Property transfer to director,s HUF in Private company

This query is : Resolved 

(Querist) 06 November 2008

Our company wants to transfer a property in the name of the one of the Direcotr' HUF. Accordingly company will charge nominal rent from the director's HUF. On other side HUF will earn Income from the same property.
Can any one explain the implication in Income tax or any other act for the same transaction.

S.Srinivasaraghavan (Expert) 06 November 2008

Assuming that the HUF status is accepted by IT authorities, HUF will be assessable for property income depending upon its crossing the non taxable limit.

In the case of company it will have to be assessed for Capital gain.

YOGESH GUPTA (Querist) 06 November 2008

thanks Mr. Srinivasaraghavan

But is there any chance that Assessing officer take a view that income has been transfered from company to HUF and if it possible what couse of action A.Officer can take.


S.Srinivasaraghavan (Expert) 06 November 2008

No. In the case of sale for a full consideration such a presumption is not possible.

YOGESH GUPTA (Querist) 06 November 2008


CA Shailesh +91 9393926464 (Expert) 06 November 2008

"Accordingly company will charge nominal rent from the director's HUF"

What does it mean? After the transfer, how could the company charge rent on it? Please make ur query clear in this part

YOGESH GUPTA (Querist) 07 November 2008

Dear Shailash

Sorry There is typing mistake.

The Querry was for renting of property or sale of property. But the answer is for sale of property only.

Please answer if property rented out to HUF what would be the legal implication and assumption of Assessing officer in this regard

S.Srinivasaraghavan (Expert) 07 November 2008

It depends upon the value of transfer, acceptability of HUF to the satisfaction of the AO etc.,

CMA A.K.ROY (Expert) 07 November 2008

While renting to HUF by the company the following points to be considered u/s 40A 2(b)-payment to relatives

we can say judgement of reasonableness of payment

-copy of Rent agreement
-Amt of rent
-Basis of rent (say per sq.ft)
-Market value of rent with proof

YOGESH GUPTA (Querist) 08 November 2008


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