Huf - gift tax (Income Tax)

This query is : Resolved

Author : Anonymous

( Author )
31 December 2011

Can a Father can gift property worth 75 lakh to his son’s newly created HUF without attracting gift tax ? How can gift tax be exempt?

Siddhartha Bhardwaj

( Expert )
31 December 2011

Gift Tax Act was abolished w.e.f 1.10.1998. Accordingly gift tax is not levied on gifts made on or after 1.10.1998.

However, there are a few problems with your query.

First, how can the son form a HUF when his father is still alive. The father shall be the karta being the eldest male member (assuming the father does not have an elder brother).

Second, where a member of a HUF transfers property to his HUF, clubbing provisions are attracted and income from such property is taxable in the hands of the member.

Author : Anonymous

( Author )
31 December 2011

Sir,

A son can form his HUF after his marriage eventhough his father is still alive.

My query was whether a father can gift property to his son's HUF without attracting the provisions of Section 56(2)(vii)

Yogesh Agarwal

( Expert )
31 December 2011

I think it will be taxable. Since the exceptions given under the section is not applicable in your case....

Anyway please tell me the nature of property being gifted... If it is not coming within the definition of Property given under the explanation (d)...

CA PARAS BAFNA

( Expert )
31 December 2011

If father is a relative of son's HUF, then Section 56(2)(vii) does not attract and gift is not taxable in the hand of the HUF.
.
Rajkot tribunal has given a judgement in favour of the assessee. It has been stated in the judgement that HUF is a group of persons. Father is relative of every member of Son's HUF. Basically the gift is being received by a group of Individuals(HUF) from a relative. As such it is exempt.

Author : Anonymous

( Author )
02 January 2012

Paras Sir,
Thanks. I have found a judgement of the Rajkot Tribunal. VINEETKUMAR RAGHAVJIBHAI BHALODIA
C/O SAMAY ELECTRONICS PVT LTD AT
VIRPUR, RAJKOT-MORVI HIGHWAY MORBI
PAN NO:AFPPB6969M

Vs

INCOME TAX OFFICER
RAJKOT WARD-5(4), MORBI

However, this judgement relates to the gift taken by the assessee from the HUF.

Can you please give the citation of the judgement which says that Father is relative of son's HUF. It will be very helpful.

regards

Author : Anonymous

( Author )
02 January 2012

CA PARAS BAFNA

( Expert )
02 January 2012

Yes. I was referring the said judgement only.
.
If an Individual is relative of HUF this only requires to be established. Gift may flow in either side as the relationship flows.