UNION OF INDIA AND ORS. versus M.V. VALLIAPPAN AND ORS.

Citation: [1999] 3 S.C.R. 1146 · Decided: 27-07-1999 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
UNION OF INDIA AND ORS. 
v. 
M.V. VALLIAPPAN AND ORS. 
JULY 27, 1999 
B 
[S.P. BHARUCHA, B.N. KIRPAL, S. RAJENDRA BABU, 
c 
D 
S.S.M. QUADRI AND M.B. SHAH, JJ.] 
Income Tt4 Act, 1961: Section 171(9) (inserted in 1980). 
Hindu Undivided Family-Partial partition-S.171 (9) de-recognised 
partial partition effected after the cut off date-Legislative competence-
Held; Within legislative competence of Parliament-Further, S.171 (9) merely 
restored the status quo ante prevailed prior to the 1961 Act-Constitution 
of India, 1950, Sch. VII List I Entry 82.::_Income Tax Act, 1922, S.25-A. 
HUF-Partial partition-S.171 (9) de-recognised partial partition 
effected after the cut off date-Validity-Held: Although the benefits conferred 
up'on those assessees who had partially partitioned prior to the cut off date · 
not withdrawn, yet S.171 (9) neither discriminatory nor arbitrary. 
E 
Section 171 (9)-0bject of-Explained. 
Section 171(9)-Validity-Not ultra vires Ss. 4 and 5. 
HUF-Partial partition-S.171 (9) de-recognised partial partition-
F. Validity of-Held: S.171(9) is not an unnecessary provision-It is for the 
Legislature to decide whether only non bona fide partial petition should be 
de-recognised or not to recognise all partial partition hardship and inequities 
have no role to play in taxation. 
HUF-Partial partition-S.171 (9) de-recognised partial partition 
G effected after the cut off date-Partial partitions effected prior to introduction 
of Finance Bill (No. 2) 1980 were also rendered null and void-Effect of-
Held: Jn the circumstances of the case, mere conferring of benefit of such 
partial partition on the assessee is of no significance-HUF concerned has 
to be assessed as if no partial partition has taken place-Hence, assessee 's 
objection to re-open the completed assessment, rejected. 
H 
1146 
.. 
.... 
U.0.1. v. M.V. VALLIAPPAN 
1147 
--, 
Section 256(2)-/ncome tax-Reference-Question-Whether /TAT was A 
right in holding that share income from the firm to the smaller HUFs could 
not he clubbed in the hands of bigger HUFs-Held: Constitutionality of 
S.171 (9) derecognising partial partition effected after the cut off date having 
. been upheld by Supreme Court, order of High Court refusing to call for 
reference of the said question, set aside--'/TAT directed to refer the question B 
to High Court. 
· 
Constitution of India, 1950: 
Article 14-Cut off date-Validity-Test-Held: Unless the cut off date 
is shown to he capricious or whimsical in the circumstances, it cannot be C 
dubbed as arbitrary even if there is no reason for its choice. 
Wealth Tax Act, 1957: 
Section 20-A-Constitutionality of-,Upheld. 
The respondent-assessee was the karta of a Hindu Undivided Family D 
(HUF) which was a partner in a partnership firm in which its funds were 
invested. On 13-4-1979 a partial partition of the said HUF was effected which 
was recognised by the Income Tax Officer (ITO) under Section 171(2) of the 
Income Tax Act, 1961. Thereafter, the said HUF filed a return for the 
assessment year 1980-81 which did not include the income from the partially E 
partitioned properties. The ITO finalised the assessment in accordance with 
the said return and also accepted the wealth tax return for the said assessment 
year. 
In the meanwhile, by Finance Bill (No.2) Section 171(9) was inserted 
in 1980 which provided that partial partition was not to be recognised if it F 
had taken place after 31-12-1978 and was given effect to from the assessment 
year 1980-81. 
Thereafter, the ITO reopened the completed assessment of the 
respondent under Section 148 of the Act and a fresh assessment order was · 
made for the respondent-assessee, which included the income from the partially G 
partitioned properties. The respondent filed a writ petition before the Madras 
High Court challenging the aforesaid reassessmeht order. 
The Madras High Court allowed the petition on the grounds that 
addition of Section 171(9) was beyond legislative competence; that Section 
171(9) was violative of Article 14 of the Constitution; that the cut off date H 
1148 
SUPREME COURT REPORTS 
[1999) 3 S.C.R. 
A of31-12-1978 was arbitrary; and that by charging to tax in the hands of the 
HUF, the income which did not belong to the HUF, Section 171(9) had enlarged 
the scope of Sections 4 and 5 of the Act. The Karnataka High Court had 
declared Section 20-A of the Wealth Tax Act, 1957 as void being violative 
of Article14 of the Constitution. The Gujarat High Court r

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