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Commission income of huf

Mridul Kogta (Chartered Accountant) (36 Points)

10 November 2011

Can HUF have income from commision ?

Regards

Mridul Kogta

ca_mridulkogata @ yahoo.co.in

+91-95297-58765

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28 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 10 November 2011

HUF is a virtual body, how it can earn comission?

CA,CMA,CS Karan Gogia (Employed) (230 Points)
Replied 11 November 2011

yes it can have . . . . Members can act for huf. . . And earn commision. . .

CA Hardik Bunha (self) (2121 Points)
Replied 12 November 2011

No Way.......... commission income will not sustain for HUF.

In case your case is selected for scrutiny A.O. will directly hit this point.....

this is not HUF's income because comission income needs personal skills.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 14 November 2011

HUF is not an artificial person unlike an Company regd under companies act. The HUF is formed of all the members who are individuals and is being managed by the Karta of the HUF who is also an individual.

If HUF as an seperate tax entity can earn any other income & file its return, then why cant it earn income from commission business? It can definitely earn income from commission.

What do the other experts think about this view?

2 Like

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 14 November 2011

Originally posted by : Giridhar S Karandikar
	HUF is not an artificial person unlike an Company regd under companies act. The HUF is formed of all the members who are individuals and is being managed by the Karta of the HUF who is also an individual. If HUF as an seperate tax entity can earn any other income & file its return, then why cant it earn income from commission business? It can definitely earn income from commission. What do the other experts think about this view?

if HUF has a business identity which is under cover of HUF pan, then surely all such income can be earned, but when no such business identity is maintained by HUF then its deemed that the commission income belong to karta and for tax evasion or diversion of tax the commission income is routed through HUF.

under any scurtiny such income would be get added to karta's individual file.

Prof. Bajaj (Author Mentor Motivational Speaker Wealth Planner) (7375 Points)
Replied 11 December 2011

In my opinion, HUF can have a commission income as HUF can have a business income and commission is a business income.

If others disagree, kindly care to answer, which category can we put commission income into ??

For the purpose of earning commissions, one has to use skills and provide services. Members of HUF can share this responsibility amongst themselves. And thus, a commission earned could be a business income for the HUF.

Suggestions most welcome from other members of the community.

2 Like

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 12 December 2011

Originally posted by : Prof. Bajaj
	In my opinion, HUF can have a commission income as HUF can have a business income and commission is a business income. If others disagree, kindly care to answer, which category can we put commission income into ?? For the purpose of earning commissions, one has to use skills and provide services. Members of HUF can share this responsibility amongst themselves. And thus, a commission earned could be a business income for the HUF. Suggestions most welcome from other members of the community.

commission income have two modules, 1) business related where the assesee has to get engaged in some business / trade and transfer the rights to next person ( sale the goods or services at the principal's fixed price against certain commision from principal) 2) acting as pure broker or agent and receives certain amount as broker/ middleman against the deal between buyer and seller.

type 1) is allowed without any question as the assesee is involved in certain business and earns commission, and its his business income.

type 2) is suspious income, as the deal can not be done by any virtual body, but needs a person to act is middleman/broker between buyer and seller at individual capaicty, and it can be assigned to individual only. as HUF is not a person, it can not work as broker without a business identity.

amit agarwal (dept head) (137 Points)
Replied 12 December 2011

in my opinion it can earn commission income as i am showing this in one of my present client return for past 7 years even in scrutiny it is not opposed by ITO and same is allowed.

hoever TDS need to be deducted in the name of HUF and HUF should hold a valid PAN and provided its client a brokerage services...

1 Like

Prof. Bajaj (Author Mentor Motivational Speaker Wealth Planner) (7375 Points)
Replied 12 December 2011

I completely agree with Mr. Amit Agarwal.

Also, coming to the 2nd point made by Mr. U S Sharma, even a group like an HUF can act as a middleman body. For example, one member of the HUF is dealing with the buying party and other is dealing with the selling party. So there could be numberous example, wherein commission income can be shown as a business income for an HUF. But totally appreciate the 1st Point made by you.

1 Like

michaelK (NA) (46 Points)
Replied 12 December 2011

i am fully agree mr.amit agrawal andprof.bajaj Discount Travel Cards

CA Hardik Bunha (self) (2121 Points)
Replied 14 December 2011

IF IN PLACE OF COMMISSION INCOME, THE BROKERAGE INCOME THEN WHAT IS OPION....?

for commission income personal skill is required. u have seen that whole family is going for deal with party........?

Inshort where personal skill is required, huf can not claim that incomes.

Prof. Bajaj (Author Mentor Motivational Speaker Wealth Planner) (7375 Points)
Replied 14 December 2011

Dear Mr. Hardik,

Please refer to the example below.

Mr. X is dealing with a cloth merchant about increasing his sales by marketing his product on commission basis. He is the sole person dealing with the cloth merchant. However, for the purpose of marketing, Mr. X is using his own contacts, his wife Mrs. Y is using her own contacts, and they are jointly approaching some potential customers wherein they have common contacts. Through this exercise, they get an additional business of Rs. 8 Lakhs to the cloth merchant and earn a commission of Rs. 80,000. Here, Mr. X is the only one dealing with the Cloth merchant, whereas both are dealing with the customers. In such case, the commission income can be shown to the HUF.

Please comment if you disagree. There is nothing wrong in putting your point of view, but if you havent come across a certain situation, it does not mean that the situation does not happen at all.