LUNAWAT& CO. CA. PRAMOD JAIN

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CA. PRAMOD JAIN FCA, FCS, FCMA, LL.B, MIMA, DISA CA. PRAMOD JAIN FCA, FCS, FCMA, LL.B, MIMA, DISA LUNAWAT & CO. Chartered Accountants LUNAWAT & CO. Chartered Accountants 16 th May 2015 16 th May 2015

Transcript of LUNAWAT& CO. CA. PRAMOD JAIN

Page 1: LUNAWAT& CO. CA. PRAMOD JAIN

CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA

CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA

LUNAWAT & CO.Chartered Accountants

LUNAWAT & CO.Chartered Accountants

16th May 201516th May 2015

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SECTION 44AD

Lunawat & Co.

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APPLICABILITY OF 44AD / 44AB ON MR. A

• AD - No

• AB - Yes

Mfg. - Turnover – 120L; NP -5L; 80-IC – 3 L; TI-1.90L

• AD - No

• AB - Yes

Trading- Turnover – 110L; NP -3L; Architect – Fee – 30 L NP- 5 L; TI-7L

• AD - No

• AB - Yes

Doctor - Trading; Turnover – 80L -NP – 3L; Fee – 27 L – NP 5 L TI- 8 L

• AD - No

• AB - Yes

Trading – TO – 150 L; NP 1.5 L – Does not file ITR

Lunawat & Co.

Page 4: LUNAWAT& CO. CA. PRAMOD JAIN

APPLICABILITY OF 44AD / 44AB ON MR. A

•AD - No

•AB - No

Trading; Turnover – 50L; NP – 3L; TI-(-)1.5L. Files ITR

•AD - No

•AB - No

Manufacturing; TO – 80L; NP -5L; 80-IC-2L; TI-4L

•AD - No

•AB - Yes

Mfg – TO – 40 L, NP – 1 L; Trading-TO – 40 L, NP-1 L; Exports – TO – 50 L, NP – 1 L

•AD – No

•AB - No

Trading; TO -60L; Commission - 2L; NP- 3L; TI 4L

Lunawat & Co.

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APPLICABILITY OF 44AD / 44AB ONMR. B

Manufacturing – 80L ; NP – 8L

Trading – 25 L ; NP- 3 L

Commission –2 L;

NP- 1L

Profession – 21 L ; NP –5 L

Lunawat & Co.

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CLUBBING OF INCOMES

�Provisions contained in Chapter V

�Sections 60 to Section 65

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Transfer

Asset

S. 61

Revocable Irrevocable

Income

S. 60

Revocable Irrevocable

Lunawat & Co.

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•Remuneration from interested concern

•Transfer of Asset for inadequate consideration or in connection with agreement to live apart

Spouse

•Transfer of Asset for inadequate consideration

Son’s Wife

•All Incomes except derived from manual work or application of skill or child with disability u/s 80U

Minor

CLUBBING PROVISIONS – PERSON-WISE

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CLUBBING PROVISIONS - HUF

�A member of HUF converts his

property into that of HUF

�Conversion is at any time after

31.12.1969

�Conversion is without adequate

consideration

�Clubbing till partition

�Clubbing after partition

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Page 10: LUNAWAT& CO. CA. PRAMOD JAIN

PARTITION

OF HUF

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Partition

Full Partial

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Partial Partition of HUF

� As per section 171(9) of the Income-tax Act, 1961 the Partial Partition after 31-12-1978 is not recognised.

� Even after Partial Partition the income of the HUF shall be liable to be assessed under the Income-tax Act as if no Partial Partition had taken place.

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Full partition of HUF

� As per Explanation (a) to s. 171(9) of the Income-tax Act, 1961 partition means: -

� where the property admits of a physical division, a physical division of the property, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition; or

� where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition;

� Assessment after Partition as per s. 171 & order to be passed by the Assessing Officer.

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Partition of HUF

� Partition need not be by Metes & bountes, if separate enjoyment can, otherwise the secured and such division is effective so as to bind the members - Cherandas Waridas, 39 ITR 202 (SC).

� The members of an HUF can live separately and such an act would not automatically amount to partition of the HUF - Shiv Narain Choudhary v. CWT 108 ITR 104 (All.)

� Motive or need for partition cannot be questioned by the IT Department - T. G. Sulakhe v. CIT, 39 ITR 394 (AP).

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Judicial Decisions - Partition

� In order to be acceptable or recognizable partition under section 171 the partition should be complete with respect to all members of HUF and in respect of all properties of HUF and there should be actual division of property as per specified shares allotted to each member. –Mohanlal K. Shah (HUF) v. ITO 1 SOT 316.

� Setting apart certain assets of HUF in favour of certain coparceners on the condition that no further claim in properties will be made by them is nothing but a partial partition and not a family arrangement not recognised in view of s. 171(9) –ITO v. P. Shankaraiah Yadav 91 ITD 228.

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Judicial Decisions - Partition

� The property received by a coparcener on partition of the HUF is the HUF property in his hands vis-à-vis the members of his branch i.e. with his wife and a daughter. –

N.V. Narendranath v. CWT, 74 ITR 190 (SC)

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Legal aspects of Partition

� Distribution of the assets of an HUF in the course of partition, would not attract any capital gains tax liability as it does not involve a transfer – S. 47(i)

� On the basis of the same reasoning distribution of assets in the course of partition would not attract any gift tax liability

� There would be no clubbing of incomes u/s. 64 as it would not involve any direct or indirect transfer.

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Reunion� It means reconstruction of divided HUF on

partition. Essentials of reunion are:

� There must have been previous state of union

� There must have been partition in fact

� The reunion must be effected by the parties

� Entire property existing on day of reunion have to be brought back – CIT vs.

Vaiyapuri Chettiar (1995) 215 ITR 836 (Mad)

Lunawat & Co.

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CA. Pramod Jain

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© 2015 CA. Pramod Jain, Lunawat & Co

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