Tax Supplement 1
ASSESSMENT OF HUF
Computation of Tax-liability of an HUF : Rs.
1. Gross income tax on its total income at the prescribed rates as aforesaid:
(a) Gross income tax on winnings under [Sec. 115BB] xxx
(b) Gross income tax on long-term capital gains [Sec. 112(1)] xxx
(c) Gross income tax on short-term capital gain (Sec. 111A) xxx
(d) Gross income tax on the balance of total income xxx
Total gross income tax xxx
2. Less: Rebate from gross income tax under Sec. 88E xxx
Net income tax xxx
3. Add: Surcharge on income tax xxx
4. Add: Education surcharge @ 2% on the aggregate income xxx
tax and surcharge
5. Add: SHEC @ 1% xxx
Total tax (3 + 4+ 5) xxx
6. Less:
(a) Rebate on share of profit from AOP under Sec. 86 where AOP xxx
(association of person) has been taxed at normal rate
(b) Relief under Sec. 89(1) xxx
(c) Double taxation relief under Sec. 91 xxx
Tax due from an HUF
Less: Prepaid taxes:
(a) Tax deducted at source xxx
(b) Advance payment of tax xxx
(c) Tax paid on self-assessment under Sec. 140A xxx
Tax payable/refund due to the assessee
Tax payable is rounded off to the nearest multiple of Rs. 10 (Sec. 288B). xxx
1. The following details have been supplied by the Karta of an HUF. You are required to compute
its total income and tax liability for the assessment year 2009-2010.
Particulars Rs
(i) Profits from business (after charging Rs 1,00,000 salary to Karta for 15,00,000
managing the business).
(ii) Salary received by the member of a family. 60,000
(iii) Director’s fee received by Karta from B Ltd where HUF holds 40,000
20% shares but he became director because of his qualifications,
(iv) Rental income from house property (after deduction of municipal taxes Rs 2,000). 78,000
(v) Dividends (gross) from Indian companies 15,000
(vi) Long-term capital gain 80,000
(vii) Short-term capital gain 30,000
(viii) Donation to a school, which is an approved institution, 1,00.000
(ix) Deposits in Public Provident Fund 20,000
(x) NSC-VIII issues purchased on 15.3.2009. 40,000
http://success-gurus.blogspot.com
2 Tax Supplement
Solution: Computation of Total Income
Particulars Rs Rs
(i) Income from house property:
Gross annual value (Rs 78,000 + Rs 12,000) 90,000
Less: Municipal taxes paid 12,000
Annual value 78,000
Less: Statutory deduction: 30% ×78,000 23,400 54,600
(ii) Profits and gains from business 15,00,000
(iii) Capital gains (a) long-term + (b) short-term 1,10,000
(iv) Income from other sources—gross dividends from Indian Nil
companies: Exempt [Sec. 10(34)]
Gross total income
Less:
1. Contribution to approved savings (Sec. 80C)
(i) Deposits in Public Provident Fund 20,000
(ii) NSC-VIII Issue 40,000
60,000
2. Donation to recognised school:
(a) Actual donation: Rs 1,00,000 or
(b) 10% of modified total income of
Rs 15,24,600 (16,64,600 - 80,000 - 60000)
whichever is less, is qualifying amount.
Amount of deduction: : 50% of Rs. 1,00,000 50,000 1,10,000
Total income 15,54,600
Computation of tax liability:
Particulars of total income Rate of income tax Rs
Rs Rs
(a) Long-term capital gain 1,10,000 20% 22,000
(b) Balance of total income: Rs 14,44,600
(i) First 1,10,000 Nil —
(ii) Next 40,000 10% 4,000
(iii) Next 1,00,000 20% 20,000
(iv) Balance 11,94,600 30% 358,380
Gross income tax 3,80,380
Add:1. Surcharge on income tax @ 10% 38,038
surcharge 4,18,418
2. Education cess @ 2% on the aggregate of 8,368
income tax and
3. SHEC @ 1% 4,184
Tax payable 4,30,970
http://success-gurus.blogspot.com
Tax Supplement 3
2. Prem was the Karta of HUF. He died leaving behind his major son Anand, his widow, his
grandmother and brother’s wife. Can the HUF retain its status as such or the surviving persons
become co-owners?
Answer: Income-tax law does not require that there should be at least two male members to
constitute an HUF [Gowli Buddanna CIT (1966) 60ITR 293 (SC)]. The expression “Hindu undivided
family” used in the Act, should be understood in the sense in which it is understood under the
Hindu personal law. The expression “Hindu undivided family” under the Income-tax Act is known
as “joint Hindu family”, under the Hindu personal law. A ‘Joint family’ may consist of a single male
member and the widows of the deceased male members. The property of the Hindu joint family
does not cease to be an HUF property merely because that the HUF, consist of one male member
at a given point of time, exercising the proprietary rights over the property of HUF property.
3. J (HUF) was the owner of a house property, which was being used for the purposes of a
business carried on by a partnership firm JC & Co. in which the Karta and other members of the
HUF were partners in their individual capacity. The Assessing Officer proposes to assess the
annual letting value of the said property as the HUF’s income from house property. The HUF
contends that the building was used for business purposes and, therefore, the annual letting
value thereof was not taxable in its hands as income from house property under Sec. 22. Examine
the rival contention.
Answer: Section 22 directs not to tax the annual value of a house property which is used by the
owner for his business m
profession, the profits of which are chargeable to tax. In the instant
case, the HUF is not using its property for its business. The Karta of the Hindu undivided family
and other members of the HUF are partners in the firm in their personal capacity. They have not
joined the partnership on behalf of the HUF. Therefore, it cannot be said that the HUF property
was being used by the HUF for its business. Hence, the Assessing Officer is justified to tax the
income of the HUF property as income from “house property”.
4. J.Hazra was the Karta of a Hindu undivided family which was assessed to income tax. He died
in an air crash and his two sons received Rs 8 lakhs as compensation and Rs 6 lakhs from the
insurance company. The said amount of Rs 14 lakhs was invested in units. The assessee claims
that the income from these units is assessable as income of the Hindu undi
vided family composed of his sons and their families. Discuss.
Answer: The right to receive compensation and insurance claim did not vest in the assessee
during his life-time. It came into existence only after his death. The income from investment and
compensation would be personal income of the asses see [CIT v. L. Bansi Dhar & Sons (1980) 123
ITR 58 (Del.)].
5. C, the Karta of a Hindu undivided family, was appointed as the treasurer of a private sector
bank on his furnishing security of the family property valued at Rs 3,00,000, as required by the
service rules of the bank. C does not own any self-acquired property.
(i) Discuss how the remuneration of C as the treasurer should be assessed.
(ii) Will your answer be different if C had joined a partnership firm as a partner by contributing
family funds of Rs 30,000.
Answer:
(i) Remuneration from bank cannot be treated a return on the security of family property,
pledged with the bank to secure the continuity of service. It cannot be treated as income of
the HUF.
Remuneration is a compensation for services rendered by C, in his personal capacity on
account of personal qualifications. C is assessable on remuneration as income from “salary”.
He can claim standard deduction under Sec. 16.
(ii) Membership of partnership has been obtained because of HUF funds and not because of
personal skill or qualification of C. Therefore, any income from partnership firm will be treated
as income of the HUF.
http://success-gurus.blogspot.com
For more information, question papers download visit http://success-gurus.blogspot.com
Comments (0)
Post a Comment