Question 17 Dinesh, an individual engaged in the business of finance, advances 5 lacs to his HUF on interest at 12% p.a., which is the prevailing market rate. The HUF invests the amount in its business and earns profit of 2 lacs from this money. Can the Assessing Officer add a sum of 1,40,000 (i.e. 2,00,000 - 60,000) as income of Dinesh under section 64(2) of the Income Tax Act, 1961?

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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parthership Tirm is relevant as between him and the other members of the HUF. The income the Karta
receives as a partner is not his individual income; it is the income of the HUF and he receives it on behalf
of the HUF. It is for this reason that the income of the wife arising from her membership of the
partnership fim, is held not includible in the income of the HUF since the total income of the HUF is not
the total income of the individual (husband).
For section 64(1) to get attracted, it is necessary that the spouse should be a partner in a partnership
firm in his individual capacity. It is not attracted where he is a partner as the Karta of the HUF to which
his wife belongs.
The action of the Assessing Officer in this case is, therefore, not correct.
Question 17
Dinesh, an individual engaged in the business of finance, advances 5 lacs to his HUF on interest at
12% p.a., which is the prevailing market rate. The HUF invests the amount
profit of 2 lacs from this money.
Can the Assessing Officer add a sum of 1,40,000 (i.e. 2,00,000 60,000) as income of Dinesh
under section 64(2) of the Income Tax Act, 1961?
its business and earns
Answer/Hints
Transcribed Image Text:parthership Tirm is relevant as between him and the other members of the HUF. The income the Karta receives as a partner is not his individual income; it is the income of the HUF and he receives it on behalf of the HUF. It is for this reason that the income of the wife arising from her membership of the partnership fim, is held not includible in the income of the HUF since the total income of the HUF is not the total income of the individual (husband). For section 64(1) to get attracted, it is necessary that the spouse should be a partner in a partnership firm in his individual capacity. It is not attracted where he is a partner as the Karta of the HUF to which his wife belongs. The action of the Assessing Officer in this case is, therefore, not correct. Question 17 Dinesh, an individual engaged in the business of finance, advances 5 lacs to his HUF on interest at 12% p.a., which is the prevailing market rate. The HUF invests the amount profit of 2 lacs from this money. Can the Assessing Officer add a sum of 1,40,000 (i.e. 2,00,000 60,000) as income of Dinesh under section 64(2) of the Income Tax Act, 1961? its business and earns Answer/Hints
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