A.ASSESMENT
1. ‘PERSON’ INCLUDE A HINDU UNDIVIDED FAMILY
The term
‘person’ has been defined in section 2(31) in an inclusive manner to include,
inter alia, a Hindu undivided family. However, there is no definition of the
purchase “Hindu undivided family in the income tax act.
2.HUF IS A SAPERATE TAX ENTITY
The supreme court in I.T.O.v. Bachula Kapoor
[1966]60 ITR 74 (SC) held that “so long as the HUF exists, the individuals
thereof cannot separately be assessed in respect of its income . . . . . thus
HUF is a separate and a distinct tax entity and income arising to HUF can be
assessed only in it’s own hands and cannot be assessed in the hands of any
member or copercener’’
3.Basic condition for assessment as HUF
Income of a joint Hindu family may be
assessed as income of a Hindu undivided family if the following two conditions
are satisfied:
·
There should be a
coparcenership. In this connection, it is worth while to mention that once a
joint family income is assessed as that of Hindu undivided family, it continues
to be assessed as such in subsequent assessment years till partition is claimed
by it’s coperceners.
·
There should be a
joint family property which consist of ancestral property, and property transferred by its members.
ANCESTRAL
PROPERTY:- Ancestral property may be defined as the property which the man
inherits from any of his three immediate male ancestor, i.e., his father, Grand
father and grate grandfather. Therefore, property inherited from any other
relation is not treated as ancestral property. In the fallowing cases, income
of ancestral property. In the fallowing cases, income of ancestral property is
taxable as income of ancestral property is taxable as income of Hindu undivided
family:
- Family of window mother and sons (may be minor or major);
- Family of husband and wife, having no child;
- Family of two windows of deceased brother;
- Family of uncle and nephew;
- Family of two or more brothers ;
- Family of mother, son and son’s wife;
- Family of male and his late brother’s wife.
B.COMPUTATION OF TAXABLE INCOME OF HUF
In order to compute the income of a Hindu
undivided family, one has to first ascertain its income under the different
heads of income exempted under section 10, 10A and 10B.
While computing income one should keep in
mind the fallowing additional points;
§ If funds of a Hindu undivided family, one has to first
ascertain its income under the different heads of income of the family in case the
fees or remuneration is earned essentially as a result of investment of funds.
Conversely, however, if the fees or remuneration is earned essentially for
services rendered by the member in his personal capacity, it will be treated as
the personal income of the member.
§ If any remuneration is paid by the Hindu undivided
family to the karta or any other member for services rendered by him in
conducting family’s business, the remuneration is deductible if remuneration is
(a) paid under a valid and bonafied agreement; (b) in the interest of, and
expedient for, the business of family; and (c) genuine and not excessive –
jugal kishore Baladeo sahai v. CIT[1967] 63 ITR 238(SC). Similarly, if salary
is paid by the Hindu undivided family to its karta for looking after its
interest in firm in which it is paid by the Hindu undivided family to its karta
for looking after its interest in firms in which it is partner through said
karta for looking after its interest in firms in which it is partner through
said karta, such salary is allowable as deduction __ CIT v. Prakash chand
agarwal [1982] 11 taxman 55(MP).
·
The fallowing
income are not taxed as income of Hindu undivided family:
o
If a member has converted (or transferred
without adequate consideration) after December 31, 1969 his self acquired
property in to joint family property, income from such property is not taxable
in the hands of the family.
Income from
impartial estate is taxable in the hands of the holder of the estate and not in
the hands of the Hindu undivided family. Through the impartiable estate belongs
to the family, income arising there from belongs to the holder of the estate
who is the senior most male member of the family. Income from impartiable
estate is taxable in hands of the holder of the estate.
o
Personal income
of the members cannot be treated as income of Hindu undivided family.
o
As stridhan is
absolute property of a woman, income arising there from is not taxable as
income of Hindu undivided family.
o
Under the
Dayabhaga school of law, no son has any right in the ancestral property during the
life time of his father, If therefore, the father does not have any brother as
a coparcener, income arising from ancestral property is taxable as his
individual income.
Clubbing and adjustment of losses- In this
regard fallowing points should be noted-
1.
Under section 60
to 63, income belonging some other person, may be taxable as income of Hindu
undivided family transfer income without transferring the asset, such income is
taxable Under section 60 in the hands of the family.
Losses of the court year as well as
proceeding years will be set off under section 70 to 80.
After the aforesaid adjustment, the total
of the five heads of income is gross total income.
DUDUCTION FROM GROSS TOTAL INCOME – After
computing gross total income in the aforesaid manner, the fallowing deduction
are made under section 80CCC to 80U for the assessment year 2003-04 in order to
arrive at net income:
Section Nature of deduction
80D Payment
on account of medical insurance premium
80DD Maintenance
including medical treatment Of
handicapped
dependents
82DDB Expenditure on
medical treatment
80G Donation
to charitable institution and funds
80GGA Donation to
scientific research or rural development
80HHB Profit and
gains from project outside India
80HHBA Profit and gains
from Housing projects
80HHC Export turnover
80HHD Earning in
convertible foreign exchange
80HHE Profit from
export of computer software
80HHF Profit from export of films software
80-I Profit
and gains from industrial undertaking after a certain
Date
80IB Profit and
industrial undertaking other than infrastructure
Development
undertakings
80JJA Profit from
the business of collecting and processing of
Bio
degradable wast
80L Interest
on certain securities, dividend etc.
80D
Royalties from
foreign enterprises
TAX Liability calculation
The procedure and the rates of tax is the
same as of on individual.
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