28 November 2011
I have a commercial land owened by me. Since I am in job in PSU and the land is commercial one,i can't build a commercial complex on the said land and undertake any business like letting out of the property on rent. As the land is in the mid of the city and there was possibility of encroachment leading to litigation, I authorised my elder brother with POA to carry out construction of commercial complex as per the plan. Expenses on construction was met by i) my contribution (40%), ii) my elder brother's contribution (40%) and iii) security money received from the proposed tenants (20%). Now the construction work is over and rental income is likely to be received. Since I am away from the place on my transfer and I am not supposed to undertake any business by virtue of service conditions, I want to lease out the above property to a person (on a nominal lease amount),it may be partnership firm or HUF,to whom i will authorise to hold it and to give it to others on rental basis, so that my personal tax liability do not increases and rental income become taxable in the hands of that entity.So to summerise at end i have two queries - 1. whether partnership firm can hold the immovable proprty under regulatios of partnership act? 2. Whether i can do so to avoid my tax liability, means i dont want to sell it but simply want to authorise that person by way of power of attorney?either to my elder brother who is taking care of the property or to a partnership firm which includes my brothers and my wife to get back the expenses in legitimate way. 3. Any other alternative to manage the property / rental income.
28 November 2011
1 as per ur first query a partnership can hold immovable property.
2.In this case the property transferred on poa basis will be deemed to ur property and any income from this will be clubbed in ur income as provisions of income tax act,1961.
3. You can devide the agreement of rent in two parts first one is for renting and other one for provision for services and same will be taxable as business income.
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