2 propritetorship firms: wife and husband. clubbing?

Tax planning 545 views 5 replies

Hello,

A person is into manufacturing of pen caps through a Proprietorship Concern in his own name. Now, he wants to open another Proprietorship Concern in the name of his wife for the same line of business. Just wanted to confirm that there is not even any remote chance of clubbing provision being applicable since the workplace ie. office address is the same for both?

Replies (5)
if investment is from the same person's income, then clubbing provisions shall apply as per the provisions of income tax act.

Thanks! Please let me know under which Section (from 60-65) will this attract clubbing?

Clubbed under section 64(1) of IT ACT

The clubbing provisions u/s 64(1) won't get attracted if...

1] The property (here the capital investment in wife's business) is acquired by spouse out of pin money (i.e. allowance given to her by husband for her dress, house hold exp., etc.)

2] Also the capital invested from "Stri Dhan" would not attract the clubbing provision.

[ This can be planning...Cheers !!! ]

Point 1] above is from the Hon'ble SC decision of L. Hirday Narain (1970)


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