Summary: The article explains that a partition of property is the process by which joint enjoyment of a property is converted into individual enjoyment by co-owners or coparceners. Each coparcener has an antecedent title to the whole joint property and, after partition, does not gain any new rights to the specific portion allocated to them, nor lose rights in the rest of the property. Not all properties can be divided, such as staircases or wells, while divisible properties may be divided in various ways, such as physical division, joint enjoyment, sale, or compensatory share distribution.
Under the Income Tax Act, the partition of a Hindu Undivided Family (HUF) is only recognized if it is total, as outlined in Section 171. The HUF continues to be assessed as such unless the Assessing Officer verifies and recognizes the partition. Partial partitions post-1978 are not recognized. The law outlines various procedural and tax implications related to partition, including joint and several liability for taxes, inquiry by the Assessing Officer, and penalties. The article also highlights important court rulings and clarifications on the nature and recognition of partition under both Hindu law and the Income Tax Act.
What is Partition of a property:
Partition is essentially a legal process that transforms the collective or joint ownership of property into individual ownership. Prior to the partition, each coparcener (co-owner) has a pre-existing, undivided share in the entire joint family property, meaning their right or interest extends to every part of the property, though not to any specific portion. The partition simply assigns each coparcener a defined and separate part of the property, allowing them to exclusively enjoy their allotted share.
Importantly, since each coparcener already had an antecedent (pre-existing) title to the entire property, the partition does not create any new rights or interests in the portion they receive. They are merely being given exclusive possession of something they already had an interest in, albeit in an undivided form. Similarly, there is no loss of right or interest in the rest of the property for the coparcener, as their share is simply being carved out from the joint ownership rather than diminishing or extinguishing any previously held right over the entire property.
Thus, the partition is not viewed as a creation or extinguishment of rights but rather a reorganization of the manner in which the rights are enjoyed.
[Kantilal Trikamal [1976] 105 ITR 92 (SC)]
Partition of property
What is subject to partition, is always a joint property. However, each and every property cannot be partitioned due to their indivisible nature, such as staircases, temples, idols, wells etc. For divisible property or property, the partition can be either of the following way –
1. The property can be jointly enjoyed by the coparceners simultaneously.
2. The property can be jointly enjoyed by the coparceners in turns.
3. One coparcener may retain the property by one of the coparceners and proportionate value of shares is distributed to others.
4. The entire property may be sold, and sale proceeds distributed among the coparceners.
Partition under Income Tax Act:
The partition of a Hindu Undivided Family (HUF) under the Income Tax Act, 1961, refers to the division of HUF assets among its members, recognized only if the partition is total, as per Section 171 of the Act. After a total partition, the HUF ceases to exist, and each member is taxed individually on their share of the income from the divided assets. Partial partitions are not recognized for tax purposes post-1978. While the partition itself does not attract capital gains tax, the Income Tax Department verifies and records the genuineness of the partition before granting recognition. Relevant section that governs partition of HUF under Income Tax Act is 171.
Section 171(1) overrides the Hindu Succession Act, 1956:
(i) A transaction can be recognised as a partition under section 171 only if, where the property admits of a physical division, a physical division of the property has taken place. In such a case, mere physical division of the income without a physical division of the property producing income cannot be treated as a partition. Even where the property does not admit of a physical division, then such division, as the property admits of should take place to satisfy the test of a partition under section 171. Mere proof of severance of status under the Hindu law is not sufficient to treat such a transaction as a partition. If a transaction does not satisfy the above additional conditions, it cannot be treated as a partition under the Act even though under the Hindu law there has been a partition—total or partial. The consequence will be that the undivided family will be continued to be assessed as such by reason of section 171(1).
[Kalloomal Tapeswari Prasad (HUF) 133 ITR 690 (SC)]
(ii) On a plain reading of section 171(1) it becomes clear that a Hindu family which is assessed as undivided has, for the purposes of the Act, to be deemed to continue as such unless there is evidence of partition and a finding is recorded to that effect under the Act in respect of such family. Before this finding is recorded an inquiry has to be undertaken on the question whether there has been a total or partial partition of the joint family property and if there has been any such partition, the date on which it took place.
In view of the language of section 171(1), the HUF would be liable to be taxed as undivided notwithstanding the effect of section 14(1) of the Hindu Succession Act.
[R. B. Tunki Sah Baidyanath Prasad 212 ITR 632 (SC)]
(iii) Though for the purpose of the HUF, section 6 of the 1956 Act would govern the rights of the parties but for the purposes of the Income Tax Act, 1961, the matter is to be governed by the provisions contained in section 171(1).
[Maharani Raj Laxmi Devi 224 ITR 582 (SC)]
(iv) The Income-tax Act, 1961, is a Parliamentary legislation and for its application, survival or existence, it does not depend on any State legislation. Consequently, even if a State legislation brings some changes in personal law of the Hindus, it will have no bearing, so far as the scope and ambit of the provisions for assessment contained under the Income-tax Act, 1961, are concerned. When the Act deems an HUF to have continued as an HUF, a change introduced by a state legislation on jointness of a Hindu family, will have no bearing on these deeming provisions of the Income-tax Act, 1961.
[Gaurikanta Barkataky 313 ITR 34 (Gauhati)]
Brief Summary of S. 171
| Section | Comments |
| 171(1) |
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| 171(2) |
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| 171(3) |
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| 171(4) |
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| 171(5) |
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| 171(6) |
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| 171(7) |
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| 171(8) |
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| 171(9) |
–No claim of partial partition will be recognized and The family will continue to be assessed as a single unit.
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| Explanation to S.171 | For the purpose of this section “partition” means—
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The issues in the partition of HUF are discussed as below:
Applicability of S. 171
(i) Unless the partition was recognised by the ITO by passing an order under section 171(1), the family continued to be joint for the purposes of this Act and was liable to tax on its total income irrespective of partition in the family. A partition in the family or a claim in respect thereof is of no consequence for the purposes of this Act unless the partition as claimed has been accepted by the ITO and an order is made to that effect under the provisions of section 171 recognizing the said partition.
[Ambika Prasad Sonkar 168 ITR 444 (Allahabad)
(ii) The expression ‘hitherto assessed’ occurring in section 171(1) puts beyond any controversy that only a HUF which has suffered tax assessment in the past can be deemed to continue to be a HUF till an order of partition under section 171(1) is recorded. If a HUF was not subjected to tax, the provisions of section 171(1) will have no application. The fiction that a joint family shall be deemed to continue, enunciated in section 171(1), is for the limited purpose of roping in cases of joint families which had hitherto been assessed. It is not possible to extend that fiction beyond the field legitimately intended by the statute. The fiction in section 171(1) must necessarily be confined to the purpose for which it was specified in that section, and for no other purpose.
(Durgamma 166 ITR 776 (AP))
(iii) Section 171 has no application to a case of Hindu family which has never had been assessed before as joint family.
[Kantilal Ambalal ((1991] 192 ITR 376 (Gujarat)]
(iv) Section 171(9) can be invoked only when the assessment made under the Income-tax Act. The phrase “hitherto assessed undivided,” as used in section 171(9), cannot be interpreted to mean assessed under the Wealth-tax Act. For such an interpretation to hold, it would require that assessments under the Income-tax Act be treated as equivalent to those under the Wealth-tax Act, and vice versa.
[Ashok Kumar 24 ITD 79 (Delhi) (TM)]
When Section 171(1) is not applicable –
(i) If a HUF was not subjected to tax, the provisions of section 171(1) will have no application.
[P. Durgamma 166 ITR 776 (AP)]
(ii) A reading of sub-section 171 of the Income Tax Act, 1961 makes it very clear that it is applicable only where assessee was already assessed as an Hindu Undivided Family (HUF). In the instant case, where assessee, legal heir of late A, inherited land and received a part of it as per oral partition. Since during lifetime of late A, family was never assessed as a HUF, section 171 would not apply even when there was a division/partition of property.
[A. P. Oree 127 taxmann.com 740 (Mad.)]
(iii) Section 171 proceeds on the postulate that there exists a family which consists of more than one individual. If there is no family as such, then there is nothing in section 171(1) to create a legal fiction of the existence of a family. The family in the instant case had been reduced to a single individual and a single individual could not constitute a family. When once the family had disappeared, section 171(1) could not apply and the family could not be assessed as such.
[Seethammal 130 ITR 597 (Mad.)].
Section 171(2) : Inquiry By the Assessing Officer
(i) Inquiry is mandatory – The section creates a deeming fiction of continuing the Hindu undivided family except where a finding of partition has been given in respect of the concerned Hindu undivided family. Before this finding is recorded, an inquiry has to be undertaken on the question whether there has been a total or partial partition of the joint family property and if there has been such partition, the date on which it took place.
[R. B. Tunki Sah Baidyanath Prasad 212 ITR 632 (SC)]
(ii) 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 are the points to be decided.
[Lakhmichand Baijnath 35 ITR 416 (SC)]
Section 171(3): Order of Partition:
(i) The effect of the order under section 171(1) is only to recognize that the joint family status has been severed, and the property has been divided into definite portions between groups of family members. After the order was passed under section 171(1), the original Hindu Undivided Family ceased to exist in the eyes of the law. If the members of the family, who formed a group between whom and the other group a partition of definite portions occurred, constitute a Hindu Undivided Family, that group may continue to be assessed as an HUF due to their relationship inter se, and not by virtue of section 171(1).
[Joint Family of Udayan Chinubhai 63 ITR 416 (SC)]
(ii) Order binding on all parties – An order, therefore, made under this section would be binding on all the members of the joint family, because once a declaration that a partition has been effected is made, no member of the family can be said to be a member of the HUF. The severance of the joint family and a partition between the members, of the assets of the joint family has the effect of vesting each member with an absolute right in the property allotted to him or which has fallen to his share.
[T. G. Sulakhe 39 ITR 394 (AP)]
(iii) So long as no order is passed u/s 171(1), the family will be deemed to be joint. But when that order gives recognition to the partition with reference to a particular date, by a legal fiction, the order must be deemed to have been made on that date. To hold it otherwise would be to ignore the operation of the order recognising the partition from an anterior date. Therefore, for all legal purposes, it must be deemed to have been made on the date from which it was intended to take effect.
[A. Thimmayya [1962] 46 ITR 999 (AP)]
(iv) There could be no doubt that the property in question here, namely, the two plots, was capable of physical division. A specific finding to this effect was also recorded by the ITO which was never thereafter challenged. No physical division of the property ever took place either at the time of or in pursuance of the oral agreement of partition of 22-10-1970 or even after the memorandum of partition had been executed on 16-11-1970. That being so, the income-tax authorities could not possibly have taken either of these dates to be the relevant date of partition. Since the property was capable of physical division, the date of partition is to be taken to be the date of the actual physical division of the said property.
[Harbhagwan & Sons 178 ITR 205 (P&H)]
(ii) When the case of partial partition was accepted by the Assessing Officer after giving notice of inquiry to all the members of the family, it followed that the said order could be reversed or cancelled by the Commissioner under section 263 only after giving notice to all the members of the family. It is cardinal principal of law that an order from which civil consequences flow, cannot be cancelled, unless due opportunity of being heard is given to the persons affected by cancellation. The order under section 171 was passed by the Assessing Officer qua the members of the family as well. Cancellation of that order would affect such members of the family and, therefore, service of notice on each such member of the family was essential. After disruption of the HUF, though partially, each member of the family was entitled to notice before the order passed under section 171 was interfered with by the Commissioner.
[Shrawan Kumar Swarup & Sons 232 ITR 123 (All.)]
Section 171(6) & (7): Recovery the demand:
(i) If no order under section 171(1) is passed, the family shall be deemed to remain undivided, even if a disruption has occurred. However, once an order of partition is passed, any tax imposed on the HUF should be recovered from its members in proportion to the shares they received from the HUF, with a notice of demand issued to each member accordingly.
[A. Ranganatham 39 ITR 730 (AP)]
Section 171(8): Levy of Penalty
(i) On a combined reading of the provisions of sub-sections (1) and (4) of section 171, it is clear-that in a case where an order has been made recording the partition of joint family property, the total income of the joint family has to be computed up to the date of partition and the tax payable by the joint family has to be determined as such, as if no partition had taken place and as if the joint family was still in existence. Again, on-going through the provisions of section 171(8), it becomes clear that this sub-section expressly enacts that the provisions of the section 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 total or partial partition of a HUF apply as they apply in relation to the levy and collection of tax. In other words, with regard to the levy and collection of penalty relating to assessment up to the date of partition, one has to proceed on the basis as if no partition had taken place and also that the joint family was still in existence. The provisions of section 171(8) give express authority for the levy and collection of penalty in respect of period up to the date of partition where the HUF had been disrupted.
[Raghunandan Prasad 143 ITR 212 (All.)]
Section 171(9)
(i) Constitutional validity of section 171(9) upheld – It is difficult to comprehend how the amendment to section 171 can be considered beyond legislative competence. Parliament has the authority to amend or delete any provision of the Act, and it cannot be said that such amendments exceed its legislative competence. If there is a rational nexus between the basis for differentiation and the objective sought to be achieved by a particular provision, such differentiation is not discriminatory and does not violate the principles of Article 14.
[M. V. Valliappan 238 ITR 1027 (SC)]
(ii) No Partial Partition after 31/12/1978: Sub-section (9) of section 171 lays down, inter alia, that any claim to partial partition after 31-12-1978, cannot be inquired into and no finding can be recorded under sub-section (3) by the Assessing Officer, and that such family shall continue to be liable to be assessed as if no such partial partition had taken place. In view of the peremptory language employed in sub-section (9) it is not legally permissible for the Assessing Officer to go into the question whether the alleged partition did or did not take place. He must proceed on the assumption that there was no partition at all and on that assumption subject the family to tax on the interest received by the divided members of the family.
[Sri Krishna Motor & Engineering Works 228 ITR 347 (AP)]
(iii) The basic requirement for bringing in application of section 171 of the Act is that the HUF must have been assessed hitherto.
[(Hari Kishan 117 Taxman 214(Delhi)]
Some of the other relevant decisions:
(i) The definition of partition given in Explanation to section 171 does not recognise a partition even if it is effected by a decree of court unless there is a physical division of the property and if the property is not capable of being physically divided then there should be division of the property to the extent it is possible. Otherwise the severance of status will not amount to partition. In considering the factum of partition for the purposes of assessment it is not permissible to ignore the special meaning assigned to partition under the Explanation, even if the partition is effected through a decree of the Court. Ordinarily decree of a civil court in a partition suit is good evidence in proof of partition but under section 171 a legal fiction has been introduced according to which a preliminary decree of partition is not enough, instead there should be actual physical division of the property pursuant to final decree, by metes and bounds. The Legislature has assigned special meaning to partition under the aforesaid Explanation with a view to safeguard the interest of the revenue. Any assessee claiming partition of a HUF must prove the disruption of the status of a HUF in accordance with the provisions of section 171 having special regard to the Explanation. The assessee must prove that a partition effected by agreement or through court’s decree, was followed by actual physical division of the property. In the absence of such proof partition is not sufficient to disrupt the status of a HUF for the purpose of assessment of tax.
[Smt. N. K. Sarada Thampatty 187 ITR 696 (SC)]
(ii) An item of property which is not capable of division by metes and bounds such as the interest of the family in a firm can be divided by making necessary entries in the books of account and that would be satisfactory evidence of the partition of such an asset.
[K. G. Ramakrishnier 49 ITR 608 (Mad.)]
(iii) Even if a share has been allotted to a person who is not entitled to it, it can be no ground for saying that the partition was illegal or void.
[Govind Narain101 ITR 602 (All.)]
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