Hindu Divided Family

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SUBHASH MISHRA (Querist)
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15 March 2011 Dated : 15th March, 2011

Respected sir,

I have already a big HUF. My father is the Karta of this HUF. In this HUF including my father there are four members and their family members. Now HUF has a piece of land and shops, which is purchased by HUF itself by contribution of its members. Beside this HUF has an ancestral land also. Beside this there is a handsome balance of cash in hand.

Now my questions are –
1) Can this HUF distribute all these immovable properties to its members without dissolving the big HUF.
2) If distribution is possible, then what will be the mode of transfer of the property i.e. Will it be treated as partition or gift to its members ? How it will be treated ?
3) Can the members of this bigger HUF can form another smaller HUF with this property ?

Please guide as soon as possible..
Thanks in advance

With regards

(Subhash Mishra)

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 March 2011
Reply-1

1. As partial partition is not recognised by income tax, you have to distribute all the properties, and not only immovable properties among HUF's members.
2. In total partition all the members cease to be members of the HUF and as such the big HUF will not remain in existence.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 March 2011 Reply-2

Total Partition will be treated as distribution of property among the members. As it is not treated as transfer U/s 47(i), no capital gains tax liability to the HUF will arise.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 March 2011 Q-3:) Can the members of this bigger HUF can form another smaller HUF with this property ?

No, otherwise it will be deemed as partial partition.

However, on total partition, the nature of property received by a male member will remain as the property of HUF of respective member. If the member is unmarried, till his marriage takes place, the property will be assessed as his individual property. It will become HUF property after his marriage.