the house property is a capital asset. Its transfer result in capital gains which is chargeable to tax under the I T Act. However, transfer of assets from HUF to its members is special case. There is express provision under the I T Act which says that the distribution of capital asset on total or partial partition of HUF is not regarded as transfer for the purpose of I T Act. The said provision contained in section 47(i) of the I T Act is as under:

“47. Nothing contained in section 45 shall apply to the following transfers :(i) any distribution of capital assets on the total or partial partition of a Hindu undivided family;”

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In the case of total or complete partition, the Hindu Undivided Family ceases to exist as such and therefore, where there is a proper claim for partition and where the same is accepted by the AO, the Hindu Undivided Family ceases to be assessed as an HUF after the date of total partition.

Where the property admits of a physical division, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition;

Where, at the time of making an assessment under Section 143 or 144, it is claimed by or on behalf of any member of a Hindu Undivided Family that a total partition has taken place amongst the members of such family, the AO shall make an inquiry thereon after giving notice of the inquiry to all the members of the family.

Where a finding of total partition has been recorded by the AO under Section 171 of the IT Act, and the partition has taken place during the previous year,

The total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and

Each member or group of members shall, in addition to any tax for which he or it may be separately liable, be jointly and severally liable for the tax on the income so assessed.

Thus, where a genuine complete partition takes place and some property is divided among the persons entitled to the share on partition, the income from the partitioned assets is liable to be assessed in the hands of the smaller branches of the HUF formed by the coparceners of a bigger Hindu Undivided Family. Where certain income is assessed in the hands of a bigger Hindu Undivided Family which has some coparceners who are the Kartas of their respective branches of the HUFs, the complete partition of the bigger HUF can enable the smaller HUFs to have their own separate income tax files if they did not exist before. The total partition of a Hindu Undivided Family can be taken advantage of by an HUF for effecting tax saving by proper tax planning.

The information given here under which was already opined in my previous reply is reproduced once again which in my opinion is the answer to your subsequent question:

The total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and

Each member or group of members shall, in addition to any tax for which he or it may be separately liable, be jointly and severally liable for the tax on the income so assessed.

Thus, where a genuine complete partition takes place and some property is divided among the persons entitled to the share on partition, the income from the partitioned assets is liable to be assessed in the hands of the smaller branches of the HUF formed by the coparceners of a bigger Hindu Undivided Family.

Coparceners cannot claim capital gains tax benefit if land and house belonging to HUF is being sold. Taxable event occurs in hands of HUF only .