Partition of a HUF & Income Tax Provision




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Partition of a HUF & Income Tax Provision

1.  Section 171 of the Income Tax Act provides the legal framework for the partition of an HUF. A partition involves the division of the assets and liabilities of the HUF among its members.

2.  The partition of a Hindu Undivided Family (HUF) under the Income Tax Act, 1961, refers to the division of HUF assets among its members, recognized only if the partition is total, as per Section 171 of the Act.

3.  The share of each member in the assets and liabilities of the HUF is determined at the time of partition. This determination is typically based on factors such as the ancestral property’s value, contributions made by each member, and any agreements among the members.

4.  Upon partition, any income earned or received by the HUF before the partition is assessed as the income of the HUF. However, any income earned or received after the partition is taxed in the hands of the respective members.

5.  Any assessments made before the partition will be binding on the HUF and its members, subject to any adjustments or modifications required due to the partition.

6.  Though for the purpose of the HUF, section 6 of the Hindu Succession Act would govern the rights of the parties but for the purposes of the Income Tax Act, 1961, the matter is to be governed by the provisions contained in section 171(1). [Maharani Raj Laxmi Devi 224 ITR 582 (SC)]

7.  Unless the partition was recognised by the ITO by passing an order under section 171(1), the family continued to be joint for the purposes of this Act and was liable to tax on its total income irrespective of partition in the family.[Ambika Prasad Sonkar 168 ITR 444 (Allahabad)




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