Huf and gift

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Manisha Jain (Querist)

12 January 2013 can huf gift? will it attract tax in either cases when gift is given to a co partioner or when gift is given to an outsider?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

12 January 2013 HUF can not gift to an outsider except the gifts which are given as a custom in the society.
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HUF can give or apportion a reasonable amount to any of its member including coparcners provided other members have no objection in this regard. However, provisions regarding partial partition also must be taken care of.
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As regards -taxability -, if we go strictly by the definition of relative given under Section 56(2)(vii), HUF has not been mentioned as a relative in case of an Individual. However in case of an HUF -every member is treated as relative of the HUF. So, this is an anomaly which courts only can sort out.
In my view, HUF should give loan to its members in-spite of making a gift.
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Any sum paid out of the income of the family is exempt from tax U/s 10(2). This can not be challanged by AO and is a better alternative than gift.
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C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

25 July 2013 No HUF should not give any gift as it amounts to partial partition which is not permitted after the provisions of section section 171 have been deleted.

If HUF is to give benefit to the memebers then full partition has to be done

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