Properties under Hindu Undivided Family (HUF)

By CA Vimal Punmiya

1. INTRODUCTION :

1. The Hindu Undivided Family (HUF) is a special feature of Hindu society. Hindu Undivided Family is defined as consisting of a common ancestor and all his lineal male descendants together with their wives and daughters. Therefore a Hindu Undivided Family consists of males and females. Daughters born in the family are coparcener and women married into the family are equally members of the undivided family. On the other hand at any given point of time a coparcenary is limited to only members in the four degrees of the common male ancestor and daughter.
2. Hindu: In this term are included all the persons who are Hindus by religion. Section 2 of the Hindu Succession Act, 1956, elaborately declares that it applies to any person, who is a Hindu by religion in any of its forms or developments, including a Virashaiva, a Lingayat or a follower of Brahmo, Prathana or Arya Samaj, a Buddist,  Jain or Sikh. In CWT. Smt. Champa Kumari Singh (1972) 83 ITR 720, the Supreme Court held that the HUF includes Jain Undivided Family.
3. Hindu Undivided Family (HUF) is a legal expression which has been employed in taxation laws as a separate taxable entity. It is the same thing as “Joint Hindu Family”. It has not been defined under the Income Tax Act, as it has a well defined connotation under Hindu Law.
4. A Hindu Undivided Family (HUF) is a separate entity for taxation under the provisions of sec. 2(31) of the Income Tax Act, 1961. This is in addition to an individual  as a separate taxable entity , it means that the same person can be assessed in two different capacities viz. as an individual and as Karta of his HUF.

2. HOW HUF COMES INTO EXISTENCE :

A Hindu male with his wife and children automatically constitutes the HUF. The HUF is a creature of Hindu Law. It cannot be created by acts of any party save in so far as by adoption or marriage, a stranger may be affiliated as a member thereof.  An Undivided Family which is a normal condition of the Hindu society is ordinarily joint not only in estate but in food and worship. The joint family being the result of birth, possession of joint property is only an adjunct of the Joint Family and is not necessary for its constitution.

3. BASIC REQUIREMENTS FOR THE EXISTENCE OF AN HUF ARE AS FOLLOWS :

(i)           Only one co-parcener or member cannot form an HUF

Family is a group of people related by blood or marriage. A single person, male or female, does not constitute a family.

The Hon’ble Supereme Court held in C. Krishna Prashad V/s CIT (1974) 97 ITR 493 (SC) that the word “Family” always signifies a group. Plurality of persons is an essential attribute of a Family. A Single person, male or female, doesn’t constitute a family.

However the property held by a single co-parcener does not lose its character of Joint Family property solely for the reason that there is no other male or female member at a particular point of time. Once the co-parcener marries, an HUF comes into existence as he alongwith his wife constitutes a Joint Hindu Family as held in the case of  Prem Kumar v. CIT , 121 ITR 347 (All.)

(ii)          Joint Family continues even in the hands of females after the death of sole male member :

Even after the death of the sole male member so long as the original property of the Joint Family remains in the hands of the widows of the members of the family and the same is not divided amongst them; the Joint Hindu Family continues to exist. CIT v. Veerapa Chettiar, 76 ITR 467(SC)

(iii)        An HUF need not consist of two male members- even one male member is enough :

The plea that there must be at least two male members to form an HUF as a taxable entity, has no force. – Gauli Buddanna v. CIT, 60 ITR 347 (SC); C. Krishna Prasad v. CIT 97 ITR 493 (SC) and Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC)

A father and his unmarried daughters can also form an HUF, CIT v. Harshavadan Mangladas, 194  ITR 136 (Guj.)

Further on partition of an HUF a family consisting of a co-parcener and female members is to be assessed in the status of an HUF.

4. NUCLEUS OF HUF :

It is many times argued that existence of nucleus or joint family property is necessary to recognize the claim of HUF status in respect of any property or income of an HUF. It has been established now that since the HUF is a creature of Hindu Law, it can exist even without any nucleus or ancestral joint family property.

5. MANAGER OF HUF OR KARTA :

The person who manages the affairs of the family is known as Karta. Normally the senior most male member of the family acts as Karta. However a junior male member can also act as Karta with the consent of the other member. Narendrakumar J. Modi v. Seth Govindram Sugar Mills 57 ITR 510 (SC).

A Wife cannot become KARTA in normal circumstances. However, in Sushila Devi Rampuria V/s ITO (1960) 38 ITR 316 (Cal), it was held that if Co-parceners are incapable, wife can act as KARTA.

Besides the same person can be taxed as both individual and Karta of an HUF. The individual and the HUF are two different units of taxation i.e. two different assesses CIT v. Rameshwarlal Sanwarmal 82 ITR 628 (SC).

6. JOINT FAMILY PROPERTY :

The following types of properties are generally accepted as joint family property:

(i)           Ancestral property;

(ii)          Property allotted on partition;

(iii)        Property acquired with the aid of joint family property;

(iv)         Separate property of a co-parcener blended with or thrown into a common family hotchpot. The provisions of sec. 64 (2) of the Income Tax Act, 1961 have superseded the principles of Hindu Law, in a case where a co-parcener impresses his property with the character of joint family property.

A female member cannot blend her separate property with joint family property but she can make a gift of it to the HUF. Pushpadevi v. CIT 109 ITR 730 (SC). A female member can also bequeath her property to the HUF, CIT v. G.D. Mukim, 118 ITR 930 ( P & H ).

1. G.   BRANCHES OF HUF :

An HUF can have several branches or sub-branches. For example, if a person has his wife and sons, they constitute an HUF. If the sons have wives and children, they also constitute smaller HUFs. If the grandsons also have wives and children, then even they will also constitute still smaller or sub-branch HUFs. As stated above, the HUF is a creature of Hindu Law and these entities are HUFs alongwith the bigger HUF of the father or the grandfather. It is immaterial whether these smaller HUFs possess any property or not. Property can be acquired by any mode; by partition of bigger HUF or by gifts from any member of the family or even by a stranger or by will with unequivocal intention of the donor or the testator that the said gift or bequest will form the joint family property of the donee or the testate or Re-union of HUF.

An HUF can be composed of a large number of branch families, each of the branch itself being an HUF and so also the sub-branches of more branches. CIT v. M.M.Khanna 49 ITR 232 (Bom).

1. H.   RIGHT OF MEMBERS :

HUF is not a natural body. It does not have physical existence as such. It is composed of members. Those members are classified in two categories, viz (i) Coparceners, and (ii) Non-Coparceners.

Coparcener means a member who has a right to demand partition. Non-Coparcener means a member who doesn’t have a right to demand partition. AS per Current scenario RIGHT TO DEMAND PARTITION is vested in male member and daughter only.

Every Co-parcener is Member, but every Member is not Co-parcener. Rights of Members are-