Mitakshara succession after the 2005 amendment limits HUF taxation to the share that legally devolves by succession.

On the death of a Mitakshara coparcener after the 2005 amendment, section 6(3) of the Hindu Succession Act, 1956 deems the joint family property to have been divided and shifts devolution from survivorship to succession. Applying that principle, the deceased coparcener's share devolved on the son in his individual capacity, while the son's own share constituted the smaller HUF. The note therefore states that capital gains on sale of the immovable properties could be assessed in the assessee HUF only to the extent of one-half share, and the balance could not be taxed in its hands.

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Issues: Whether the capital gains arising on sale of the three immovable properties were taxable wholly in the hands of the assessee HUF or only to the extent of one-half share.

Analysis: The applicable legal position under section 6(3) of the Hindu Succession Act, 1956, after the 2005 amendment, is that on the death of a Hindu governed by Mitakshara law, his interest in joint family property devolves by succession and not by survivorship, and the coparcenary property is deemed to have been divided as if a partition had taken place. On that basis, the deceased coparcener's share devolved on the son in his individual capacity, while the son's own share formed the nucleus of the smaller HUF. The alternative approach of taxing the entire gain in the assessee HUF was also inconsistent with the position that, if no partition under section 171 of the Income-tax Act, 1961 is recognized, the entire property could not be assessed in the hands of the assessee HUF alone.

Conclusion: The capital gains from the properties were taxable in the assessee HUF only to the extent of one-half share, and the balance could not be assessed in its hands.

Final Conclusion: The assessee succeeded on the substantive ground, and the appeal was allowed while the alternative grounds were not adjudicated further.

Ratio Decidendi: On the death of a Mitakshara coparcener after the 2005 amendment, succession is governed by section 6(3) of the Hindu Succession Act, 1956, and the resulting deemed division limits assessment in the hands of the successor HUF to the share that legally devolves upon it.

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