Whether coparcener of HUF can be regarded as benamidar of HUF and thus obliged to file Form No. 12A in terms of Explanation (b) of section 185(1)

1. Reference is invited to the Explanation to section 185(1) as substituted by the Taxation Laws (Amendment) Act, 1975. This Explanation has been made effective from April 1, 1976. The Explanation reads as under:

“For the purposes of this section and section 186, a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar—

(a)   of any other partner to whom the first-mentioned partner does not stand in the relationship of a spouse or minor child, or

(b)   of any person, not being a partner of the firm, and any of the other partners knew or had reason to believe that the first-mentioned partner was such benamidar and such knowledge or belief had not been communicated by such other partner to the Income-tax Officer in the prescribed manner.

2. The Board have examined the question whether the provisions of clause (b) of the Explanation referred to above will apply to a case where a karta of Hindu undivided family is a partner in a partnership firm on behalf of this Hindu undivided family. The Board are of the view that a karta of the Hindu undivided family cannot be regarded as a benamidar of the Hindu undivided family. In view of this there is no obligation to file Form No. 12A in such cases.

Circular: No. 207 [F. No. 220/20/76-IT], dated 24-9-1976

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