Demystification Of Income Clubbing With MCQ Self Challenge #0053
Master tax complexities by understanding major tax clubbing concepts with this detailed blog. Read on to get more information.
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 the Income Tax Act in a unique
manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the 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 a 25% share in the profits of the firm. The wife of MrX is employed by
firm ABC and getting income in the form of remuneration.
A) The income of the wife will not be clubbed in the hands of Mr.X since HUF does not have a substantial interest in the firm.
B) The income of the wife will be clubbed in the hands of MrX since HUF has having substantial interest in the firm.
C) The income of the wife will not be clubbed in the hands of Mr.X since Mr.X does not have a substantial interest in the firm.
D) The income of the wife will not be clubbed in the hands of MrX since MrX does not have a 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 an asset?
A) Shall be Clubbed in the hands of the 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 the husband since he transfers a loan without adequate consideration.
D) Shall not be Clubbed in the hands of the husband since he transfers an asset without adequate consideration.
Have a Nice Day!
Sincere Regards
CA Sanjay Kumar Agrawal
Mobile: 9810116321
Answer MCQ Self Challenge # 0053
“This post of MCQ is on provisions relating to clubbing provisions under the Income Tax Act.
Answer to MCQ 53.1:
C) The Income of the wife will not be clubbed in the hands of Mr.X since Mr.X does not have a substantial interest in the firm.
Practical Analysis for MCQ 53.1:
1. Section 64(1)(ii) of the Income Tax Act provides for the clubbing of income of an individual to include the income of a spouse from a concern in which
an individual has a substantial interest
2. Clubbing will apply if the individual has a substantial interest in his capacity and not in a representative capacity.
3 interest means 20% or more voting power/share in profit at any time during the previous year.
DECEMBER 2017
4. In our case Mr. X holds more than 20% voting power in representative capacity being as a Karta of HUF.
Based on the above analysis, the correct answer MCQ 53.1: C) The Income of the wife will not be clubbed in the hands of Mr.X since Mr.X does not have
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 53.2:
1. Section 64(1)(iv) of the Income Tax Act provides for the clubbing of income of individuals 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 the transferor.
3. Giving a loan is not a 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 a professional opinion; you can definitely have your own opinion.)
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Sincere Regards!
CA Sanjay Kumar Agrawal
Mobile: 9810116321
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