Taxes applicable on HUF partial partition

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Sid Sharma (Querist)
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07 June 2011 Hello experts,

My friends father was kicked out of his HUF joint family business 15 years ago without being paid a single rupee. He is the eldest of the family. This month, there will be a cash settlement of one of the 2 properties which is the factory. The house settlement remains due. The father is the only one in the entire HUF who is being given his fair share. My question is what Income tax and/or wealth tax does my friends father have to pay on the partial settlement and what are the investment methods to reduce the tax burden?

Any advice from experts would be appreciated.

Thanks

U S Sharma

U S Sharma (Expert)
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07 June 2011 any sum received from partition of HUF is not taxable, however you have not mentioned the method of cash settlement, whether the factory property is disposed, or transferred to anybody of HUF? if yes then HUF will get liable for capital gain tax.

i advise you to visit any ca of your city with documents and details in hand to get a clear view and advise.

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Sid Sharma

Sid Sharma (Querist)
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08 June 2011 Hello Sir/Madam,

Thanks for the reply. The father was offered a cash settlement and he was the only one who was asked to be removed from the factory. The factory is still in operation by the younger brothers and there has been no sale of that factory. This is the money that the younger brothers have given in lieu of the older brother's right in the HUF (as per the division of property at current market rates). Would Income tax or wealth tax be applicable on the cash settlement? Also, does he have to re-invest this cash into a property within 90 days?

The father's CA has gone bankrupt in the city and taking this information to a new CA might be risky. Your help would be appreciated.

Thanks

Sid

U S Sharma

U S Sharma (Expert)
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09 June 2011 it represents the sale of HUF factory to one co-pancer of HUF, diff of market value and book value will be net capital gain, for which the HUF is liable to pay tax.

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