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MCQ Self Challenge # 0053 on Clubbing of Income under ITA

 

Dear Professional Seniors & Friends,

Warm Greetings!

Here is the Next post of #MCQ on concept based practical professional knowledge on clubbing provisions under Income Tax Act in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.

MCQ 53.1: The HUF is a partner in a firm ABC through its karta Mr. X and has 25% share in the profits of the firm. Wife of Mr.X is employed by firm ABC and getting income in the form of remuneration.
A) Income of wife will not be clubbed in the hands of Mr.X since HUF is not having substantial interest in the firm.
B) Income of wife will be clubbed in the hands of Mr.X since HUF is having substantial interest in the firm.
C) Income of wife will not be clubbed in the hands of Mr.X since Mr.X is not having substantial interest in the firm.
D) Income of wife will not be clubbed in the hands of Mr.X since Mr.X is not having substantial interest in the firm.

MCQ 53.2: Husband gives interest free loan to his wife and wife purchases an asset out of the loan. What will be the treatment of Income from such asset?
A) Shall be Clubbed in the hands of husband since he transfers an asset without adequate consideration.
B) Shall not be Clubbed in the hands of husband since he transfers a loan without adequate consideration.
C) Shall be Clubbed in the hands of husband since he transfers a loan without adequate consideration.
D) Shall not be Clubbed in the hands of husband since he transfers an asset without adequate consideration.

Have a Nice Day!

Sincere Regards
CA Sanjay Kumar Agrawal
Mobile: 9810116321

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————Answer MCQ Self Challenge # 0053————

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on provisions relating to clubbing provisions under Income Tax Act.

 

Answer to MCQ 53.1: C) Income of wife will not be clubbed in the hands of Mr.X since Mr.X is not having substantial interest in the firm.

 

Answer to MCQ 53.2: B) Shall not be Clubbed in the hands of husband since he transfers a loan without adequate consideration.

 

Practical Analysis for MCQ 53.1 :-

  1. Section 64(1)(ii) of Income Tax Act provides for clubbing of income of individual to include income of spouse from a concern in which individual has substantial interest.
  2. Clubbing will apply if individual is having substantial interest in his individual capacity and not in representative capacity.
  3. Substantial interest means 20% or more voting power/share in profit at any time during the previous year.
  4. In our case Mr. X hold more than 20% voting power in representative capacity being as a Karta of HUF.

 

Based on the above analysis, correct answer MCQ 53.1: C) Income of wife will not be clubbed in the hands of Mr.X since Mr.X is not having substantial interest in the firm.

 

Practical Analysis for MCQ 53.2 :-

  1. Section 64(1)(iv) of Income Tax Act provides for clubbing of income of individual to include income of spouse.
  2. If assets are transferred by one spouse to another without adequate consideration, then income from such assets shall be clubbed in the hands of transferor.
  3. Giving a loan is not transfer of assets and clubbing applies when assets are transferred for inadequate consideration.

Based on the above analysis, correct answer MCQ 53.2: B) Shall not be Clubbed in the hands of husband since he transfers a loan without adequate consideration.

 

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal

 

For All MCQ post please click on:

Webpage: http://www.casanjay.me/

Facebook: https://www.facebook.com/CA.Sanjay.K.Agrawal/

Linkedin: https://www.linkedin.com/in/ca-sanjay-kumar-agrawal/

 

#CASanjay #MrCA #MsCA #MCQ #CharteredAccountants  #CharteredAccountant #CA #India

 

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