Assessment of HUF:-

An HUF is recognized as a separate assessable entity under the Act. Its income may be assessed if following two conditions are satisfied:

 (i) There should be a coparcenership. In this connection, it is worthwhile to mention that once a joint family income is assessed as that of HUF, it continues to be assessed as such in subsequent assessment years till partition is claimed by coparceners.

(ii) There should be a joint family property which consists of ancestral property, property acquired with the aid of ancestral property and property transferred by its members.

   ■ Ancestral Property: Ancestral property may be defined as the property which a man inherits from any of his three immediate male ancestors, i.e. his father, grandfather and great grandfather. Therefore, property inherited from any other relation is not treated as ancestral property. Income from ancestral property held by following families is taxable as income of HUF:

 (a) A family of widow mother and sons (may be minor or major) ;

 (b) Family of husband and wife, having no child ;

 (c) Family of two widows of deceased brothers ;

 (d) Family of two or more brothers ;

 (e) Family of uncle and nephew ;

 (f) Family of mother, son and son's wife ;

 (g) Family of a male and his late brother's wife.

Note: Property obtained by daughter from joint family property would be her absolute property. Any income therefrom is chargeable to tax in her hands in the individual status only. This will also apply to any legal heir obtaining property in the capacity of a descendent.

1 Partition of HUF: Partition means division of property. Where the property is capable of admitting a physical division, share of each member is determined by making physical division of the property. On the other hand, where the property is not capable of physical division, partition shall mean such division as the property may admit.

Though partition can be claimed only by coparceners, the following persons are also entitled to their share in the property:

 (a) A son in the womb of mother at the time of partition;

 (b) Mother (gets equal share if there is partition between sons after the death of father); and

1.1 Assessment after partition (Section 171): Once income of a joint family is assessed as income of a HUF, it will continue to be assessed as such until one or more coparceners claim partition. Such claim must be made before the relevant assessment year. The Assessing Officer, on the receipt of such claim, must make an enquiry after giving due notice to the members and record a finding whether there has been a partition and, if so, the date of partition.

Income of the family from the first date of the previous year till the date of partition is assessed as income of HUF and, thereafter, income from the property which was subject to partition is assessed as individual income of the recipient members. If, however, the recipient member forms another HUF along with his wife and son(s), income of the property which was subject to partition is chargeable to tax in the hands of new HUF.

1.2 Partition – Total or partial: Under the Hindu law, an HUF is entitled to effect a partition which may be total or partial.

  ■  Total partition – where an HUF undergoes a total partition, the entire joint family property is divided amongst all coparceners and the family ceases to exist as an HUF.

  ■  Partial partition – A partial partition, on the other hand, may be partial as regards the persons constituting the joint family or as regards the properties belonging to the joint family or both.

 (a) In a partial partition, as regards the persons constituting the family, one or more coparceners may separate from others and the remaining coparceners may continue to be joint.

 (b) In a partial portion, as regards the property, a joint family may make a division and severance of interest in respect of a part of joint estate while retaining their status as a joint family and holding the rest of the properties as joint and undivided property.

1.3 Effect of partial partition [Section 171(9)]: After the enactment of section 171(9), partial partition is not recognised under the Act. The provisions of section 171(9) is applicable on satisfaction of two conditions, firstly, the partial partition should have taken place after December 31, 1978 and secondly, such partition must have taken place in an HUF which was assessed as a HUF before.

  ■  If the above two conditions are satisfied, such family will continue to be assessed as if no such partial partition has taken place,i.e., the property or source of income will be deemed to be belonging to the HUF and no member will be deemed to have separated from the family.

  ■  Each member or group of members of such family immediately before such partial partition and the family will be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under the act by such HUF, whether before or after such partial partition.

  ■  The several liability of any member or group members of such family will be computed according to the portion of the joint family property allotted to him on such partial partition.