnerships. The partition agreement referred to the division of movable properties of the HUF and division of outstandings receivable by and payable to the family and set out that the rice mill business of the HUF would thereafter be conducted as co-owners. Provision was made for a registered deed of partition dividing the family properties by metes and bounds and the agreement ended with a declaration that the father and son, the two coparceners, would thereafter have no relation in properties but only in blood. A regular registered deed of partition followed on 26-7-1954. A registration under section 25A of 1922 Act had been refused. On appeal, the AAC recorded that appropriate entries in the books of firms had been made showing the assessee and his son as partners and such admission had been recognised in the assessment of the two firms for the assessment year 1955-56. But the capital accounts, relating to the investments of the family in the three firms were divided only on 12-4-1957, with effect from 31-12-1956, in the family books. The AAC took the view that, in regard to these two firms, for a completed partition during the relevant period, it was necessary that in the family books…

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