Commission income in huf & individual
This query is : Resolved
22 March 2017
I am asking my question in story format for better communication of my query. Please spare your precious time and provide your valuable guidance in the following matter:
Mr. Rohit is involved in MLM business of a company (Say Amway or Oriflame) whereby various persons are being continuously added to his downline.
say, both in left leg and right leg, thereby creating a tree.
For example Mr A in right leg and Mr. B in left leg are added to downline of Mr. Rohit. Subsequently Mr. C & D are added to right and left leg of Mr. A and Mr. E & F are added to right and left leg of Mr. B and so on......
Mr. Rohit earns Commission for any purchase sale of products made by persons in downline and also for further extension of downline trees.
Mr. Rohit is having a valid individual PAN Number and a Valid HUF PAN Number.
Now, Mr. Rohit has also added another PAN representing Mr. Rohit (HUF) to his downline.
i.e his HUF PAN is added in downline of his personal PAN. Consequently some amount of commission is also generated under HUF PAN.
Mr. Rohit has been assessing his personal commission income regularly under his PAN and accordingly files return of income.
1) Now the question arises that whether : -
the commission income arising in Mr. Rohit's HUF PAN will be clubbed with Karta's individual income
or
the commission income arising in Mr. Rohit's HUF PAN can be nornally assessed under HUF Income.
2) Will the assessing officer object if the income is assessed under HUF??
Mr. Rohit is involved in MLM business of a company (Say Amway or Oriflame) whereby various persons are being continuously added to his downline.
say, both in left leg and right leg, thereby creating a tree.
For example Mr A in right leg and Mr. B in left leg are added to downline of Mr. Rohit. Subsequently Mr. C & D are added to right and left leg of Mr. A and Mr. E & F are added to right and left leg of Mr. B and so on......
Mr. Rohit earns Commission for any purchase sale of products made by persons in downline and also for further extension of downline trees.
Mr. Rohit is having a valid individual PAN Number and a Valid HUF PAN Number.
Now, Mr. Rohit has also added another PAN representing Mr. Rohit (HUF) to his downline.
i.e his HUF PAN is added in downline of his personal PAN. Consequently some amount of commission is also generated under HUF PAN.
Mr. Rohit has been assessing his personal commission income regularly under his PAN and accordingly files return of income.
1) Now the question arises that whether : -
the commission income arising in Mr. Rohit's HUF PAN will be clubbed with Karta's individual income
or
the commission income arising in Mr. Rohit's HUF PAN can be nornally assessed under HUF Income.
2) Will the assessing officer object if the income is assessed under HUF??
23 March 2017
Commission income arising under Mr. Rohit's HUF PAN should be assessed separately under HUF and should not be clubbed with karta's income because karta (i.e individual) and HUF are two different persons and they wil be assessed separately
23 March 2017
Sir,
Thanks for your reply.
I completely understand that Individual Karta and HUF are two separate and distinct persons. But my query is beyond what appears to be simple.
Issue under consideration is that generally Income Tax Officer disallows commission income in the hands of HUF stating that HUF cannot act in itself for earning commission and services of individual are required for it. Therefore, in past assessments it has been observed that commission income shown in HUF are assessed in the hands of individual by Income Tax Department.
Thanks for your reply.
I completely understand that Individual Karta and HUF are two separate and distinct persons. But my query is beyond what appears to be simple.
Issue under consideration is that generally Income Tax Officer disallows commission income in the hands of HUF stating that HUF cannot act in itself for earning commission and services of individual are required for it. Therefore, in past assessments it has been observed that commission income shown in HUF are assessed in the hands of individual by Income Tax Department.
24 October 2021
Here it will be separate as MLM commission is facilitation fees, not involvement of any person directly.
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