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"HUF Reunion And Tax Planning"

 

The Madras High Court gave a very interesting decision with regard to HUF reunion. This decision is a very classic one for all those who are interested to have a reunion of their earlier Hindu Unidivided Family. The Madras High Court in the case of CIT v. A.M Vayapuri Chettiar and Another [1995] 215 ITR 836 laid down very precisely the condition which are precedent for a valid reunion under the Hindu Law.


When the matter came up before the judges, first of all they opined that conditions precedent for a valid reunion under Hindu Law are as under:

1.       There must have been a previous state of union, reunion is possible only among the persons who were, on an earlier date, members of a Hindu undivided family;


2.       There must have been a partition in fact;

 

3.       The reunion must be effected by the parties or some of them who had made the partition; and

 

4.       There must be a junction of the estate and the reunion of property because a reunion is not merely an agreement to live together as tenant-in-common. Reunion is intended to bring about a fusion in interest and in the estate among the divided members of an erstwhile Hindu Undivided family so as to restore to them the status of a Hindu undivided family once again and, therefore, reunion creates a right on all the reuniting coparceners in the joint family properties which were the subject matter of partition among them, to the extent they were not dissipated before the reunion.


Finally, the High Court upheld the order passed by the Income Tax Appellate Tribunal regarding the reunion of the HUF.

 

From the A.Y. 2013-2014 the gifts received by HUF from its members would not be treated as gift and hence not added to income.
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