HUF--Interest deduction u/s 24(b)

Hi Mr Laxman,

Being not a juristic person like a company, the HUF cannot ownproperties in its own name. Being not a "person" in a legal sense,it is not competent to contract. But it has the Karta, who isveritably the Alter Ego of the HUF. All its assets are held in theKarta's or some other coparcener's name. But this question is ofacademic interest only. The point is that immovable property can beacquired with the funds of the HUF. All those capital gainsexemptions u/s 54, et al speak of both an individual and an HUF.Nearly all the deductions and exemptions realting to propertyavailable to an individual in the Income tax law are available tothe HUF also.If the income from house property is taxable in an HUF's hands,there is no reason why Section 24 deduction on account of intereston housing loan can't be available to it. Consider the followingcase:[A part of the cost of construction of a house property belonging toan HUF was raised by the Karta utilising a housing loan obtained byhim from his employer. The Karta claimed that he had lent money tohis HUF. The coparceners of the HUF confirmed this arrangement.It was held that the revenue is not correct in such a case inholding that there was a transfer of personal funds by the Karta toHUF within the meaning of section 64(2) of the Income Tax Act.Merely because in this case there was physical blending of funds,the revenue cannot claim that there was a case of blending. Ablending or vesting requires a mental intention to abandon separateright.So in this case there was neither a blending nor gift so as toattract section 64(2). The loan, though personal, was being directedto the family along with an obligation to return it with interest.The family thus adopted the housing loan as its own and it obtainedthe same on condition that it would pay interest equal to the samepayable by the Karta. The interest for the loan so utilised inconstruction was deductible under section 24. [Justice G. RamanujuluNaidu v. ITO 6 ITD 465]So interest on money borrowed by the HUF even from the Karta can beclaimed by it u/s 24(b).

Thanks,

CA Sanjeev Bedi-

-- In http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/post?postID=eBF5n-qL8s3Z9BcugQzpcM62in2LWC5DPldaJgXRVpvsX5F1GwS_f1qrc5_0GW61bmhMlY2S_4QuANa9zH8WTG6Gt1qQRlsN-4Sy, Laxman Sundesha wrote:>>> Dear Sanjeev,>> Wonderfull elaboration on the untouched subject of HUF for thebenefit of colleagues ad member of the Institute. There is one morequestion arose in my mind i.e whether a HUF can hold/purchasesimmovable properties in its name , specially residential house ? Inthis case whether husband or wife can pay loan taken by HUF andavail deduction u/s 24 (b) ? Please put some light on this.