03 July 2011
Does blending of individual property to huf by the co-parcener attracts capital gain? what is the position with regard to clubbing provisions in this matter?
03 July 2011
nO IT DOES NOT ATTRACT CAPITAL GAIN BECAUSE FOR THE PURPOSES OF THE ACT THE INDL IS DEEMED TO BE OWNER OF THE PROP[ERTY AND INCOME FROM PROPRTY IS TREATED AS HIS INCOME. THE ABOVE PROPSITION FURTHER GET CONFIRRMED BY CIRCULAR NO 204 DT 24-7-1976 THIS CIRCULAR EXPLAINED THE REASON FOR AMDT IN SECTION 49 AND PROVIDED AS UNDER "Where property is transferred to HUF by the mode referred under section 64(2), the cost of acquisition in case of HUF will be deemed to be the cost for which the individual acquired the property 15. Section 49 did not contain any provision for determining the cost of acquisition of a capital asset in cases where the asset became the property of a Hindu undivided family by the mode referred to in section 64(2) of the Income Tax Act. Section 64(2) provides that where an individual being a member of a Hindu undivided family converts at any time after 31-12-1969, his separate property into property belonging to the Hindu undivided family, he will be deemed to have transferred the property through the family to the members of the family for being held by them jointly.
Under the provisions of section 64(2), as amended by section 13(b) of the Amending Act income derived from the converted property will be deemed to arise to the individual himself and not to the family. By virtue of the aforesaid provision, capital gains arising from the transfer of the converted property will be chargeable to tax in the hands of the individual. However, where the converted property is transferred by the HUF after the death of the individual, capital gains arising from the transfer will be chargeable to tax in the hands of the family. Section 49, as amended by the Amending Act provides that the cost of acquisition of such an asset in the case of the HUF will be deemed to be the cost for which the individual acquired the said property. The cost of the acquisition of the asset in such cases will be increased by the cost of improvement of the asset incurred or borne by the individual or, as the case may be, the HUF. The amended provision takes effect from 1-4-1976 and will, accordingly, apply in relation to the assessment year 1976-77 and subsequent years."
CA MANOJ GUPTA' JODHPUR 09828510543 gm2104@gmail.com
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