The Hindu Business Line : A find that is not in the net

When I was dining at a restaurant, I found a pouch and took it home. It contained Rs 3,25,000. I have placed an advertisement in the newspapers, but there have been no claimants so far.

I have not deposited the money into my bank account. I have also not disclosed this in my tax return. If I were to disclose this now, will this be treated as my income and charged to tax? K. V. Gopal

The amount found by you will not be an income within the meaning of Section 2(24) of the Income-Tax Act and, therefore, will not be charged to tax.

You may, however, note that the onus will lie on you to prove that the sum was found by you and that, therefore, the same will not be taxable.

If you fail to establish this, this sum can be brought to tax in your hands.

I want to create a HUF (Hindu undivided family) and pursue share trading. My wife and I are government servants. We have two children. How do I start a HUF? H. K. Sahni

The question of creating a HUF in the strict sense of the term does not arise. What is normally created is a nucleus to a HUF. It is a presumed state.

Your family constitutes a HUF. The initial nucleus to the HUF may be brought in as a gift from an outsider to it.

It may be possible for a coparcener to impress his individual property with that of the HUF after the initial nucleus is available with the HUF.

You may note that impressing of individual property with that of the HUF by a coparcener will attract the provisions relating to clubbing under Section 64(2) of the Act.

The initial nucleus or corpus of the HUF can come out of partition of a larger HUF or by way of will, where the intention is clear that the property should be received by the HUF.

My father passed away in 2004. He had bought 30 cents of land in a remote village. We are five sons and two daughters. I am the youngest. I got married in 2000. The value of my share in the property is very low, about Rs 5,000. I would like to create a HUF comprising my wife and me.

Suppose I were to get the land transferred to my name and sell it for Rs 5,000 and deposit the same in the bank by opening a savings bank account for the HUF, will it stand created? Can I, thereafter, give a loan to the HUF which can be used for investment in shares and then repaid by the HUF to me with interest? Can the HUF borrow loan from my relatives or my wife's relatives or friends and invest in shares, which can be repaid with interest? Can my relatives or my wife's relatives give a gift to the HUF?

Will the gifts be exempt or taxable? If the HUF borrows from the bank with me as surety, will this be acceptable in law? K. Ganesh

The question of creating of a HUF does not arise. A HUF is a presumed state. What can be created is at best a corpus or nucleus of the HUF.

In your case, if the property belonged to your father in his individual capacity, the same cannot devolve on you in your capacity as Karta of the HUF, but will devolve on you only in your individual capacity. The Hindu Succession Act specifically prohibits the succession of an individual asset on the HUF on the death of the individual.

That being so, the sale of the property by you, which devolves on you in your individual capacity on the death of your father, cannot create the nucleus to the HUF.

The nucleus of the HUF can be created by a gift from an outsider to it or where a property devolves on it by way of a will or where there is the partition of a bigger HUF.

If the nucleus to the HUF is created by any of the above means there would be no prohibition on you giving a loan to the HUF or on the it taking a loan from your relatives or wife's relatives or friends. A gift can also be given by your relatives or by your wife's relatives to the HUF.

You may, however, note that a gift received by the HUF in excess of Rs 50,000 per annum in the aggregate will be deemed as the income of the HUF, which will be taxed in the hands of the HUF. There is also no prohibition on the HUF taking a loan from a bank where you act as a surety for the loan.

If there is a joint account — a savings bank account in the name of my wife and I — which is an either or survivor account, can the interest be accounted to the extent of 50 per cent in the hands of my wife and me? Given that dividends from shares and income from mutual funds is exempt, will there be any advantage in showing the same in the tax return?

If there is a short-term capital loss from sale of shares and where there is no short-term capital gain, can such loss be set off against income from other sources?

Is there any concession in the payment of tax in respect of interest from post office deposits? Is pension received from LIC annuity scheme taxable? M. Gopal

The interest from the joint SB account will have to be accounted by you in your respective returns in the proportion in which the money has been contributed by each of you to the account.

Insofar as showing exempt income in the return is concerned, the same would be useful to explain for the source for investments or expenditure at a later date when the investment is made or the expenditure is incurred.

Short-term capital losses cannot be set off against income from other sources. It can only be set off against short-term capital gains or long-term capital gains.

There is no tax concession available in respect of interest from post-office deposits.

The pension amount received from the LIC annuity scheme would be taxable.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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