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> Now this person i.e. grand father of the married person wish to gift certain amount in cash as well assets out of his HUF money to the HUF of his grand son.
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> Members are requested to kindly share their views on the validity of thus transaction with respect to Income Tax Act, 1961. Further whether this shall be treated as gift from the HUF of grandfather to the HUF of grandson and therefore would be taxable as income in the hands of HUF of grandson.
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> Whether the clubbing provisions shall be attracted to this transaction. If yes, then the rational for this.
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> Members are requested to kindly share their views supported by case law, notification, circular or section / rule.
By CA Brajesh Agrawal
Ans Section 64(2) of the Income-tax Act, 1961 begins as follows :
"Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time after the 31st day of December, 1969, been converted by the individual into property belonging to the family ......"
Thus, the HUF has to be one of which such individual is a member, in order to attract the clubbing provisions of s. 64(2). The given case relates to gift by one HUF to another. There are no clubbing provisions relating to such gifts, i.e., by one HUF to another. Therefore, the same are not attracted.
In CIT v. Premji Bhai Parekh (1970) 77 ITR 27 (SC), it was held that before an income can be held to come within the ambit of section 16(3) of the 1922 Act [corresponding to section 64 of the 1961 Act], it must be proved to have arisen, directly or indirectly, from a transfer of assets to any of the persons specified therein. In order to check whether section 64 is applicable to a particular case, provisions must be strictly constructed.
However, the provisions of section 56(2)(vii) are squarely applicable.
It must be borne in mind that the Karta is the controller and custodian of the finances of the HUF. He can gift away the movable assets of the HUF out of natural love and afffection but only within reasonable limits.
Regards,
by CA. B. L. Bhojwani
B. L. Bhojwani & Associates,
By djain128, Section Case Laws
Posted on Sat Jan 09, 2010 at 10:29:21 PM EST
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