Capital contribution in huf

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suman (Querist)

24 January 2012 if an individual contributes 25 lac rs as his capital conrtibution to huf then whether he will be taxed for same or not?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

24 January 2012 Capital Contribution means -
As a loan? , or
as a Gift?

.
He should be in a position to the explain the source of such a big amount. If he can not explain the source of the investment he not only will be taxed, but will also be penalised.
.
If he gives loan, there is no issue, except
to see whether the funds are his own or borrowed?
In case of borrowed funds, where he has to pay interest to the lender, against this, he should have to charge interest from the
HUF. If he is contributing from interest free funds or own funds, issue of interest may easily be addressed.
.
If he gifts the amount , income arising from such contribution will be taxed in his hands vide Section 64(2).
.

suman

suman (Querist)

24 January 2012 Thanks sir

he is in a position to show rs 25 lacs as he has amount in his balance sheet.

if he chooses to make gift under irrevocable trust mode than it will not be tax in his hand u/s 64(2) pls clarify i am right or not?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

25 January 2012 Being a member of the said HUF, it can not be said that he does not derive direct or indirect benefit from income arising out of such funds.

The income arising to irrevocable trust is includible in the hands of the transferor.
.
Further, in relation to HUF & its member, direct or indirect conversion both are covered U/s 64(2).

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