CONCEPT OF HINDU UNDIVIDED FAMILY
I. MEANING OF HUF
Income Tax Act provides a special status to HUF under the Act and covers it in the definition of person u/s 2(31) of the Act. The Hindu Undivided Family (HUF) has not been defined under Income Tax Act, 1961, however, as per Hindu Law A Hindu Undivided Family (HUF) is ordinarily joint not only in estate but in food and worship. The members of a Hindu Family live in a state of union, unless the contrary is established. HUF is a creation of law and cannot be created by the act of parties, except in the case of adoption by member of HUF. HUF is a separate legal entity as per section 2(31) of the Income Tax Act and therefore, as long as the HUF is in existence, no individual member can be separately assessed in respect of its income. [ITO vs. Bachu Lal Kapoor (1966) 60 ITR 74 (SC)]. Even if the family is reduced to sole – surviving coparcener (male or female) with other family members, income tax is leviable on the joint family and not on male members as individual.
Concept of Coparcener
A HUF, as such, can consist of a very large number of members including female members (w.e.f. 9th September, 2005, whether married or unmarried) as well as distant blood relatives in the male line. However, out of this, coparceners are only those males who are within 4 degrees in lineal descendent from the common male ancestor and including the common ancestor and the daughter of the common ancestor.
The relevance of concept of coparcener is that only coparceners can ask for partition. The other male family members; i.e, other than coparceners in a HUF, have no direct claim over HUF property, but can claim only through the coparceners. The coparcener must be a member of the family but a member of the family need not be a coparcener.
HUF may be composed of
– Large or
– Small or
– Nuclear Joint Families
HUF is a Joint Hindu Family consisting of:-
Male members lineally descended from a common male ancestor, together with their‑
– Unmarried daughters and
– The Hindu coparcenary * [CGT v. B.K. Sampangiram (1986) 160 ITR 188 (Karn.)]
Note: STRANGER can be introduced in HUF only by adoption [CIT vs. M.M. Khanna (1963) 49 ITR 232 (Bom)].
Distinction – Co-parcener and a member
A HUF, as such, can consist of a very large number of members including female members as well as distant blood relatives in the male line.
However, out of this, coparceners are only those males & females who are within 4 degrees in lineal descendent from the common male ancestor. The relevance of concept of coparcener is that only coparceners can ask for partition. The other family members; i.e., other than coparceners in a HUF, have no direct claim over HUF property, but can claim only through the coparceners.
School of Thoughts under Hindu Law
There are two principle school of thoughts under Hindu Law, namely Mitakshara and Dayabhaga.
1. Mitakshara Scool:
- The Mitakshara School exists throughout India except in the State of Bengal and Assam. The Inheritance is based on the principle or propinquity i.e. the nearest in blood relationship will get the property.
- Sapinda relationship is of blood. The right to Hindu joint family property is by birth. So, a son immediately after birth gets a right to the property.
- The system of devolution of property is by survivorship. The share of co-parcener in the joint family property is not definite or ascertainable, as their shares are fluctuating with births and deaths of the coparceners. The coparcener has no absolute right to transfer his share in the joint family property, as his share is not definite or ascertainable.
- A woman could never become a coparcener. But, the amendment to Hindu Sucession Act of 2005 empowered the women to become a coparcener like a male in ancestral property. A major change enacted due to western influence.
- The widow of a deceased coparcener cannot enforce partition of her husband’s share against his brothers.
- There are four Sub-Schools under the Mitakshara School:
– Dravidian School of thought (Madras school)
– Maharashtra school (Bombay school of thought)
– Banaras school of thought:
– Mithila school of thought:
2. Dayabhaga school:
- It exists in Bengal and Assam only. It has no sub-school. It differs from Mistakshara School in many respects.
- Inheritance is based on the principle of spiritual benefit. It arises by pinda offering i.e. rice ball offering to deceased ancestors.
- Sapinda relation is by pinda offerings.
- The right to Hindu joint family property is not by birth but only on the death of the father.
- The system of devolution of property is by inheritance. The legal heirs (sons) have definite shares after the death of the father.
- Each brother has ownership over a definite fraction of the joint family property and so can transfer his share.
- The widow has a right to succeed to husband’s share and enforce partition if there are no male descendants.
- On the death of the husband the widow becomes a coparcener with other brothers of the husband. She can enforce partition of her share.
Rights and liabilities of members of HUF
As specified under the Hindu law and the codified law, various members of the family are entitled to rights, etc., as given below:
- The coparceners of the HUF are entitled to demand partition. Besides the coparceners, the Hindu widows under the Hindu Women’s Right to Property Act, 1937, are also entitled to demand partition just as her husband could have done. However, wife of a coparcener cannot claim for partition.
- The members of the HUF which include male and female members, daughters and children of the male members are entitled to maintenance. Maintenance includes food, shelter, clothing, education, medical aid and marriage.
- A members of the HUF is entitled to own and possess his separate property besides his interest in the HUF property.
- The widow and children of a deceased coparcener have the right to be maintained out of the HUF property and are also entitled to demand partition.
- If a coparcener or other member converts himself into any other religion like Islam or Christianity, he ceases to be a member of family and he cannot enjoy joint status along with other members.
- A coparcener or member may enter into partnership with Karta of HUF by bringing his capital or even without bringing any capital but contributing his skill and labour only.
2. CHARACTERISTICS OF HUF
1. The Karta can function in Dual capacity and can claim remuneration and other benefits from the HUF.
2. Hindu Undivided family may be composed of
– Large or
– Small or
– Nuclear Joint Families
3. Every above said families may hold the property in its own RIGHT, may be assessed for its income as a separate unit.
4. There need NOT be more than one MALE member to form HUF.
5. If the family is reduced to Sole – Surviving coparcener with other family members, income tax is leviable on the joint family and not on male members as individual.
6. There can be a HUF comprising only of FEMALE members.
7. A member of the family can carry on any other business individually, it will be his individual income not of family even if he borrows requisite capital from the joint family fund.
8. Mostly fees or salary earned by Karta as director or partner may be considered as his individual income.
9. Salary income of the individual will not be assessed as income of the HUF merely by the reason that the person having been educated, maintained, supported wholly by joint family funds.
3. CONCEPT OF CO-PARCENERY
The Hindu Coparcenary – a narrower body than Joint Family.
A Hindu joint family consists of the common ancestor and all his lineal male descendants upto any generation together with the wife/ wives (or widows) and unmarried daughters of the common ancestor and of the lineal male descendants. Whatever the skeptic may say about the future of the Hindu joint family, it has been and is still the fundamental aspect of the life of Hindus.
Whereas a co-parcenery is a narrow body of persons within a joint family. It exclusively consists of male members. A Hindu coparcenery is a corporate entity, though not incorporated. A coparcenery consists of four successive generations including the last male holder of the property. The last male holder of the property is the senior most member of the family.
HUF coparcenery is a limited body, a part of the HUF, smaller than the membership of HUF. It includes those persons who acquire interest in joint coparcenary property by BIRTH, namely:-
– Grand Sons
– Great Grand Sons
Under the Mitakshara School of thoughts, a Coparcener is that member of HUF who acquires by birth an interest in the joint property of the family whether inherited or otherwise acquired by the family. The members of the family who are not Coparceners have no right to claim partition.
Characteristics of Coparcenery
A Hindu coparcenery has following essential characteristics as under according to CED v. Alladi Kuppuswamy (1977) 108 ITR 439 (SC):
1. The male descendants as well as female descendants after the Succession (Amendment) Act, 2005, up to the third generation acquire an independent right of ownership by birth and not representing their ancestors. After the commencement of Hindu Succession (Amendment) Act, 2005, a daughter of a coparcener shall have the same right in the coparcenery as she would have had if she had been a son.
2. The members of the coparcenery have the right to work out their rights by demanding partition.
3. Until partition, each member has got ownership extending over the entire property co-jointly with the others and so long as no partition takes place, it is difficult for any coparcener to predict the share which he might receive.
4. As a result of such co-ownership, the possession and enjoyment of the property is common.
5. There can be no alienation of the property without the concurrence of the other co-parceners unless it is to be for legal necessity.
6. The interest of a deceased member lapses on his death and merges in the coparcenery property.
Rights of Mistakshara coparcener
- A Mitakshara Coparcener has right to claim partition of the family property and to separate himself from the family.
- A coparcener has his/her right and interest by birth in the whole of the joint family property without having a definite share in that property. According to Appovier v. Rama Subba Aiyan (1866) 11 MIA 75, 90, no coparcener of an undivided family can predict in the joint and undivided property that he has a certain definite share.
- Every coparcener has a right to be maintained out of the joint family fund. However, the extent of maintenance available to him is at Karta’s sole discretion.
- It was held in Attorney General of Ceylon v. A.R.A Arunachalam Chettiar & Ors. (1958) 34 ITR (ED) 42 (PC), that a coparcener can Initiate proceedings against the Karta to ensure recognition of his future maintenance rights where he is excluded entirely from the benefits of joint enjoyment of family property and income. He can also claim compensation for his earlier exclusion.
- The coparceners are tied together with unity of interest and unity of possession between them.
- Every coparcener has a right to challenge an improper alienation made by Karta, apart from those made for legal necessity, benefit of estate or indispensable duties or for legitimate acts of management.
- As held in State Bank of India v. Ghamandi Ram AIR 1969 SC 1330 and N.V.Narendra Nath v. CWT (1969) 74 ITR 190 (SC), a Mitakshara coparcener has the right of survivorship meaning that he takes the joint family property by survivorship. However, w.e.f. 9-9-2005 as a consequence of commencement of Hindu Succession (Amendment) Act, 2005, the interest in Joint Hindu Family shall devolve by testamentary or intestate succession and not by survivorship.
Right of coparceners under Dayabhaga School
The right of the coparceners under Dayabaga and Mitakshara Schools have many things in common. There are, however, certain points of distinction which are as under:
- Under the Dayabhaga school, no person has any interest or right by birth. The interest of each coparcener is a specified and fixed one.
- A coparcener under the Dayabhaga schools, has the right to joint possession and enjoyment of the HUF properties.
(Source – Book on Practical Aspects of Tax Audit, TDS, HUF & Capital Gains written by CA Agarwal Sanjay ‘Voice of CA’ & Team)