Circular No. 207

Whether coparcener of HUF can be regarded as benamidar of HUF and thus obliged to file Form No. 12A in terms of Explanation (b) of section 185(1)

What this is

Circular No. 207 was issued by the Central Board of Direct Taxes on 24 September 1976. Its subject is Whether coparcener of HUF can be regarded as benamidar of HUF and thus obliged to file Form No. 12A in terms of Explanation (b) of section 185(1).

What it does

Holds that a karta who is a partner in a firm on behalf of his Hindu undivided family is not a benamidar of that family for the Explanation to section 185(1), substituted by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976. That Explanation treats a firm as not genuine where a partner is a benamidar of a non-partner and another partner knew or had reason to believe it and did not tell the Income-tax Officer in the prescribed manner. Since the karta is not a benamidar of the family, there is no obligation to file Form No. 12A in such cases.

Why it was issued

The Board examined whether clause (b) of the new Explanation reached the common case of a karta joining a firm for his Hindu undivided family.

Who it reaches

Firms with a karta as partner representing a Hindu undivided family
Other partners who would otherwise have had to disclose in Form No. 12A
Income-tax Officers testing genuineness for registration under section 185

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.185	s.326
s.186	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

Whether coparcener of HUF can be regarded as benamidar of HUF and thus obliged to file Form No. 12A in terms of Explanation (b) of section 185(1)

1. Reference is invited to the Explanation to section 185(1) as substituted by the Taxation Laws (Amendment) Act, 1975. This Explanation has been made effective from April 1, 1976. The Explanation reads as under:
"For the purposes of this section and section 186, a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar—
(a) of any other partner to whom the first-mentioned partner does not stand in the relationship of a spouse or minor child, or
(b) of any person, not being a partner of the firm, and any of the other partners knew or had reason to believe that the first-mentioned partner was such benamidar and such knowledge or belief had not been communicated by such other partner to the Income-tax Officer in the prescribed manner.
2. The Board have examined the question whether the provisions of clause (b) of the Explanation referred to above will apply to a case where a karta of Hindu undivided family is a partner in a partnership firm on behalf of this Hindu undivided family. The Board are of the view that a karta of the Hindu undivided family cannot be regarded as a benamidar of the Hindu undivided family. In view of this there is no obligation to file Form No. 12A in such cases.
Circular: No. 207 [F. No. 220/20/76-IT], dated 24-9-1976.

What to watch

The clearance is confined to the karta acting for his family; it says nothing about any other partner holding for someone else.
Clause (a) of the Explanation, dealing with a partner who is benamidar of another partner, is untouched by this circular.
Firm registration under sections 185 and 186 and Form No. 12A have long since gone from the scheme of the Act.

Where you meet it

On an old refusal or cancellation of firm registration on the ground that a partner was a benamidar and no Form No. 12A was filed.

What it names

Forms it names. Form No. 12A

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. Notification No. 103/2019 [F. No. 370149/159/2019-TPL]/SO 4455(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 13 December 2019
Notification No.59/2016 [F.No.142/8/2016-TPL] /SO 2476(E) — [To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)] 20 July 2016
Circular No. 224 — Whether coparcener of HUF can be regarded as benamidar of HUF and thus obliged to file Form No. 12A in terms of Explanat 22 June 1977
Circular No. 70 — New Form Nos. 11, 11A and 12 incorporating provisions of Explanation inserted by Taxation Laws (Amendment) Act, 1970 not 11 December 1971
Circular No. 31/2016 — Circular No.31 of 2016 30 August 2016
Circular No. 19/2016 — - Central Board of Direct Taxes 25 May 2016

← Circular No. 208 · Circular No. 206 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.