Section 171 of the Income-tax Act, 1961 – Hindu undivided family – Assessment after partition (Family arrangement) – Assessment years 1991-92 to 1996-97 – Family arrangement of assessee-HUF provided for allotment of a sum to each of six minor daughters of Karta in form of fixed deposits – Assessee claimed deduction of interest that accrued on fixed deposits receipts – Assessing Officer held that document did not amount to partial partition and though it was a family arrangement, it did not have effect of taking away corresponding wealth from purview of HUF, and, accordingly, he treated interest as income of HUF – Whether once HUF had settled a sum in favour of six minor daughters of karta, corresponding amount ceased to be wealth or assets of HUF – Held, yes – Whether amount could not be treated as part of wealth of HUF – Held, yes [Para 18] [In favour of assessee]

Para 18 :-

The net result is that once the Hindu undivided family has settled a sum of Rs. 1,25,000, each, in favour of six minor daughters of the karta, the corresponding amount ceased to be the wealth or the assets of the Hindu undivided family. The same cannot be treated as part of the wealth of the Hindu undivided family even thereafter. The returns filed by the Hindu undivided family is not the avenue to examine the question as to how the amount so settled must be treated in the hands of the person on whom it was settled.