The judgment of the court was delivered by

VENKATARAMIAH J.-These two appeals by certificate-one by the assessee and the other by the Commissioner of Income-tax, Kanpur-are filed against the judgment and order dated September 29, 1972, of the High Court of judicature at Allahabad in Income-tax Reference No. 47 of 1971 under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to Is " the Act "), made by the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad (for short " the Tribunal "). The two questions which were referred by the Tribunal for the opinion of the High Court were:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the properties in dispute were capable of division in definite portions amongst the 10 coparceners as contemplated in Explanation (a)(i) to section 171 of the Income-tax Act, 1961, and that even otherwise the mere severance of status was not sufficient to entitle the assessee to succeed in its claim for partial partition ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income from the properties in dispute which were accepted to have been partitioned under the Hindu law but with regard to which an order accepting the claim of partial partition was not made was liable to be included in the computation of the assessee's income ? "

The assessee is a Hindu undivided family known as M/s. Kalloomal Tapeswari Prasad and the year of assessment is 1964-65. The assessee is governed by the Mitakshara school of law. The following genealogical tree represents the relationship amongst the members of the family:

Phakki Lal

Chandoolal Bishambhar Nath Sitaram

(His wife, (died issueless in (Wife---

Rampiari, 1940-Wife pre- Kripa

died on deceased him) Devi)

17-9-1963)

Gopalji Ramji

Jagat Roop Swarup Shyam Bimal

Narain Narain Narain Narain Narain

During the relevant previous year, the family consisted of Chandoolal, Sitaram and his wife, Kripa Devi, Jagat Narain, Roop Narain, Swarup Narain, Shyam Narain and Bimal Narain, who were the five sons of Chandoolal and Gopalji and Ramji, the two sons of Sitaram. The assessee (Hindu undivided family) was deriving income from various sources such as income from property, income from money-lending business, income from speculation business and cloth business, etc. There was a partial partition in the family in the year 1951 when a sum of Rs. 5,00,000 out of its total capital of Rs. 12,85,423 was divided amongst the coparceners at the rate of Rs. 41,666-10-8 amongst the members of Chandoolal's branch and at the rate of Rs. 83,333-5-4 amongst the members of Sitaram's branch. Kripa Devi did not receive any share at that partition. The said partial partition was accepted and acted upon by the I.T. Dept., whereafter the cloth business was treated as the business of a firm consisting of most of the coparceners as partners. Again, on December 11, 1963, which fell within the previous year relevant to the assessment year in question, i.e., 1964-65, according to the assessee, there was another partial partition orally as a result of which its eighteen immovable properties were divided amongst the ten members of the family and they held those properties as tenants-in-common from that date. It was claimed by the assessee in the course of the assessment proceedings that the members of the family had commenced to maintain separate accounts with regard to the income from the said eighteen properties and to divide the net profits amongst themselves according to their respective shares at the end of each year. The eighteen immovable properties were situated in different places and their valuation was as follows :

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S. No. Municipal number of Value

the property

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1. 75/2 1,78,875

2. 76/162 27,000

3. 76/169 45,000

4. 47/110 13,500

5. 47/26 20,700

6. 48/203 16/200

7. 55/124 90,000

8. 55/36 41,400

9. 55/37

10. 70/87 1,57,500

11. 71/150 8,100

12. 71/89 3,600

13. 71/112 19,800

14. 63/61 7,425

15. 51/68 17,100

16. 51/73 14,400

17. 86/37 20,520

18 . 1/301A 45,000

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7,26,120

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When required by the ITO to explain as to why the properties were not divided in definite portions as required by s. 171 of the Act, the assessee stated that physical division of the properties in question amongst the ten members was impossible and the only possible way to partition those properties was to define their respective shares and to enjoy the income from them separately. In support of the above claim the assessee relied upon a copy of an award dated April 15, 1964, made by one S. B. Tandon which was made into a decree in Suit No. 60 of 1964 on the file of the Court of the First Civil judge, Kanpur, dated September 21, 1964. In that award the arbitrator had stated that the properties did not admit of physical division. The ITO did not agree with the assessee's contention that it was not possible to divide the properties in question in definite portions. Accordingly, he rejected the claim of partial partition in respect of the eighteen immovable properties and proceeded to assess the income derived therefrom in the hands of the assessee. Against the order of the ITO the assessee filed an appeal before the AAC. During the pendency of that appeal the assessee appointed another arbitrator by name Lakshman Swaroop, retired chief engineer, to examine the possibility of a physical division of each of the eighteen properties into ten portions and, if that was not possible, to suggest any other mode or modes to divide them into ten parts in accordance with the share allotted to each of the parties to the partition. By his award dated February 3, 1965, Lakshman Swaroop stated that the aforesaid properties were " not capable of physical division into ten shares by metes and bounds and that the only practical division is that of allocation of proportionate shares in all the 18 properties in question ". It may be mentioned here that out of the ten shares, six shares were 1/12th each and four shares were 1/8th each. Chandoolal and his five sons had been allotted 1/ 12th each and Sitaram, his wife and his two sons had been allotted 1/8th each. Lakshman Swaroop was also examined as a witness before the AAC by the assessee and cross-examined by the ITO. The AAC, on consideration of the material before him, including the decree of the court referred to above and the evidence of Lakshman Swaroop ; held that the case of the assessee that it was not possible to divide the properties physically into ten shares referred to above was not tenable and dismissed the appeal. The assessee, thereafter, took up the matter before the Tribunal in appeal. The tribunal also was of the view that the contention of the assessee that if the properties had been divided into ten shares, they would have either been destroyed or would have lost their value, was not correct. Accordingly, the claim of the assessee under s. 171 of the Act that there was a partial partition was rejected. Thereupon, on an application of the assessee made under s. 256(1) of the Act, the two questions set out above were referred by the Tribunal to the High Court for its opinion.

After hearing the parties, the High Court recorded its answer to the first question in the affirmative and in favour of the department and in reaching that conclusion, it observed thus:

We have seen the evidence of the arbitrator as well as the Chief Engineer, and it is apparent therefrom that even though the 18 properties could not individually be divided into 10 shares without destroying their utility, yet after assessing the value of the properties, they could be apportioned between the ten members and the difference in the allocations could be equalised by payment of cash amounts by one to the other. In our opinion, it cannot, in such a situation, be said that these 18 properties were incapable of physical division in 10 shares, and so, in view of clause (a)(i) of the Explanation, mere severance of status was not sufficient for recording the finding of partition. "

The High Court answered the second question in favour of the assessee holding that the income accruing from the eighteen immovable properties after December 11, 1963, was, however, not, liable to be included in the computation of the joint Hindu family's income. In recording this answer, the High Court observed thus :

Section 171 of the 1961 Act, in essence, is a re-enactment of section 25A with the difference that it applied not only to cases of total partition but also to cases of partial partition. There are some incidental changes as well, e.g., section 171 applies also for purposes of levying and collecting penalty, fine or interest and in addition requires the Income-tax Officer to record a finding as to the date on which total or partial partition took place. The fact that section 171 applies to a partial partition (meaning a partition which is partial as regards the persons or as regards the properties of the family or both) as well shows that a finding of partial partition can be recorded and on such a finding being recorded under subsection (4) the total income of the joint family in respect of the period u to the date of partition is to be assessed as if no partition had taken place and each member of the family was to be liable, notwithstanding anything contained in clause (2) of section 10, jointly and severally for the tax on the income so assessed. Thus, section 171 like section 25A, seeks to nullify the effect of section 10(2) under which a member was not liable to be taxed on the income received as a member of Hindu undivided family. The section does not entitle the inclusion of income from an asset which has ceased to belong to the joint family, in the assessment of the joint Hindu family.

In the present case, on the findings, the position is that the joint Hindu family stood disrupted in relation to the 18 immovable properties as a result of the oral partition dated 11th December, 1963. Thereafter the income of these properties belonged to the individual members and not to the joint family. It could not be included in the assessment of the family."

Aggrieved by the answer to the first question, the assessee has filed Civil Appeal No. 1373 of 1974 and aggrieved by the answer to the second question, the revenue has filed Civil-Appeal No. 1768 of 1975.

It is necessary to refer to the history of the relevant pro visions in order to decide the questions raised before us. Under the Indian I.T. Act, 1922 (for short " the 1922 Act "), an HUF could be assessed on its income. Section 3 of the 1922 Act laid down that where any Central Act enacted that income-tax should be charged for any year at any rate or rates, tax at that rate or those rates should be charged for that year in accordance with and subject to the provisions of that Act in respect of the total income of the previous year of every individual, HUF, etc. But s. 14(1) of the 1922 Act provided that no tax was payable by an individual assessee in respect of any sum which he received as a member of an HUF where such sum had been paid out of the income of the family. Section 25A was inserted in the 1922 Act in the year 1928 providing for the machinery for assessment after the partition of an HUF. That section, immediately before the repeal of the 1922 Act, read as follows:

" 25A. Assessment after partition of a Hindu undivided family.-(1) Where, at the time of making an assessment under section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions, he shall record an order to that effect:

Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family.

(2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by Hindu undivided family whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in sub-section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Incometax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23:

Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such.

(3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family." Section 25A of the 1922 Act as it stood then (subsequent modifications in it being immaterial for the purposes of this case) came up for consideration by the judicial Committee of the Privy Council in Sir Sundar Singh Majithia v. CIT [1942] 10 ITR 457. The Privy Council held that s. 25A of the 1922 Act provided that if it be found that the family property had been partitioned in definite portions, assessment might be made, notwithstanding s. 14(1), on each individual or group in respect of his or its share of the profits made by the undivided family, while holding all the members jointly and severally liable for the tax. It was further held that if, however, though the joint Hindu family had come to an end, it be found that its property had not been partitioned in definite portions then the family was to be deemed to continue-that is, to be an existent Hindu family upon which assessment could be made on its gains of the previous year. But it was of the view that s. 25A had nothing to say about any HUF which continued in existence, never having been disrupted. Such case was held to fall outside sub-s. (3) of s. 25A and, in effect, it held that the said section did not apply to cases of partial partition.

In Gordhandas T. Mangaldas v. CIT [1943] 11 ITR 183 (Bom), Kania J. (as he then was), who agreed with Beaumont C. J., explained the scheme of s. 25A of the 1922 Act (as it stood then) in his concurring judgment thus (p. 199):

It is material to bear in mind the scheme of the Income-tax Act, in the first instance. Under sections 2 and 3, the different units stated therein are liable to be taxed as such. One of them is a joint Hindu family. In order to avoid double taxation, section 14 lays down that when the individual member is being assessed, his income as a member of a joint family should not be assessed again. Then comes the stage, what happens when a family, which has once been so assessed, comes to a partition. To meet that contingency, section 25A has been enacted. In the section, as it existed before the amendment of 1939, in terms the Incometax Officer required proof, (i) that a separation of the members of the joint family had taken place, and (ii) that the joint family property had been partitioned amongst the various members or groups of members in definite portions. On being satisfied on those points, he had to record an order to that effect. The effect of such a recording was that the joint family income would be assessed and recovered in terms of sub-section (2). In the absence of such order, under sub-section (3) the joint family continue to be assessed as before.

The same view was followed in Waman Satwappa Kalghatgi v. CIT [1946] 14. ITR 116 (Bom) and in M. S. M. M. Meyyappa Chettiar v. CIT [1950] 18 ITR 586 (Mad).

This court had to consider the true meaning of s. 25A of the 1922 Act in Lakshmichand Baijnath v. CIT [1959] 35 ITR 416 (SC). Venkatrama Aiyar J., speaking for the court, observed in the above case thus (pp. 421, 422):

" Now, when a claim is made under section 25A, the points to be decided by the Income-tax Officer are whether there has been a partition in the family, and if so, what the definite portions are in which the division had been made among the members or groups of members. The question as to what the income of the family assessable to tax under section 23(3) was would be foreign to the scope of an enquiry under section 25A. That section was, it should be noted, introduced by the Indian Income-tax (Amendment) Act, 1928 (3 of 1928), for removing a defect which the working of the Act as enacted in 1922 had disclosed. Under the provisions of the Act as they stood prior to the amendment, when the assessee was an undivided family, no assessment could be made thereon if at the time of the assessment it had become divided, because at that point of time, there was no undivided-family in existence which could be taxed, though, when the income was received in the year of account the family was joint. Nor could the individual members of the family be taxed in respect of such income as the same is exempt from tax under section 14(1) of the Act. The result of these provisions was that a joint family which had become divided at the time of assessment escaped tax altogether. To remove this defect, section 25A enacted that until an order is made under that section, the family should be deemed to continue as an undivided family. When an order is made under that section, its effect is that while the tax payable on the total income is apportioned among the divided members or groups, all of them are liable for the tax payable on the total income of the family. What that tax is would depend on the assessment of income in proceedings taken under section 23, and an order under section 25A would have no effect on that assessment. "

The above view was reiterated by this court in Kalwa Devadattam v. Union of India [1963] 49 ITR (SC) 165, in Addl. ITO v. Thimmayya [1965] 55 ITR 666 and in Joint Family of Udayan Chinubhai v. CIT [1967] 63 ITR 416 (SC). The substance of all these decisions was that under s. 25A of the 1922 Act, an HUF which had been assessed to tax could be treated as undivided and subjected to tax under the Act in that status unless and until an order was made under s. 25A(1) and if in the course of the assessment proceedings it is claimed by any of the members of the HUF that there has been total partition of the family property resulting in physical division thereof as it was capable of, the assessing authority should hold an enquiry and decide whether there had been such a partition or not. If he held that such a partition had taken place, he should proceed to make an, assessment of the total income of the family as if no partition had taken place and then proceed to apportion the liability as stated in s. 25A amongst the individual members of the family. If no claim was made, or if the claim, where it was made, was disallowed after enquiry, the HUF would continue to be liable to be assessed as such. This was the legal position under the 1922 Act.

The law relating to assessment of an HUF, however, underwent change when the Act came into force. Section 171 of the Act; which corresponds to s. 25A of the 1922 Act, reads thus:

" 171. (1) A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family, except where and in so far as a finding of partition has been given under this section in respect of the Hindu undivided family.

(2) Where, at the time of making an assessment under section 143 or section 144, it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, has, taken place among the members of such family, the Income-tax Officer shall make an enquiry thereinto after giving notice of the inquiry to all the members of the family.

(3) On the completion of the inquiry, the Income-tax Officer shall record a finding as to whether there has been a total or partial partition of the joint family property, and, if there has been such a partition, the date on which it has taken place.

(4) Where a finding of total or partial partition has been recorded by the Income-tax Officer under this section, and the partition took place during the previous year,

(a) the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place and

(b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed.

(5) Where a finding of total or partial partition has been recorded by the Income-tax Officer under this section, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place; and the provisions of clause (b) of sub-section (4) shall, so far as may be, apply to the case.

(6) Notwithstanding anything contained in this section, if the Incometax Officer finds after completion of the assessment of a Hindu undivided family that the family has already effected a partition, whether total or partial, the Income-tax Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed.

(7) For the purposes of this section, the several liability of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial.

(8) The provisions of this section shall, so far as may be, apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to the date of the partition, whether total or partial, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period.

Explanation.-In this section,

(a) 'partition' means

(i) where the property admits of a physical division, a physical division of the property, but a physical division of the income without physical division of the property producing the income shall not be deemed to be a partition ; or

(ii) where the property does not admit of a physical division then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition ;

(b) 'partial partition' means a partition which is partial as regards the persons constituting the Hindu undivided family, or the properties belonging to the Hindu undivided family, or both."

Section 4(1) of the Act which levies the charge of income-tax states that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, the Act in respect of the total income of the previous year or previous years, as the case may be, of every person. The expression It person " is defined in s. 2(31) of the Act as including within its meaning an HUF. In order to avoid double taxation of the same income under the Act, any sum received by an individual as a member of an HUF, where such sum has been paid out of the income of the family is required by s. 10(2) of the Act not to be included in computing the total income of previous year of any person. This requirement, however, is subject to s. 64(2) of the Act with effect from April 1, 1971. Then follows s. 171 of the Act which provides for the assessment after partition of an HUF.

Under Hindu law partition may be either total or partial. A partial partition may be as regards persons who are members of the family or as regards properties which belong to it. Where there has been a partition, it is presumed that it was a total one both as to the parties and property but when there is a partition between brothers, there is no presumption that there has been partition between one of them and his descendants. It is, however, open to a party who alleges that the partition has been partial either as to persons or as to property, to establish it. The decision on that question depends on proof of what the parties intended-whether they intended the partition to be partial either as to persons or as to properties or as to both. When there is partial partition as to property, the family ceases to be undivided as regards properties in respect of which such partition has taken place but continues to be undivided with regard to the remaining family property. After such partial partition, the rights of inheritance and alienation differ according as the property in question belongs to the members in their divided or undivided capacity. Partition can be brought about, (1) by a father during his lifetime between himself and his sons by dividing properties equally amongst them, (2) by agreement, or (3) by a suit or arbitration. A declaration of intention of coparcener to become divided brings about severance of status. As observed by the Privy Council in Approver v. Rama Subba Aiyan [1866] 11 MIA 75, 90 (PC):

"....... when the members of an undivided family agree among themselves with regard to a particular property, that it shall thenceforth be the subject of ownership, in certain defined shares, then the character of undivided property and joint enjoyment is taken away from the subjectmatter so agreed to be dealt with; and in the estate each member has thenceforth a definite and certain share, which he may claim the right to receive and to enjoy in severalty, although the property itself has not been actually severed and divided."

A physical division of the property which is the subject-matter of the partition is not necessary to complete the process of partition in so far as that item of property is concerned under Hindu law. The parties to the partition may enjoy the property in question as tenants-in-common. In Approver's case [1866] 11 MIA 75, 92 (PC) the Privy Council further laid down that:

"....... if there be a conversion of the joint tenancy of an undivided family into a tenancy-in-common of the members of that undivided family, the undivided family becomes a divided family with reference to the property that is the subject of that agreement, and that is a separation in interest and in right, although not immediately followed by a de facto actual division of the subject-matter. This may, at any time, be claimed by virtue of the separate right."

It is thus clear that Hindu law does not require that the property must in every case be partitioned by metes and bounds or physically into different portions to complete a partition. Disruption of status can be brought about by any of the modes referred to above and it is open to the parties to enjoy their share of property as tenants-in-common in any manner known to law according to their desire. But the income-tax law introduces certain conditions of its own to give effect to the partition under s. 171 of the Act.

Section 171 of the Act applies to a case where there is an HUF which had been assessed as such under the Act until a claim is made under s. 171(2) that there has been a partition-total or partial in it. The partition contemplated under s. 171 of the Act may be either total or partial. Here there is a departure made from s. 25A of the 1922 Act which was concerned with a total partition only. In sub-ss. (2) to (5) and (8) of s. 171 of the Act, the word " partition " is qualified by words " total or partial ". The Explanation to s. 171 of the Act to which we shall revert again also defines the expression " partial