Query No. 1: Effect of Succession (Amendment) Act 2005
What is the effect of Hindu Succession (Amendment) Act, 2005 in respect of right of daughter in HUF property?
The Hindu Succession Act, 1956 has been amended in the year 2005 with a view to give daughter on birth, her same right as a son on his birth. Consequently, the daughter has the right to be a co-parcener and also right to claim partition or vest her individual property in the HUF. These are important right hitherto denied to daughters, The amendment takes effect from September 9, 2005.
Thus, after marriage, she remains co-parcener in her father’s HUF and becomes a member in husband’s HUF.
As she is co-parcener in her father’s HUF, she can also will her share in co-parcenery property.
Query No. 2: Computation provisions are not applicable when presumptive income is adopted u/s. 44AE
A is having four tank lorries. He submits his Income-tax Return under presumptive scheme u/s. 44AE. Whether he can pay amount up to rupees two lakh in each for his high speed diesel (HSD) bills?
Section 44AE reads as under:
“(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in case of an assessee, who owns not more than ten goods carriages at any time during the previous year and which is engaged in the business of plying, hiring or leasing such goods carriages, the income of such business chargeable to tax under the head “Profits and Gains of Business or Profession” shall be deemed to be aggregate of profits and gains from all the goods carriages owned by him in the previous year computed in accordance with the provisions of sub-section (2)
(2) For the purpose of sub-section (1), the profits and gains from each goods carriage shall be an amount equal to seven thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from the vehicle, whichever is higher ………..”
Thus section 44AE with non obstante clause to ensure that computation provisions do not have application. Hence section 40A(3) and (3A) will have no application. Therefore, where presumptive income is adopted, the question of judging the correctness of expenses cannot arise [see Pushpak Auto Centre v. ITO 158 ITD 588 (Del.)]
Query No. 3: Mandatory recording of Partition
A has made full partition of HUF in March 2016. HUF submits ITR for the Assessment year 2017-18. The intimation u/s. 143(1) is received, but no partition u/s. 171 is recorded. What steps the assessee should take?
As per section 153(1) of the Act, time limit for completion of assessment is December 31, 2019 for assessment year 2017-18. So before this date the Assessing Officer should investigate the claim of partition and give finding.
The result of provisions of section 171 is that though a family has come to an end in law because of a partition in status vis-a-vis all the properties, its disappearance will not be recognised and it will continue to be assessed as a joint family and charged as a single unit of assessment on its income as before as per ITO v. N. K. Sarada Thampathy [187 ITR 696 (SC)].
As per Kalwa Devadattam v. UOI [49 ITR 165 (SC)], even where there is complete partition by metes and bounds the family will be deemed to continue (i) if no claim of partition is made by the members at the time of the assessment; or (ii) if a claim is made but no finding is given by the officer recording the partition.
Hence, where claim is made, it will be duty of the Assessing Officer to investigate the claim and give a finding. Where he makes an assessment on the family without disposing of the claim, the Supreme Court held in Kapurchand Shrimal v. CIT [131 ITR 451], held that the assessment should be set aside in appeal or other appropriate proceedings with a direction to the officer to make a fresh assessment according to law.
Therefore, it is necessary to assessee to pursue the Assessing Officer to record the partition before the assessment is completed.
Query No. 4: Availment of MAT credit u/s. 115AA
Can availment of MAT credit be deferred. In other words, assessee wants to pay regular tax and does not wish to utilise available MAT credit for reducing the current tax liability. Assessee wishes to utilise available MAT credit in future years. Is there any bar in his doing so?
No, subject to the provisions of sub-sections (3A) to (5) of section 115JAA. The sections read as under:
(3A) The amount of tax credit determined under sub-section (2) shall be carried forward and set-off in accordance with the provisions of sub-section (4) and sub-section (5) but such carry forward shall not be allowed beyond the fifteenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A).
(4) Tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA or section 115JB as the case may be.
(5) Set-off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA or section 115JB, as the case may be for the assessment year.
Query No. 5: Remuneration paid to HUF
In case when both the HUF and his Karta is a partner of same partnership firm, remuneration paid to HUF will be allowed or not?
It depends upon the fact:
In V. D. Dhanwatey v. CIT [68 ITR 365 (SC)], V. D. D. as a member of a bigger HUF was looking after the family business of lithography and printing and was remunerated for the same between 1930 and 1939. After partition the business was converted into partnership but VDD continued to be with one eighth share on behalf of his smaller HUF which had contributed proportionate capital. Under clause 7 of the partnership deed the general management and supervision of the business was to be in the hands of VDD, who under clause 16, was to be paid remuneration.
The Supreme Court, by a majority of four to one, held that salary to VDD was paid due to the contribution made by the joint family and the remuneration paid was directly related to investments from the assets of the HUF. There was a real and sufficient connection between the investment made by the HUF and the remuneration paid to him. It, therefore, followed that remuneration was not earned without detriment to HUF funds, and the case fell directly within the principles laid down by the Court in Kalu Babu Lal Chand [37 ITR 123(SC)] and Mathura Prasad v. CIT [60 ITR 428 (SC).]
The majority, therefore, held that the Karta was partner representing the family and under the partnership agreement, that he was responsible for general management and supervision of the partnership business and that he was to be paid monthly remuneration for the same. The remuneration paid was held to be directly related to the investment in the partnership business from the assets of the family and salary was held to be assessable in the hands of HUF.
The principle laid down in V. D. Dhanwatey [68 ITR 365 (SC)] was applied by the Allahabad High Court in Nagar Das v. CIT [66 ITR 203.]
From the study of the judgments, the guidelines set out by the Supreme Court, it is obvious that the dividing line between the two views is thin and is based –
(A) (i) First on the fundamental principle as to whether the remuneration was earned because of any personal qualification of the members of HUF, and
(ii) Secondly as to whether the remuneration was merely a form of profit sharing and was earned by detriment to HUF funds invested therein.
(B) If there as a clear finding on facts that the remuneration was earned due to personal qualifications of the Karta or member of the HUF and was not earned by detriment to HUF funds, then the remuneration would be taxed in the hands of individual and will be excluded from the income of HUF.
If it is because of detriment to HUF fund it would be taxed in the hands of HUF.
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Try to be pure and unselfish – that is the whole of religion.
— Swami Vivekananda