Distribution of HUF Funds - Section 171

[satbir singhwahi]

huf has funds Rs.50 lacs. The family members want to distribute Rs.40 Lacs amongst them. Can they do so in view of section 171 of IT Act. Otherwise what remedy one has.

[Rama Krishana]

Partial partition is not allowed under section 171. If the members wants to use the funds of the HUF either partition the HUF completely in terms of section 171 or distribute loan after complying with the conditions of sections 269SS and 269T of the Income Tax Act, 1961.

AI Summary

Prohibition on partial partition: HUF cash can be released only by complete partition or by loans complying with statutory loan rules. Partial partition of a Hindu Undivided Family is not permitted under Section 171; HUF funds cannot be selectively distributed unless the HUF is completely partitioned. Alternatively, funds may be advanced to members as loans provided those advances comply with the statutory restrictions and procedural conditions applicable to loans between parties.