Taxation on transfer of asset in case of huf partition
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 January 2013
Hey
Anyone can tell me any relevant case laws regarding followings
Father HUF is dissolving.
HUF property are transfered.
Such HUF property should be transfer to member's individual account or to member's personnel HUF?
And what is tax benefits in both options.
Thank u so much in advance
Anyone can tell me any relevant case laws regarding followings
Father HUF is dissolving.
HUF property are transfered.
Such HUF property should be transfer to member's individual account or to member's personnel HUF?
And what is tax benefits in both options.
Thank u so much in advance
19 January 2013
HUF can not be dissolved but HUF property can be partitioned among the members or group of members.
All male members will be receiving property on behalf of HUF in capacity of manager of HUF. Unmarried male members will hold the property in their individual capacity till they gets married, Female members will receive thew share in their individual capacity.
If there is full and complete partition of which finding is given by AO u/s. 171(3),then only income from date of partition will be assessed in the hands of unit of recipient of partitioned property.
Complete partition is essential w.e.f. 31.12.1978.
Partitioned property will be credited to respective smaller HUF or individual if unmarried member and other individual members who received the property in family partition.
All male members will be receiving property on behalf of HUF in capacity of manager of HUF. Unmarried male members will hold the property in their individual capacity till they gets married, Female members will receive thew share in their individual capacity.
If there is full and complete partition of which finding is given by AO u/s. 171(3),then only income from date of partition will be assessed in the hands of unit of recipient of partitioned property.
Complete partition is essential w.e.f. 31.12.1978.
Partitioned property will be credited to respective smaller HUF or individual if unmarried member and other individual members who received the property in family partition.
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 January 2013
Agree with you Mr. Kochar.
My confusion is whether its mandatory to transfer property to the member in his HUF capacity only ?
If yes then any judgement in the support of the same is available?
Thank you so much in advance
My confusion is whether its mandatory to transfer property to the member in his HUF capacity only ?
If yes then any judgement in the support of the same is available?
Thank you so much in advance
26 July 2025
You're raising a key issue in **HUF (Hindu Undivided Family)** taxation—**how property should be treated after partition**, and whether it **must go to a member's HUF or can be treated as individual property**.
---
## 🔍 Key Concepts on HUF Partition and Tax Implications:
### 🔹 1. **Partition under Section 171 of the Income Tax Act**
* Partition can be **total or partial**.
* **Only total partition** (as recognized under **Section 171(3)**) is recognized for income tax purposes.
* After partition, the **income from partitioned property** is taxable in the hands of the person or entity **receiving the property**.
---
## 📘 Is the Property Transferred to Individual or HUF of Member?
This depends on **how the property is received** and the **facts of the case**. There is **no mandatory rule** that the property must be transferred to the member's HUF.
### ✅ **General Rule:**
* If a **coparcener receives property on partition**, it **can be treated as his individual property**, unless **he chooses to treat it as the nucleus of his new HUF**.
* There is **no compulsion** under law to treat it as HUF property post-partition.
---
## 🧾 Judicial Precedents
### ⚖️ **CIT v. Arun Kumar Jhunjhunwala (1997) 223 ITR 45 (Cal)**
* The Court held that **property received on partition belongs to the coparcener** and he can **treat it either as individual or HUF property**.
* The intention of the recipient is **key** in determining its status.
### ⚖️ **CIT v. M. Balasubramanian (1990) 182 ITR 117 (Madras)**
* Property received by a son on partition is not automatically HUF property of his new family.
* It becomes **individual property** unless he **clearly declares** intention to treat it as HUF.
### ⚖️ **Kalyani v. CIT (1985) 154 ITR 49 (SC)**
* The Supreme Court held that there is **no presumption** that property received by a coparcener becomes his HUF property.
* Affirmed the principle of **voluntary blending** for converting individual to HUF.
---
## 💡 Tax Implications
| Option | Who Receives? | Taxability | Future Implications |
| ----------------- | ------------------------ | -------------------------------- | ------------------------------------------------- |
| **As Individual** | Member in personal name | Income taxed in individual hands | Simpler, no further HUF complications |
| **As HUF** | Member's own smaller HUF | Income taxed in that HUF | May allow for some tax planning via HUF in future |
**NOTE:** Once the property is treated as individual property, it **cannot be converted back** to HUF unless blended **with a clear intent**.
---
## ✅ Conclusion
* It is **not mandatory** to transfer HUF property into member's HUF after partition.
* Member may **receive it as individual property**.
* However, if tax planning using HUF status is intended, the member can declare that he is treating the property as belonging to his new HUF.
* **Intention and documentation** are key.
---
If you'd like, I can draft a sample **declaration of intent** to treat partitioned property as HUF property or cite more rulings.
---
## 🔍 Key Concepts on HUF Partition and Tax Implications:
### 🔹 1. **Partition under Section 171 of the Income Tax Act**
* Partition can be **total or partial**.
* **Only total partition** (as recognized under **Section 171(3)**) is recognized for income tax purposes.
* After partition, the **income from partitioned property** is taxable in the hands of the person or entity **receiving the property**.
---
## 📘 Is the Property Transferred to Individual or HUF of Member?
This depends on **how the property is received** and the **facts of the case**. There is **no mandatory rule** that the property must be transferred to the member's HUF.
### ✅ **General Rule:**
* If a **coparcener receives property on partition**, it **can be treated as his individual property**, unless **he chooses to treat it as the nucleus of his new HUF**.
* There is **no compulsion** under law to treat it as HUF property post-partition.
---
## 🧾 Judicial Precedents
### ⚖️ **CIT v. Arun Kumar Jhunjhunwala (1997) 223 ITR 45 (Cal)**
* The Court held that **property received on partition belongs to the coparcener** and he can **treat it either as individual or HUF property**.
* The intention of the recipient is **key** in determining its status.
### ⚖️ **CIT v. M. Balasubramanian (1990) 182 ITR 117 (Madras)**
* Property received by a son on partition is not automatically HUF property of his new family.
* It becomes **individual property** unless he **clearly declares** intention to treat it as HUF.
### ⚖️ **Kalyani v. CIT (1985) 154 ITR 49 (SC)**
* The Supreme Court held that there is **no presumption** that property received by a coparcener becomes his HUF property.
* Affirmed the principle of **voluntary blending** for converting individual to HUF.
---
## 💡 Tax Implications
| Option | Who Receives? | Taxability | Future Implications |
| ----------------- | ------------------------ | -------------------------------- | ------------------------------------------------- |
| **As Individual** | Member in personal name | Income taxed in individual hands | Simpler, no further HUF complications |
| **As HUF** | Member's own smaller HUF | Income taxed in that HUF | May allow for some tax planning via HUF in future |
**NOTE:** Once the property is treated as individual property, it **cannot be converted back** to HUF unless blended **with a clear intent**.
---
## ✅ Conclusion
* It is **not mandatory** to transfer HUF property into member's HUF after partition.
* Member may **receive it as individual property**.
* However, if tax planning using HUF status is intended, the member can declare that he is treating the property as belonging to his new HUF.
* **Intention and documentation** are key.
---
If you'd like, I can draft a sample **declaration of intent** to treat partitioned property as HUF property or cite more rulings.
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