R. R. Rastogi, J. - (1.) THE family of the assessee, Banarsi Lal Tulsiyan, consisted of Banarsi Lal Tulsiyan, his son, Vishwanath Tulsiyan, and the latter's wife, Smt. Yamuna Devi. This family was carrying on cloth business in the name and style of Arjun Das Banarsi Lal. A partial partition took place in the family on October 25, 1955, and the capital invested in the aforesaid business amounting to Rs. 22/124 odd was divided between the father and the son, the assessee receiving Rs. 11,062 out of the same as his share. After the partition, the family business was converted into a partnership business, the partners being the father and the son. That firm continued up to October 15, 1964, when the assessee became partner in two firms, M/s. Arjun Das Banarsi Lal and M/s. Banarsi Das Niranjan Lal. At that time his capital in the erstwhile firm, M/s. Arjun Das Banarsi Lal, had increased to Rs. 80,309. On October 15, 1964, the assessee debited his individual account by Rs. 50,000 in the books of the firm, M/s. Arjun Das Banarsi Lal, and credited that amount to the HUF account opened in his name and the balance was transferred to his account in M/s. Banarsi Das Niranjan Lal. On October 16, 1964, a fresh partnership deed was executed whereby M/s. Arjun Das Banarsi Lal was formed. THE partners of this firm were : the assessee, as representing his undivided family consisting of himself and his son with 30% share; Vishwanath Tulsiyan, the assessee's son, representing his smaller family with 40% share and Smt. Yamuna Devi, wife of Vishwanath Tulsiyan, with 30% share.
(2.) THIS reconstituted firm of M/s. Arjun Das Banarsi Lal was granted registration for the assessment year 1966-67 and benefit of continuance of registration was also granted in subsequent years. In the assessee's assessment for the assessment years 1966-67 to 1971-72, the question arose as to whether the share income from the said firm received by the assessee was liable to be assessed in his hands as individual or in the status of HUF. The claim of the assessee was that he was liable to be assessed on this income in the status of HUF since he had impressed this amount of Rs. 50,000 with HUF character. That claim was rejected by the ITO and the share income from M/s. Arjun Das Banarsi Lal was assessed in the hands of the assessee taking his status as that of an individual. The assessee's appeals before the AAG succeeded and the department filed appeals before the Appellate Tribunal. Those appeals, being I.T.A. Nos. 963 to 967 (Alld) of 1971-72 and 865 (Alld) of 1972-73, were disposed of by the Tribunal by a common order dated September 29, 1973. The Appellate Tribunal did not agree with the view which had been taken by the AAC for the reason that no doubt the family of which the assessee was the karta had undergone a partial partition in 1955, but had continued joint and undivided in so far as the immovable properties were concerned and, thus, the assessee was a coparcener and had an interest in the coparcenary property. However, the property which he had received on partial partition would be treated as an ancestral property in his hands though for income-tax purposes he was being assessed as an individual on the income from that property and further that the assessee could not be allowed to undo the partial partition. In that view of the matter, the claim of the assessee was negatived by the Appellate Tribunal and the department's appeals were allowed. For the assessment year 1972-73, with which we are concerned in this reference, similar claim was made by the assessee in respect of share income from M/s. Arjun Das Banarsi Lal and some property income. That claim was negatived by the ITO and the income from the above two sources was assessed in the hands of the assessee in the status of an individual. On appeal the AAC accepted the assessee's claim but on further appeal the Appellate Tribunal, following its order given for the earlier years, confirmed the action of the ITO. Hence, at the instance of the assessee, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the share income from the firm, M/s. Arjun Das Banarsi Lal, and the income from property in the present case was liable to be assessed as the income of the assessee for the assessment year 1972-73 in the status of individual ?" At the outset we may mention that, in so far as income from property is concerned, the Appellate Tribunal in its appellate order has, of course, observed, following their decision for the earlier years, that the AAC was not justified in excluding some property income from the assessee's assessment. However, in the order which was given by the Appellate Tribunal in the appeals for the preceding six years we do not find any discussion in regard to property income and hence there being no material before us, this part of the question is to be returned unanswered.
(3.) NOW, coming to the main dispute, the facts, as have been set out in the earlier part of this judgment, are not in dispute and the question that falls for our consideration is as to what is the character of the property received by a coparcener in a partition--partial or complete. We will confine ourselves to the case of a partial partition. A partition between coparceners may be partial either in respect of a property or in respect of persons making it, vide para. 328(1) of the Principles of Hindu Law by Mulla, 14th Edn. In the present case, the coparceners in the family were the father and the son and the property which was the subject-matter of the partial partition between them was the capital employed in the family business, that capital was divided between the father and the son in equal shares and the family business was converted into a partnership business. The assessee was, thereafter, assessed on the share income from the firm as individual. This state continued till October 15, 1964, on which date the total amount standing to his credit was Rs. 80,209 and out of that he debited his account to the extent of Rs. 50,000 and credited that amount to the HUF account opened in his own name and on the following day this firm was reconstituted. He became a partner in this firm as karta of the HUF consisting of himself and his son and the amount of Rs. 50,000 aforesaid was invested by him therein. He claims to have impressed that amount with HUF character. According to Sri R. V. Gupta, learned counsel for the assessee, the property received by the assessee, on partial partition, was a separate property and since the assessee was a coparcener and there was coparcenary property in the family, he could impress his separate property with HUF character. On the other hand, according to Sri Ashok Gupta, appearing for the department, this property was not capable of being blended because it could not be regarded as self-acquired property. In our opinion there is considerable substance in what has been submitted before us on behalf of the assessee. As laid down in Krishna Prasad v. CIT [1974] 97 ITR 493 (SC) (at p. 497): "The share which a coparcener obtains on partition of ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently. Such share, however, is ancestral property only as regards his male issue. As regards other relations, it is separate property, and if the coparcener dies without leaving male issue, it passes to his heirs by succession. ..." ;