| Question And Answer | |
|---|---|
| Subject: | amount received on Family arrangement and partition of HUF |
| Category: | Income-Tax |
| Querist: | Prakash Kulkarni |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Family Arrangement, Family arrngement, Hindu Undivided Family, HUF, Partition |
| Date: | July 17, 2022 |
Assessee is an individual and Hindu . He got married with another women in the life time of first wife. He had two children from first wife and a daughter from second wife. First wife expired and thereafter almost 25 years assessee and his second wife are living together as husband and wife and also accepted by all family and society. Assessee was also assessed to tax in the capacity of HUF also.
The family members consisting of the children of first wife and the second wife and her daughter has decided to settle their disputes about the property of the individual and HUF of the assessee by way of family arrangement and full partition of HUF. Accordingly, executed the memorandum of family arrangement. As per said arrangement, the second wife and her daughter have received certain properties.
Whether these amounts are taxable in the hands of second wife and her daughter under Income Tax Act?
Whether provisions of section 56(2)(x) are applicable to the properties received as per family arrangement and partition of HUF ?
It is a well settled position in law that daughters have the same rights as sons in HUF property. Therefore, the daughter out of the second marriage will have the same rights as children from the first marriage with respect to the properties of the HUF.
Furthermore, since all the members of the HUF are relatives of each other, the transfer will not attract section 56(2) of the Income-tax Act, 1961. The Hon’ble Income-tax Appellate Tribunal (ITAT) – Rajkot Bench in the case of Vineetkumar Raghavjibhai Bhalodia v. ITO [2011] 12 ITR(T) 616 (Rajkot) held that a gift received from ‘relative’, irrespective of whether it is from an individual relative or from a group of relatives is exempt from tax under provisions of section 56(2)(vi) of the Act and that an HUF is a group of relatives and therefore, gift received from HUF would be exempt from tax under section 56(2)(vi) of the Act.
As per section 47(i), any distribution of capital assets on partial or total partition of huf is not regarded as transfer. So there’s no taxability of capital gains tax in the hands of huf. Similarly, in the hands of recipient, for say members of huf, also not chargeable to tax under clause (ix) of first proviso to section 56(2)(x). So there’s no chargeability of tax either in the hands of huf or in the hands of member of huf.