JUDGMENT
Untwalia, C.J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter called ” the Act “), by the Income-tax Appellate Tribunal, Patna Bench, which has stated a case and referred the following three questions of law for determination by this court:
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deciding that the provisions of Section 171 of the 1961 Act were complied with by the assessee with effect from January 1, 1961, in the course of the assessment proceeding for 1961-62 ?
(2) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to come to the conclusion that the claim of partial partition should be admitted with effect from January 1, 1961?
(3) Whether, on the facts and in the circumstances of the case, and on a true interpretation of the deed of partition, dated February 2, 1962, the* Tribunal was right in allowing partial partition as from January I, 1961?”
At the outset facts may be stated in a narrow compass. There was a Hindu undivided family consisting of several coparceners as also other members of the joint family. The names and styles under which the family carried on business or owned and managed immovable properties from which also it derived income were: (1) Messrs. Ghan Shyam Das Lakshminarayan, and (2) L. N. Agarwalla and Brothers. In the course of the assessment proceeding for the assessment year 1961-62, Shri H.P. Agarwalla, one of the members of the Hindu undivided family aforesaid, filed a petition on December 16, 1963, before the Income-tax Officer under Section 171 of the Act and claimed that the Hindu undivided family stood disrupted on and from January 1, 1961, and properties stood partitioned from that date. There is no dispute that in the present reference we are
concerned with partition of the immovable properties belonging to the erstwhile Hindu undivided family. Business belonging to the family had not been partitioned in the previous year relevant to the assessment year 1961-62. Shri Agarwalla, in support of his claim for partition, relied upon :
(1) an award dated January 1, 1961, made by the arbitrator, Shri Arjan Agarwalla, a copy of which is annexure ” B ” to the statement of the case, which award was made in pursuance of the arbitration agreement (annexure “A”) dated December 28, 1960, and
(2) a deed of partition (annexure “C”) dated February 2, 1962, executed by the parties.
It may be stated here that the award was an unregistered document but the deed of partition had been registered on May 1, 1962.
2. On a consideration of the relevant recitals in the award and the deed of partition, the Income-tax Officer, in his order (annexure ” D “) dated November 30, 1965, held that the actual partition by’metes and bounds of the immovable property took place on February 2, 1962; therefore, the effective date of partial partition in respect of the immovable house property was that date. The assessee went up in appeal. The Appellate Assistant Commissioner, by his order (annexure ” E “), dated October 29, 1966, dismissed the appeal taking the same view as the one taken by the Income-tax Officer. In second appeal before the Tribunal, it was urged on behalf of the assessee that by the award dated January 1, 1961, the family stood disrupted and separated and partition by metes and bounds of immovable properties was effected by the award itself. After referring to some recitals in the deed of partition as also in the award, the Tribunal held that the arbitrator, after stating that the Hindu undivided family stood dissolved from January 1, 1961, had further specified the various properties which were allotted to the coparceners, the coparceners had agreed to the award and in token thereof had signed it; it was, therefore, a clear proof of the fact that not only the family disrupted on and from January 1, 1963, but the partition of the immovable properties as made by the arbitrator was also effective from that date. On being asked by the Commissioner of Income-tax, the Tribunal has stated a case and referred the three questions of law above mentioned.
3. In my opinion, all the three questions can be consolidated and compressed in one. The one reframed question will cover the point of law which arises from the appellate order of the Tribunal and bring out the issues indicated in the three questions. I, therefore, reframe the question in the following language :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in giving effect to the claim of partial partition under Section 171 of the Income-tax Act, 1961, with effect from January 1,
1961, as against the decision of the departmental authorities that the claim was fit to be allowed with effect from February 2, 1962 ? ”
One of the parties to the agreement was Shrimati Janki Devi, the third party. As mentioned in clause 4 of the award, she waived her right to claim a share on partition amongst her sons and grandsons and, therefore, no property was allotted to her. The other parties were in four groups described as first, second, fourth and fifth parties. In paragraph 2 of the award it was adjudged and declared by the arbitrator that the first and second parties had each one-third share and the fourth and fifth parties had each one-sixth share. Thereafter, in clause 3 the arbitrator stated:
” That I further adjudge and allot to the parties of the first, second, fourth and fifth parties the properties described in the lots A, B, C and D respectively.”
As mentioned in Clause 7 of the award, parties were to come into possession of their respective properties within twenty-seven months from the date of the award. Definite and specific properties were mentioned in schedules A, B, C and D appended to the award, showing that the arbitrator had not only declared the share of the parties but had also partitioned the properties amongst them by metes and bounds. At the end of the award, after stating. ” We accept the above award and shall abide by it”, the parties signed it. Then came the deed of partition dated February 2, 1962. In the preamble of the deed it is recited :
” Whereas the parties hereto of the first, second, third, fourth and fifth parts are members of a joint Hindu Mitakshara trading family, known by the name of M/s. Ghanshyamdas Laxminarayan and L. N. Agarwalla and Bros., and
Whereas the said parties of the first, second, third, fourth and fifth parts by an agreement, dated the 23rd December, 1960, referred the disputes relating to the parties to arbitration of Shri Arjun Agarwalla; and
Whereas after hearing the parties and taking such evidence as was found necessary, the said Shri Arjun Agarwalla gave his award, dated the 1st January, 1961 directing partition in the manner therein indicated ; and
Whereas the parties of the first, second, third, fourth and fifth parts accepted the said award and have considered it advisable to effect the partition in accordance therewith. Now this deed of partition witnesseth as follows : ”
After the preamble aforesaid, in paragraph 1 of the deed it was provided:
“(1) In accordance with the directions contained in the aforesaid award, dated the 1st January, 1961, made and given by Shri Arjun Agarwalla, the parties hereto hereby agree and declare that the said first party,
second party, fourth party and fifth party hereto shall henceforth be separate owners of the properties mentioned in the first, second, third and fourth schedules hereto respectively and such of them shall hold and enjoy the properties so allotted to it in severalty and free and discharged from all claims and demands of the others thereto or concering therewith.”
Paragraphs 4 and 6 of the partition deed runs thus :
“(4) The properties hereby partitioned amongst the first, second, fourth and fifth parties are naturally to be held jointly by the respective parties within their group.
(6) In respect of the property hereby allotted to the particular party hereto, but in possession of any party other than itself, the possession of the said property shall be restored within 1962 to the party to whom it has been allotted under this deed of partition and until then, the party occupying shall not pay any rental for the use and occupation of the said property to the party to whom the said property has been allotted.”
Paragraph 8(b) of the deed states :
” (8) It is hereby agreed among the parties as follows :–……
(b) The properties hereby allotted to each party shall be entered upon and henceforth held in severalty by such party without any interruption or disturbance by the other party or any one claiming through under or in trust for it.”
Paragraph 9 also should be quoted as the recital in this paragraph seems to have influenced the judgment of the Tribunal. Argument upon its basis was advanced before us also.
It says :
” (9) It is hereby agreed that each party will be entitled to realise the arrears of rent from the 1st January, 1961, in respect of the property allotted to it and the other party hereby assigns its undivided right and interest in such arrears.”
Section 171 of the Act replaces with substantial variations Section 25A of the Indian Income-tax Act, 1922. Recognition to partial partition under the old law was not accorded under Section 25A; it was on a different principle of law for the first time enunciated by the Privy Council in Sundar Singh Majithia v. Commissioner of Income-tax, [1942] 10 I.T.R. 457 (P.C.), followed thereafter in several decisions in India. A claim to partial partition is expressly and in terms allowable under Section 171 of the Act, Explanation (b) of which says:
” ‘ 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.”
Under the scheme of law engrafted in Section 171 of the Act in the background of the well-settled principles enunciated in various decisions, there is no doubt that a claim of complete partition or partial partition of the properties belonging to the erstwhile Hindu undivided family will be recognised only if the properties which admit of a physical division have been physically divided, that means, only when there has been a partition of such properties by metes and bounds. Such partition must be proved before the Income-tax Officer when he makes an enquiry under Sub-section (2) of Section 171 of the Act. It may be proved by placing such materials–documentary or oral–which would show that there has been a partition in the family and properties capable of physical division have been partitioned by metes and bounds. Such a claim may also be proved by producing a document which in law may have the effect of bringing about the physical division of the properties by metes and bounds, such as, a final decree of partition of a civil court, a registered award of an arbitrator or a registered deed of partition. If any of the documents aforesaid is produced then no further evidence or material may be necessary to prove physical division of the properties by metes and bounds as the document on its own force will have that effect. Question for consideration in this case is whether the assessee has proved in this case that the immovable properties of the erstwhile joint family were partitioned by metes and bounds as a fact or any of the two documents had the effect of proving such fact of law ; if so, which of the two documents–the award or the deed of partition ?
4. I shall immediately consider the effect of the award in law. Undoubtedly, the deed of partition, since it was registered, had the effect of bringing about partition by metes and bounds of the properties mentioned therein with effect from February 1, 1962, the date of the execution of the deed, as under Section 47 of the Registration Act, on its registration, the effect will relate back to the date of the execution. The effect of the award which was unregistered will be presently considered. But, before that is done, I shall discuss the recitals in the two documents. The effect of the recital on a question of fact was that the parties accepted the award and agreed to abide by it, meaning thereby that they agreed to partition their properties by metes and bounds in accordance with the award made by the arbitrator. Such a construction on the statement in the award is amply supported by the recitals of the partition deed. The recital in the first paragraph of the preamble was undoubtedly incorrect. The joint Hindu family had come to an end surely from the date of the award–January 1, 1961–if not from December 23, 1960, the date of the arbitration agreement. To be more accurate, the Supreme Court has said in Kashinathsa Yamosa Kabadi v. Narsingsa Bhaskarsa Kabadi, (1) A.I.R. 1961 S.C. 1077 that the disruption of the family is from the date of the arbitration agreement. But here whether the date of the disruption of family is December 23, 1960, or January 1, 1961, is not material. What is to be emphasised is that on the day the deed of partition was executed, the parties to the deed could not say that on that day they were members of a joint Mitakshara trading family as recited in paragraph 1 of the preamble. But, apart from that inaccurate statement, the repeated recitals in the preamble and in the subsequent paragraphs which have been extracted above leave no room for doubt that the parties to the deed were giving effect to the partition of the properties by metes and bounds by means of the deed. There is no recital in the whole of the deed to show that the partition of the properties as mentioned in the award had been given effect to by the parties by their agreement on and from January 1, 1961, and to make it a pucca partition in the eye of law they were executing a formal registered deed of partition. Rather, the recitals clearly show that partition was being effected in accordance with the award by the deed. Recitals also show that the properties allotted by the deed will be the properties of the parties. As against such clear recitals in the various paragraphs of the preamble of the deed and the deed, the recital in paragraph 9 is of no avail. Parties could very well agree with respect to the rented houses that they would be entitled to realise the arrears of rent from 1st January, 1961, in respect of the properties allotted to them. But, then, in that very paragraph the right to such arrears of rent by parties other than the one to whom the property was allotted has been assigned by the deed by the use of the expression “hereby assigns”. On a careful consideration of the matter, therefore, I have no doubt that on the written materials produced by the assessee in the shape of the award and the deed of partition it could not be held that partition by metes and bounds, as a matter of fact, had been effected on and from January 1, 1961; rather, the recitals indicate that the partition was being effected from February 2, 1962.
5. Now comes the question of the effect in law of the award. It is unnecessary to repeat that the effect of the registered deed of partition was to bring about partition by metes and bounds of the properties mentioned in the deed of partition. But what was the effect of the award made by the arbitrator in the eye of law ? Had it been a registered award, there could have been no difficulty in taking the view that the award, by its own force, as held by the Supreme Court in Satish Kumar v. Surinder Kumar, A.I.R. 1970 S.C. 833 had the effect of bringing about partition by metes and bounds of the properties mentioned in the various schedules appended to the award. The recital in the arbitration agreement that the parties agree to abide by the award would have been sufficient to bring about this result of the award in law even without there being any express acceptance of it in the award itself.
The Supreme Court, after quoting a passage with approval from an unreported decision of that court given earlier, has said in paragraph 9:
“This judgment is binding on us. In our opinion, this judgment lays down that the position under the Act is in no way different from what it was before the Act came into force, and that an award has some legal force and is not a mere waste paper. If the award in question is not a mere waste paper but has some legal effect it plainly purports to or affects property within the meaning of Section 17(1)(b) of the Registration Act.”
Upsetting the view of the Full Bench of this court in Sheonarain Lal v. Prabhu Chand, A.I.R. 1958 Pat. 252 [F.B.] it held that the award is not a waste paper and it affects properties within the meaning of Section 17(1)(b) of the Registration Act. In paragraph 10 a passage from the decision of the Supreme Court which was given in an appeal which had gone to that court from the ultimate decision of this court in Sheonarain Lal’s case has been quoted. It runs :
“The position would have been otherwise if the arbitrators had directed by the award itself that this shop would go to Prabhu Chand without any further document. In that case the award itself would have created in Prabhu Chand a right to these properties. That is not, however, the provision in the award. In the absence of a registered document, Prabhu Chand would get no title on the award and Sheonarain’s title would remain in the shop.”
It would thus be seen that if there is a registered award concerning partition of properties worth more than Rs. 100, it has the effect of bringing about a partition of the properties allotted to the various parties even though it may not have been made a rule of the court. But surely for culling out this legal effect from the award it must be registered. If it is an unregistered award and if the award by its own force purports to partition and allot properties to the various parties then in the absence of registration it cannot affect any immovable properties comprised thereunder, as provided in Section 49(a) of the Registration Act. Surely, in the instant case, the award was not sought to be used, nor could it be so used, for a collateral purpose ; the very purpose of filing the award was to show that by the award partition by metes and bounds had taken place.
6. In my opinion, the Tribunal has misread and misinterpreted the various terms and recitals of the award and the partition deed. At one place in its order the Tribunal says :
” The position has been made further clear showing thereby that the partition has been effected in pursuance of the award.”
It may be in pursuance of the award which had the effect of, so to say, an agreement to partition in accordance with it. But the partition was really effected by the deed of partition. It was not only sufficient for the
parties to accept the unregistered award but it was also necessary to act upon it. In the decision of the Supreme Court in the case of Kashinathsa Yamosa Kabadi which was relied upon by learned counsel for the assessee, stress has been laid on both the aspects in paragraph 22 of the judgment at page 1083, wherein it has been said :
” It may be sufficient to observe that where an award made in arbitration out of court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by One of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the dispute, and that the agreement and the subsequent actings of the parties are binding.”
There is no recital in the award that the parties acted upon it on January 1, 1961. Rather, the recitals in the deed clearly show that they gave effect to it on February 2, 1962. The mere fact of the parties having shown in their return income from the properties on partition as their separate income, which must have been filed obviously after execution of the deed of partition, could not lead to the conclusion that partition by metes and bounds had taken place on January 1, 1961. In my opinion, therefore, the Tribunal committed clearly an error of law in arriving at the conclusion at which it did and in giving effect to the claim of partial partition from January 1, 1961.
7. For the reasons stated above, the re-framed question of law must be answered in the negative against the assessee and in favour of the revenue. I accordingly hold that, on the facts and in the circumstances of this case, the Tribunal was not right in law in giving effect to the claim of partial partition under Section 171 of the Act with effect from January 1, 1961. The decision of the departmental authorities that the claim was fit to be allowed only with effect from February 2, 1962, was correct. In the circumstances there would be no order as to costs.
Nagendra Prasad Singh, J.
8. I agree.