1 .What is HUF?
The
income tax act, 1961 does not define the expression “HUF” the reason of this
omission is that this expression has a well known connotation under the Hindu
law.
The
HUF is a separate taxable entity under the I.T Act, as the term has not been
defined any where by the said act, it should be construed in the sense in which
it is understood under the Hindu law. A joint Hindu family consist of a persons
lineally descended from a common ancestor and includes their wives and unmarried
daughters. The daughter, on married, ceases to be a member of her father’s
family and become a member of her Husband’s family.
2. Different schools of Hindu law?
Two types of joint family system prevail
according to Hindu traditions:
(i)
Mitakshara joint
family system.
(ii)
Dayabhaga joint
family system.
In
case of Mitakshara joint family – Father, sons, grandsons and grate grandsons all are considered as coparcener
in the family.
A
female cannot be considered as coparcener in Mitakshara joint family system. It
is very easy to create a new HUF file if a coparcenary exists e.g. father &
son or two married brothers living jointly in the same house or ancestral
house, because the normal state of a HUF is that, it is joint in food, worship
and estate.
In case Dayabhaga joint family there is no
coparcenary between father & sons. Here son will become coparcener on the
death of their father. For example, if a person is having three sons (three
brothers) will become coparcener in the family.
Notes: (i) A female can be a coparcener in
dayabhaga joint family system.
(ii).Existence of
one male member is essential in dayabhaga
joint family system.
(iii).Dhayabhaga
school of law prevails in West Bengal and Assam
For income tax
purpose Mitakshara & Dhayabhaga HUF have the same effect in the eye of law.
Mitakshara school of law applies to the whole of India
except west Bengal and Assam
3. JAIN AND SIKH FAMILIES
Through
jain and sick families are not governed by the Hindu law, such families are
treated as Hindu Undivided families for the purpose of the Income Tax Act.
4. PERSONS TO WHOM THE HINDU LAW APPLIES.
Mulla’s principles of hindu law (14th
edition), states in that regard as under;
“The word Hindu does not denote any
particular religion or community. During the last hundred years and more it has
been a nomenclature used to refer comprehensively to various categories of
people for purposes of personal law. It has been applied to dissenter and
non-conformists and even to those who have entirely repudiated Brahmanism. It
has been applied to various religious sects and bodies which in various periods
and in circumstances developed out of, or split off from, the Hindu system but
whose members have nevertheless continued to live under the hindu law, and the
courts have generally put a liberal construction upon enactments relating to
the personal laws applicable to Hindus,”
LIST OF PERSONS TO WHOM THE HINDU LAW
APPLIES
I.
Not only to
Hindus by religion, i.e., converts to Hinduism;
(i)
To illegitimate
children where both parents are Hindus;
(ii)
To illegitimate
children where the father is a christian and the mother is a Hindu, and the
children are brought up as Hindus.
(iii)
To Jains
Buddhists in India
(iv)
To a hindu by
birth who, having renounced Hinduism has reverted to it after performing the
religious rites of expiation and repentance, or he was recognised as a Hindu by
his community;
(v)
To brahmos; to
Arya Samajist; and to santhals
(vi)
To hindus who
make a declaration that they were not Hindus for the purpose of the special
marriage Act, 1872.
5. WHAT IS A FAMILY
As
observed by their lordship of the supreme court in C Krishna Prasad vs
Commissioner of Income – Tax, Bangalore (1974)97 ITR 493(SC) at page 496, the
word “family” always signifies a group. Plurality of persons is essential
attribute of the family. A single person male or female does not constitute a
family. He or she would remain, what is inherent in the very nature of the
things, an individual, lonely individual is a contradiction in terms. The same
results also fallows from section 2(31) of the Act, which treats a Hindu
undivided family as an entity different from an individual.
It
fallows there fore, that the assessment in the status of Hindu undivided family
made only when there are two or more members to form a Hindu undivided family. A
joint hindu family consist of persons lineally descended from a common ancestor
and includes their wives and unmarried daughters. The daughter, on marriage,
ceases to be a member of her father’s family and become a member of her
husband’s family.
6. CONCEPT OF ANCESTRAL PROPERTY
According Mitakshara joint family
system property inherited from father, grandfather or grate grand father is
known as ancestral property as a source will also be the HUF property. Any
person can blend or through use of this ancestral property as a source will
also be the HUF property. Any
person can blend or throw his individual property in to the common funds of the
family but for blending or throwing of one’s separate property in to the common
funds of the family, it is existence of HUF which is essential.
7. WHY TO CREATE A H.U.F FILE?
HUF being a common feature in hindu society
may yield fallowing tax benefit:-
In
case of an individual assessee, who is also a member of HUF property is not
considered for deriving at the total income of that person as an individual, As
HUF property. Total
partition of HUF, expenses like remuneration, interest, commission etc. To the members there of for the service
rendered and deductible. Total
partition of HUF, is the best way to avoid income tax, capital gain tax, gift
tax, wealth tax, stamp duty etc. because the property divided in the members
through participation is not considered as transfer or disposition of the
property.
We shall reach you again with the Process of Creation of HUF, and other nuances in our next post, you can reach us by submitting mail to get regular updates of Popular Posts.
