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ABHIJIT (Querist)
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08 March 2011 if a person want to transfer his business(proprietary concern)i.e all assets and also dealership that he is having, to his daughter-in-law who is actualy indian but she is just became NRI from last year and she will continue to be NRI for few more year.
1)Can her father in law transfer business to her(NRI)?
2)Will clubbing of income affect in the above case? Who will have to pay tax fatherin law or daughter in law?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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10 March 2011 1.) Yes, but kindly see the Income Tax implications.
2.)If the businees is sold at fair market value then clubbing should not apply.

Also FEMA regulations are as under:-
A non-resident Indian or a Person of Indian Origin resident outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India, provided that -

a) the amount invested is received either by inward remittance through normal banking channels or out of an account maintained with an authorised dealer/authorised bank by the non-resident Indian or the person of Indian origin in accordance with the relevant Regulations;

b) the firm or the proprietary concern is not engaged in any agricultural/plantation activity or real estate business, i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom;

c) the amount invested shall not be eligible for repatriation outside India;

Vide AP (Dir series) Circular No. 39 dated December 3,2003, it is provided that NRIs/PIOs can invest in sole Proprietorship concerns/ Partnership Firms also with Repatriation benefits but with prior approval of Secretariat of Industrial Assistance (SIA), Government of India and the RBI.

Persons other than NRIs/PIOs can invest in sole Proprietorship concerns/ Partnership Firms or any association of persons in India with repatriation rights but with prior approval of Reserve Bank.

d) the firm or the proprietary concern is not engaged in print media."

Anuj
9810106211

ABHIJIT

ABHIJIT (Querist)
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12 March 2011 THANKS A LOT SIR

what if business is transfered for free, i.e without any consideration.? of course here clubbing will apply. But can business be transfered for free to NRI(family member only who is daughter-in-law)?

Can father-in-law(who is resident)be a power of attorney for business transfered to his daughter-in-law(who is NRI)?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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14 March 2011 Kindly check whether you can escape provisions sec.56 of IT Act 1961.

I think you are trying a case where it shall be difficult to substantiate the purpose and objective of such transfer.

Anuj
9810106211

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