Transfer of business to son due to inability to run due to old age
Umesh
(Querist) 12 October 2014
This query is : Resolved
Dear Sirs,
Kindly guide me in the in the below situation:
Father, a senior citizen, who is the sole proprieotor of a saari shop (non vatable) wants to transfer on 31st Oct’14 all the current assets and liabilities of the said business to his one of the sons without tranfrerring the immovable property in which the business is being carried out.
My qweries are:
1. Can he do so by executing a memorandum of transfer in non judicial stamp paper.?
2. What would be the implication of Income tax in the hands of father & son?
Please note that the son is currently working as an employee in the same business and drawing salary.
An early reply would be highly appreciated.
Best Regards.
ajay sethi
(Expert) 13 October 2014
during his life time father should not hand over business to his son . let the son manage the show but all cheques etc should be signed by father only . if however father is determined to do so he can execute agreement if he so desires . inform the bank and other authorities
ajay sethi
(Expert) 13 October 2014
what is the consideration received by father for transfer of business ? or is out of natural love and affection?
Rajendra K Goyal
(Expert) 13 October 2014
He can execute an agreement for transfer. For tax purpose, same can be advised after referring agreement and documents. Consult your tax adviser.
ABDUL RAZIQUE
(Expert) 13 October 2014
Yes he can do so but it is better to add next son as confirming party.
Tax will be applicable on both according to present situation.
Advocate Ravinder
(Expert) 13 October 2014
Yes father can transfer all the movables of the shop to his son in the form of letter of handing over possession of movables and the son should acknowledge the receipt of the same. Registration is not necessary for movables. Then the son will become a lessee and the father will become lessor.
Anand Bali Adv.
(Expert) 14 October 2014
I agree with the Expert Ravinder up to certain extent only as in his reply he has forgot to consider the Tax implications.
I would advise to give a Gift of all the movables and submit an end of the ownership in the Taxation Department with final closure and start a fresh ownership by way of the gift to the son who should on the basis of the Gift deed get a fresh Sates Tax registration in his name.
This will also not attract any duty charges as for transferring movable assets there is no need of its registration too.
You just get it done on the Non Judicial Stamp paper and get it Notarised for the any future implications but this will apply only where all the assets are of your (Father's) own earned property and not inherited one.
Umesh
(Querist) 14 October 2014
Thanks to all of you.
Anand Sir,
All the movables, trading stock etc. are fathers earned property.
1. Will it attract capital gain tax/other income tax if the trading stock is gifted to a major son?
2. What can be done to close the IT file of father?
Best Regards,
Anand Bali Adv.
(Expert) 15 October 2014
In such case your father can Gift whole property to you and there will not be any gift tax on the property received as gift by father .The valuation of the property will be on today's price and will also attract the income tax on the property owned as gift.
For closing the IT file of the Father it is better to consult your CA however I think when father will gift the property to you his IT return will exclude the part of earning by the same venture (business) but his other sources of income will continue to be mentioned in the annual ITR.
Umesh
(Querist) 15 October 2014
Thanks Sir,
But, I have heard that there is no Income tax on Gifts received from father.
Regards,
T. Kalaiselvan, Advocate
(Expert) 18 October 2014
the author's query has been properly addressed by all experts, if he is still in further doubts about taxation, he may consult a local CA for next course of action.
