The Commissioner Of Income Tax v. Shri. Mohanlal K. Shah(Huf

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO.209 OF 2006 The Commissioner of Income Tax. Vs. Shri. Mohanlal K. Shah(HUF). Mr. R. Ashokan with Mr.P.S.Sahadevan for theAppellant. Mr. B.D. Damodar i/by Kanga & Co. for the Respondent. ..Appellant. ..Respondent. CORAM : F.I. REBELLO &R.S. MOHITE, JJ.DATED : 26th March,2008. PC : 1. Heard parties. 2. This appeal filed by the Commissioner of Income Taximpugns an order passed by the Income Tax AppellateTribunal in ITA NO.7228/Mum./2003. The substantial questions of law as enumerated in Para-4 of the appeal memo are as follows. i) Whether on the facts and circumstances of thecase and in law, the partition of the assesseeHUF has taken place in accordance with theprovisions of the Income Tax Act,1961?ii) Whether on the facts and circumstances ofthe case and in law, the arbitration award dated24.9.1994 can be treated as a partition or a partition deed in respect of the assessee HUF? 3. The brief facts of the case are as follows: thereon, the total constructed area being 1/3rd of the total area of the plot. and each coparcener should hold his share in an independent capacity. Assessing Officer rejected the respondent’s application under Section 171 of the Income Tax Act. appeal came to be filed. correctly proceeded on the footing that under Section171 of the Income Tax Act, where the property admits ofa physical division, what was required was actualphysical division of the property. That without aphysical division of the property there would be nopartition for the purpose of Section 171. It wascontended that the property in question had been held,by the Assessing Officer as well as CIT (Appeals) to becapable of physical division. It was pointed out thatthey had placed reliance on the partition agreement ofthe year 1975 which contemplated such a physicaldivision. It was contended that the requirement of physical division contemplated by Section 171 of the Income Tax Act was lost sight by the Tribunal. 5) On perusing the record, we find that the entiredispute relating to the house property at Char wasreferred to arbitration precisely because there could beno amicable partition between the family members inspite of a consent decree. The solution ultimatelyfound by the Arbitrator in the award was to direct allthe copartners to transfer their rights to a third partyin return for compensation. It appears that when thefamily partition was arrived at in the year 1985 thenfamily partition agreement was entered into. The saidpartition agreement not only pertained to property atChar but also to property in Gujrath State. Theexplanation (is) to Section 171(1) contemplates that where the property does not admit of physical divisionthen such division as the property admits of wouldamount to partition. In our view, the record of thecase do not indicates that the property admitted of aphysical division and in the circumstances, it wasrequired to be sold to an outsider with the division ofthe proceeds as per the arbitration award. Thissituation, in our view, would be covered under the definition of partition as contemplated by explanation (is) of Section 171(1) of the Income Tax Act. 6) In this view of the matter, in our opinion, the substantial question of law as raised would not arise. Hence, appeal is summarily rejected. (R.S. MODISTE, J.) (F.I. REBELLED, J.)