Taxability in hands of Individual

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Bharath (Querist)
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05 April 2009 Hi,

My query is:
X (HUF)carries on business of selling gold. X (HUF) is a senior citizen. He now wants to transfer the whole business to his sons Mr Y and Mr Z. X (HUF) will be fully dissolved after the assets are transferred. Mr Y and Mr Z wants to carry the same business of selling gold with the help of assets transferred from X (HUF). Mr Y and Mr Z are carrying on business in a individual capacity ie sole proprietorship. please note that the stock held here is GOLD.

Can someone help in knowig the tax implications of transferring business from HUF to Individual. Also ways to mitigate tax, if any or other implications. Your reply would be of great help. Thanks

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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06 April 2009 If you directly transfer the business to individuals you may land up in capital gain tax problems.

since already each individual is having sole proprietorship firm and huf is also carrying gold business please follow the follwing steps.

Sell the stock of gold to individuals.
Then Debtors will appear.
Then dismatile huf. Transfer each share to individual. Then tranfer the debtor to the share of individual.

Remaining if any it should be tranferred by way of bank or cash payaments.

If properties are there then you have to make partition deed and then based on that the properties has to be transferred.

Bharath

Bharath (Querist)
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11 April 2009 Hi srinivasulu, thanks for your reply. HOwever correct me if i am wrong. The business of X(HUF) is of selling gold. So gold here is stock in trade. As per Sec 2(14), capital assets excludes stock in trade held for purpose of business. So i think charging sec 45 fails as there is no capital asset and capital gains should not arise on transfer.

Can u please explain the process of transfer of each share to individual and transfer of debtor to individual. How will this work.

Thanks in advance

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