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association of person

Tax queries 508 views 1 replies

Vikas Yadav

46 Points Posted on 08 January 2010

ASSOCIATION OF PERSON

One of my client has inherited land , he joins hands few people who purchase the adjoining land and now they want to construct a commerical complex on this total land .
I had advised my client to form a HUF for his land as he had become owner of land by virtue of will of his grand father . Furthur I had advise him to form a AOP.

I understand that that land transfered by all the individual in AOP shall not attract capital gain , capital gain shall arise on sale of plots etc , AOP will get the profit of Coinstruction & Gain of sale of land shall be taxed in the individual hand .
From the all the vieiwers my querry is
1. Is my advise correct and with in the legal parameter , if not what ammendment has to made in current advise.

2. What is the format of agreemnet to made for forming the AOP considering the above situation .
3. Do any one has the draft agreemnet of AOP ?, if yes would you be kind enogh to mail at vyadav_ca @ hotmail.com

4. Any other better advise

Replies (1)

Amir

Learner

4016 Points Posted on 08 January 2010

Dear Vikas,

Idea of tranferring LAND in AOP is NOT CORRECT on following grounds:-

1) AOP has to pay tax on receipt of Plot u/s 56(2), Since GIfts in Kind have been made Taxable..

2) Further, Gains in the hands of AOP will be taxed at Maximum Marginal Rate @ 33.99%

3) Exemption of Sec 54 is available to Individuals/HUF's only..

4) It is not an easy job to bifurcate the sale price into two things(Biulding & Land) for the purpose of computing capital gains in the hands of Individuals & AOP

My advice would be -

1) Idea of HUF is correct but it can be possible only in case assessee is married.

2) AGREEMENT RATHER THAN AOP - All Friends should make a specific mentionregarding their in the agreement while incurring cost of construction & selling the house..