Hindu Undivided Family Essay Example

of individuals. Therefore, it is legally impossible for an HUF to be a partner in a partnership firm.

HUF, or Hindu Undivided Family, is considered a person under Section 2(31) (ii) of the Income Tax Act 1961. This section defines "person" to include various entities such as individuals, Hindu undivided families, companies, firms, associations of persons or bodies of individuals (whether incorporated or not), local authorities, and artificial juridical persons. When a banker deals with Hindu undivided families, they must exercise caution while providing credit facilities. This is because certain laws and customs pertaining to succession and transfer of rights among Hindus create significant obstacles for the banker in using what is typically regarded as normal and reliable bank security. It should be noted that HUF can be governed by either Mitakshara Laws or Dayabhaga Laws.

The Mitakshara Law governs all HUFs, except in West Bengal where the Dayabhaga system is followed. Under the Mitakshara law, a HUF operates in such a way that all members acquire rights in ancestral property from birth. These rights are considered to date back to the conception of the child who, through legal fiction, is deemed a member of the HUF. This implies that even an individual who was not yet born at the time of a transaction can challenge its validity. To encumber a joint family estate, it is necessary for all family members to either participate in or give consent to the execution of the deed. Alternatively, the head of the family can execute the deed as karta or manager.

The powers of the karta are limited and any charge created by the karta is binding on the family property

only if the loan is taken for a purpose necessary or beneficial to the family or if it serves to discharge a lawful antecedent debt due from the family. This type of debt is known as vyavaharika debt, which translates to good conduct in this context. If a banker files a lawsuit against a joint family estate for a loan secured by the property, the burden of proof lies on the banker to demonstrate that they ensured the loan was taken for purposes beneficial to the family before granting it. To avoid such difficulties and others, some banks require Hindu customers opening accounts to provide a statement declaring that the money deposited is their personal or self-acquired property and not that of a joint Hindu family.

The manager of a trading Hindu family can be appointed by the family or be someone who is seen as their official representative. It is not necessary for the manager to be the Karta, as there can be multiple managers, especially if the business is conducted in different locations. The powers of a manager are broader than those of a Karta. The manager of a joint Hindu family has all the necessary powers to operate the family business. They can incur debts for business purposes and use the family's credit and property for regular business activities, but not for speculative transactions.

The person must ensure that his actions are not immoral. He can use Negotiable Instruments in the name of the family firm to bind all members, including minors. Additionally, he has the power to settle disputes but cannot start a new venture. These powers apply to the manager of joint

family property as established in the case of Ramdayal and others v. [name].

According to the Rajasthan High Court in Bhanwarlal and others, AIR 1973 Raj. 173, the principles of law regarding the transfer of joint family property by the manager are well established. These principles state that the manager of a joint Hindu Family has the authority to transfer the joint family property for value, thereby binding the interests of both adult and minor coparceners, under certain conditions. The conditions are: the alienation must be made for legal necessity (Apatkale), for the benefit of the estate (Kutumbharte), or for indispensable religious, pious, or charitable duties (dharmarthe) such as sradha, upananyana, and other necessary sanskars. The payment of debts incurred for family business or other necessary purposes also falls under legal necessity.

The alinee bears the responsibility of proving legal necessity for alienation. The alinee can establish this not only through proof of legal necessity but also by demonstrating reasonable inquiries and satisfaction regarding the existence of the legal necessity. It is important to note that the Karta or manager can create a charge against joint family property only if the loan taken for the charge is necessary or beneficial to the family.

The responsibility of proving legal necessity rests with the banker. In addition to proving legal necessity, the banker must also demonstrate that reasonable inquiries were made and that satisfaction was obtained regarding the existence of legal necessity (Jandhyala Sreerama Surma v. Nimmagadda Krishnavenamma, AIR 1957 AP 434). The Kartha is the eldest male member of the family and has exclusive authority to oversee the property and business of the Hindu Undivided Family (HUF).

Kartha has

the authority to enter into contracts on behalf of the Hindu Undivided Family (HUF) and can also bind all the members to the extent of their share in the property or business. If the coparceners (members of the HUF) wish, they can authorize any one or more adult coparceners to manage the business, who would be known as "Managers." The Supreme Court also upheld this provision in NarendraKumar Modi v. CIT (1976) ITR 109 (SC), as mentioned in Mulla's Hindu Law. Additionally, the Hindu Succession (Amendment) Act 2005 grants equal rights to males and females in matters of inheritance, thereby giving daughters the status of copartners.

Some experts also believe that even if there is no male member or only male members are minors, a female member can become the Kartha/manager of the HUF after 2005. It is generally assumed that the money needed for the family business is a necessity and that all family members consent or agree to the business. Therefore, if the manager incurs debts for the family business in the ordinary course, all coparceners become liable. However, their liability is limited to their interest in the family property and does not extend beyond that. Although adult coparceners become personally liable when they themselves are contracting parties with the manager or if they ratify the manager's contract, a minor coparcener is not personally liable unless they ratify the contract after reaching adulthood.

The Indian Partnership Act defines a partnership as an agreement between individuals to share business profits. The question arises whether a Hindu Undivided Family (HUF) can be considered a person under the law. Unlike a company, an HUF does not have

independent existence from its members and cannot enforce its own rights; it must be represented by a Kartha or adult member. Consequently, an HUF cannot be regarded as a person. However, the Income Tax Act includes HUFs in its definition of "person." In the case of Dulichand Laxminarayanan vs., the Supreme Court has addressed this matter.

The Commissioner of Income Tax (AIR 1956 SC 354) has stated that the definition of a partnership firm cannot be applied to Section 4 of the Partnership Act, and as a result, a Hindu Undivided Family (HUF) cannot form a partnership with a firm. This was further reiterated in the case of Rashiklal & co vs. Commissioner of IT, Orissa (9AIR 1998 SC 401), where it was affirmed that a HUF cannot become a partner in a firm because a firm is composed of individual members. Therefore, based on these legal precedents, it can be concluded that a HUF is not eligible to be a partner in a partnership firm. However, this ruling may be subject to review in CIT Vs. situation.

The Supreme Court has ruled that a Kartha of a Hindu Undivided Family (HUF) or an adult member of the family can enter into a partnership on behalf of the family. It is important to note that it is the individual who becomes a partner, not the HUF. The establishment of a Hindu Undivided Family has sparked debates and controversies despite various legal judgments.

Under the Income-tax Act of 1961, a Hindu Undivided Family is treated as a separate entity for income-tax purposes. If even after partition, a family continues to be recognized as a Hindu Undivided Family, it will

be assessed accordingly until confirmed by the assessing officer under section 171 that there has been partition.

A joint Hindu family includes all descendants from one common ancestor, including wives and unmarried daughters. On the other hand, a Hindu coparcenary refers to a narrower group comprising individuals who inherit an interest in joint or coparcenary property by birth (Gowli Buddanna v. C.).

I. T. (60 I. T. R.)

According to Section 293 (SC), a joint Hindu family can consist of smaller or branch joint families who have their own properties and are considered separate assessable units from the main joint family (C. I. T.).

The privy council in the case of Kalyanji Vithaldas v. V. Khanna (49 I. T. R. 232) stated that.

C. I. T. (5 I.)

T. R. 90 states that the phrase "Hindu undivided family" is used in the Income-tax Act, specifically referring to the narrower term "Hindu coparcenary" as seen in the case of Sushila v. I.

T. O. (38 I. T.)

R. 316). The Supreme Court ruled in the case of Gowli Buddanna that the presence of only one male member, along with female members, is sufficient for the formation of a Hindu undivided family (Vedathanni v. C.).

I. T. (1 I. T. R. 70 (SB)) states that even when the family is left with only one coparcener and other female members, the property and income are owned by the joint family. Therefore, for such income, the tax is applicable to the joint family and not to the male member individually (Attorney-General v.

Arunachalam (34 I. T. R. (ED) 42 (PC)). This principle also applies to cases where joint family property is partitioned and property is given to a coparcener

who has a wife but no male issue. In such situations, the income from the property is taxable as the income of the Hindu undivided family that consists of the member and his wife (and daughters, if any). It should not be included in the assessment of the individual member (Narendranath v.

C. W. T. is 74 years old and in the field of information technology.

According to Section 190 (SC) of the Code of Criminal Procedure, if a coparcener gets married after the partition, the same rule applies. In these circumstances, the income generated from the property allocated to the coparcener should be considered as the income of the Hindu undivided family. This encompasses both the coparcener and his wife, as determined in Premkumar v. C.

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The text states "121 I. T. R. 347 (I. T. Case No. 121, Decision No. 347)".

", mentions the reference as "121 I. T. R. 347 (I. T. Case No. 121, Decision No. 347)".

The case of C. I. T. v. was ruled by the Supreme Court.

According to Veerappa Chettiar (76 I. T. R. 467), it was determined that in the event of the demise of the last male member of a Hindu undivided family, the family can consist entirely of female members.

The case of Krishna Prasad v. C. I. T. (97 I. T.) states that regardless of gender, an individual is unable to establish a Hindu undivided family.

The Hindu Succession Act of 1956 states that if a son receives separate property from their father through intestacy, it will be treated as their individual property and not as joint family property.

T. v. Chander (161 I. T.)

Under R. 370 (SC), a Hindu

undivided family member is not required to pay tax on any amount received from the family's income, regardless of whether taxes have been paid by the family or not. However, if a Hindu individual possesses separate and self-acquired property that has not been added to the joint estate, the income from this property will be taxed as the individual's income rather than as the income of the Hindu undivided family. This rule also applies when there are sons who have not separated from him, as they do not have any claim over this income (Kalyanji v. C.).

The case of I.T. (5 I.T.R. 90, 94 (PC)).

The income generated from an individual member's property that is added to the family hotchpot is subject to taxation as the joint family's income, in accordance with the general tax law principle. However, section 64 (2) supersedes this principle. The case of Murugappa v. C. I. T explores commissions earned under a managing or selling agency.

(21 I. T. R. 311) or insurance agency (Ram Jhav. C.

According to the case of I. T. (31 I. T. R. 987), if a karta or another coparcener enters into an agreement, it would be considered their personal income unless it can be proven that the rights were obtained using joint family property (as seen in the case of Haridas, 15 I.).

T. R. 124)). The personal income of the holder of a hereditary office of the head of a religious sect includes the offering received, provided that the functions and obligations associated with that office are personal (Ranchhodraiji v. C. I.

T. (54 I. T. R. 664).

The treasurer of a bank receives a salary that is considered

their individual income, even though the bank may have used joint family properties as security. (Piyarelal v. C. I. T.)

(40 I. T. R. 17 (SC)).

According to the case of Padampat v. C. I. T., if a member of a trading joint family conducts business on his own, the resulting profits would be considered as his personal income instead of the joint family's income.

(24 I. T. R. 84)), even if the member borrowed the necessary capital from the joint family funds (C. I.

T.v. Thaver (2 I.T.

R. 230) or the member may, after earning the income as their own, contribute it to the family hotchpot (Amarchand v. C. I. T.

(30 I. T. R. 38))

Members who conduct business on their own behalf as partners may be evaluated as a firm, as established in the case of Harisingh v. C. I. T. (2 I. T.).

C. 80)). Nonetheless, simply signing a partnership deed as family members will not prevent the undivided family from being assessed for the profits of the business (C. I.

T. v. Doraiswami (1 I. T. C.)

214). If a coparcener uses joint family funds to contribute his share of capital in the firm, he should be considered as having entered into partnership on behalf of and representing the family (C.I.T. v. Kalubabu (37 I.

T. R. 123)). Last year, the Punjab & Haryana High Court in C. I.

T. v. Bhagat Singh (229 I. T.)

R. 239) stated that a Hindu undivided family, which is a customary institution in Hindu society, includes all people descended from a common ancestor, along with their wives and unmarried daughters. Even if there is only one male member, it is still considered a Hindu undivided

family. This means that a Hindu undivided family can consist of a male Hindu, his wife, and unmarried daughter. In this case, B formed a Hindu undivided family with his wife, son, and four daughters. A partial partition occurred between B, his wife, and their children.

The partition was carried out on April 1, 1971 using the ancestral property, which was officially acknowledged by the department. Later, on November 23, 1971, B. B. had another daughter. He argued that he and his daughter formed a Hindu undivided family for the property obtained through the partition, and requested to be assessed separately.

The income-tax officer rejected the argument that the subsequent birth of a daughter would return the status of Hindu undivided family to the assessee, as his wife was already separated from the family. However, the Tribunal accepted this argument. The Punjab and Haryana high court, on a reference, ruled that the property received by the assessee on partition was still considered ancestral property and therefore still part of the Hindu undivided family. With the subsequent birth of a daughter, the assessee was considered to be part of a Hindu undivided family in relation to this property. Therefore, the court held that the income received from this property should not be assessed as an individual, but as a Hindu undivided family consisting of the assessee and his daughter.

Finally, in an interesting decision in C. I. T. v.

According to the case of Pratapchand (36 I. T. R. 262), a Hindu who claimed under the Special Marriage Act, 1872 or 1954 that he did not practice the Hindu religion, did not lose his Hindu status. Therefore, he

remained subject to Hindu law, allowing him to file a return as karta of a joint family for the income generated from ancestral properties.