HUF taxation: Implications of coparcener's death

livemint.com:

I presume that it would be legal for taxation purpose in case we form a HUF with the following structure as we have 2 coparceners.

Father — Coparcener — Karta

Mother — Member

Son — Coparcener

Daughter in Law — Member

I wanted to know what would be the status of the HUF in case Karta dies leaving only one coparcener and two female non-coparcener members.

Please note that a HUF cannot be formed by action of parties. Under the tax laws as developed by various judicial pronouncements, a HUF comes into existence as soon as a child is born into the family. Please note that HUF and HUF assets are two different things.

There may be a HUF in existence without there being any HUF assets.

In your case, the HUF came into existence as soon as the son was born in the family. It is necessary to have a minimum of two coparceners for a HUF to come into existence but it may continue even if the number of coparceners is reduced to one provided there are one or more widows alive in the HUF when it is reduced to a single coparcener HUF.

In Gowli Buddanna v/s Commissioner of Income-Tax, Mysore (60 I.T.R. 293) the Supreme Court has held that there might be a joint Hindu family consisting of a single coparcener and the widows of deceased coparceners. The court held that on the death of Buddanna Karta of the HUF, the family which included a widow and females born in the family was represented by their adopted son and the property continued to belong to that HUF and income received therefrom was taxable as income of the HUF.

The above decision was rendered long before the amendment of Section 6 of the Hindu Succession Act, 1956 in 2005 which had made females born in the family also coparceners having status equal to the sons of the family.

Balwan