A Hindu Undivided Family is said to be resident in India in any previous year where the control and management of whole of its affairs is situated in India.
A Firm or Association of Persons is said to be resident in India in any previous year where the control and management of its affairs are wholly or partly situated within India during the relevant previous year. They are however treated non-resident in India, if control and management of whole of its affairs are situated wholly outside India.
The residential status of the HUF under Income Tax Act:
Section 6(2) of the Income-tax Act, 1961, clearly contemplates a situation where a HUF can be non-resident also. In fact, HUF can also be Not Ordinarily Resident. HUF will be considered to be resident in India unless, during the previous year, the control and management of its affairs is situated wholly outside India. In such a case, it will be treated as non-resident HUF.
Section 6(6)(b) of the Income-tax Act, 1961 further provides that, in case of a HUF whose manager has not been resident in India in nine out of ten previous years preceding the previous year or has, during the seven previous years preceding that year, been in India for a total 729 days or less, such HUF is to be regarded as not-ordinarily resident within the meaning of the Income-tax Act, 1961. As such, it is not necessary for a HUF to be resident in India.
In case of change of Karta of HUF during the year, the residential status of HUF can be determined by considering the period of stay in India of both Karta of HUF i.e. previous Karta and successive Karta.
Under the Income Tax Act the residential status is determined with reference to the previous year relevant to a particular assessment year. Therefore the residential status of HUF may also be different for different assessment years considering the facts of relevant previous year.
As discussed earlier, the test is not where the Karta resides; the test is where the control and management of the affairs of HUF is situated. Even if a part of control and management is situated in India, such HUF will be treated as resident in India. Though, generally, Karta is supposed to manage the affairs of HUF, it is not an absolute rule and, by consent, the power of control and management may be delegated to other members of the family, either fully or partially. The relevant factor for determining the status is where the control and management of HUF is situated (even in part). Therefore the HUF may be resident even where the Karta was residing outside India for whole of the year.
As per Section 10(2), of the Income-tax Act, 1961, any sum received by an individual from Hindu Undivided Family of which he is member is exempt from tax. But the amount received not as a member of Joint Family but in pursuance of some statutory provision, etc. would not be exempted in this section. Also the position of member of joint family in law to claim the right u/s 10(2) does not get affected only with the reason that they are living apart from the other members of the family.
As Per Section 6(2), Of the Income Tax Act, 1961-
Residence in India.
6. For the purposes of this Act,—
(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.