DIFFERENT WAYS OF CREATING OF HUF
A HUF can be created by following ways:
- Blending of individual property with the family Hotchpot
- Receipts of Gifts
- Doing Joint labourfor the benefit of HUF
- Inheritance through a specific bequest under a Will
- Partition of a larger Hindu Undivided Family
- Reunion of separated coparceners
1. Creation of HUF Corpus by Blending
Blending means transfer of one’s individual property in the common hotchpot and make it a part of the common property of the HUF. There must be an intention to throw the separate property into the common stock and it is necessary to waive all separate rights in respect of the property, which must be clearly established through a declaration. Only the coparcener is entitled to throw in HUF’s common property
2. HUF Creation by receipts of Gifts
HUF is a creation of law and cannot be created by the act of parties, therefore, HUF cannot be created for the first time by a gift from the stranger. If HUF already exists, gift can be made by a stranger to such HUF.
The gifted property will be HUF property if the gift is made to HUF.
Intention of donor & the character of the gifted property will depend on the construction of the gift deed.
Some Precautions which is to be taken by family while accepting gifts
- Clear declaration of intention through affidavit
- Gift to be valid & genuine.
- No specific bar to a gift by the father to the HUF of his son, his wife & minor children. However, for avoiding the clutches of sec 64 (1)(vi) such gifts better be avoided
- HUF can accept gifts from relative who may not be the member of the family.
3. HUF creation by Doing Joint labour for the benefit of HUF
Property acquired in the course of some business carried on by the persons constituting a joint Hindu family, takes the characteristic of joint family property.
As per Hindu law, in case of properties not acquired with the aid of joint family property, it is presumed that property acquired by coparceners by working together is joint family property unless the persons concerned desire to hold it as co-owners. This is valid if the coparceners are carrying on work together and belong to the same line of ancestors.
The income from such property is out of the purview of section 64(2) of the Income Tax Act, 1961 and section 4(1 A) of the Wealth Tax Act, 1957.
In the cases of properties acquired with the aid of joint family property is also the joint family property.
4. HUF creation by Inheritance through a specific bequest under a Will
A HUF can also be created by will of a person provided the will is valid and there is a specific bequest in favour of the HUF .Moreover, HUF need not be in existence at the time of execution of will. Even a stranger can bring a HUF into existence by making a will in the favour of HUF of a person.
Some points should be remembered :
– No existence of HUF at the time of execution of will.
– Valid will should be there. – An HUF is created if there exist a valid will.
5. Creation of HUF by Partition of a larger Hindu Undivided Family
Partition of an existing HUF can also result in creation of many smaller HUFs. As per Hindu Law, the property does not change its character on partition. Property received by a coparcener having a family, continues to have characteristic of HUF. An unmarried coparcener receiving any property will own the property in the status of HUF until he acquires the status of HUF. In case of married coparceners who have no child, the property will continue with the status of HUF.
However, the partition has to be total partition because the law does not recognize partial partition as per Income Tax Law.
6. Creation of HUF by Reunion of separated coparceners
Even after partition of HUF, members may re-unite to form a new HUF. However, there are certain conditions to make such reunion valid in the eyes of law. Reunion can take place only when there was in existence a HUF and there was total partition of such HUF. It can take place only between persons who were parties to the original partition and to support such reunion, there must be an agreement between the parties. To constitute a reunion there must be an intention of the parties to reunite in estate & interest and such intention is evident. As per Mitkarsha, Dayabhaga and SmritiChandrika, a member of a joint family once separated can reunite only with his
- brother or
- paternal uncle but not with any other relation.
Some Decided Cases facts related to HUF
1. Under the Hindu Law:
- It is possible among persons who were on earlier date, members of HUF.
- There must have been a partition in fact.
- Reunion must be effected by the parties or some of them who had made their partition.
- Must be a junction of estate & reunion of the property
Further, share of property of reunited members got at an earlier partition &
- its possession at the reunion
- becomes the property of the joint family.
2. It is not necessary that all the property
- Belong to HUF should be brought back
- in to the re-united joint family
- This reunion is said to be VALID
3. The minor cannot be a part of reunion neither by self nor by someone on behalf of such minor.