I am owning HUF Inherited Agricultural lands and filing IT returns from time to time as KARTHA in compliance with the law. Our HUF consist of my self, my wife & two sons, now with their respective families. In the year 1987-88, we have purchased a residential site in Bangalore using accumalated HUF Funds and allowed to be registered in the name of my wife who is also a member of HUF. Investment on this property is shown in HUF Income Tax returns from time to time. My both sons were minors at that time the said property registration. My wife was neither having any employment for earning nor any source of income of her own at the time of registration of property. Now after over 25 years of possession of scheduled property shown in HUF IT returns, it has come to our notice that my wife has executed irrevocable Gift Deed in favour of her Brother living in Bangalore in the year 2009 citing reasons of her love and affection. She has not taken consent of other members of HUF ie.. me & my sons who were majors by that time. None of us from HUF have given cosenting witness signatures before the Sub-registrar. She has handed over all papers with possession and the Donee brother has accepted the GIFT as per the Gift Deed. Registration fee of Rs. 1120/- has been paid. Registered value of Residential site in the year: 1989 is Rs.55,000/- Market Value when the gift deed executed in the year 2009 was around 1,20,00,000/- (approx) In this regard, please advice me on the following: 1. Whether this GIFT from from wife in HUF merits exemptions from payment of any Income Tax including Capital Gains for the period from the date of possession till the date of handing over possession as Gift? 2. Proceedure to delete the property from the HUF IT returns since the AY:2009-10. 3. Whether such transaction attract Capital Gains with interest and penalty from the date of possession till the date of handing over the possession as gift to my wife's brother? 4. What could be the Tax liability if any, on the above value? 5. What other actions that may have to be faced by the HUF and copparceners individually in such a situation?
1 Gift to HUF cannot be exempte u/s 56.
2 Gift by HUf is taxable in the hands of wife's brother.
3There is no capital gains tax as transaction is in nature of gift.
4 Tax at normal rates for income of Rs 1,20,00,000
5. it is the case of your brother in law.
If I understand correctly, the property standing in the name of your wife acquired out of HUF funds was gifted to her brother.
1 There is no capital gains in the hands of your wife or HUF at the time of the gift. The actual cost of acquisition of the property in the hands of the HUF will be the cost of acquisition in the hands of her brother, as and when he sells the property.
2 The gift may be disclosed in your IT returns as and when needed. As there is no receipt of consideration, there is no tax liability. Hence, there is no need to disclose the deletion of the HUF property in the IT Return. However, if you are filing any Wealth tax return, you will have to disclose the deletion.
Even in the Income Tax also, if you were offering rental income on such property, the rental income would no longer be yours. If you still continued to disclose the rental income, it is more like transfer of asset without transfer of the income, which is the reverse of the provisions relating to the transfer of income without transfer of the underlying asset.
You need to take proper legal opinion by scrutiny of documents executed and available with the sub-registrar.
3 I am not clear about your question. If I understand it correctly, the the date of possession in the hands of HUF and the date of possession in the hands of your wife's brother are the dates you are referring to. If its so, there is no tax liability, as there is no gift tax on the property gifted.
4 There is no tax liability at the time of gift.
5 The HUF and Coppareceners may individually proceed against your wife legally, if you wish to.
In the hands of your brother in law, the applicability of Section 56(2)(vi) or (vii) needs to be considered, as there is gift of the property.
