GIFT OF CAPITAL OF PROPRIETARY CONCERN TO DAUGHTER

[RAKESH SHARMA]

"A" is running a proprietorship concern in the name of "AM Ents" and the business data includes debtors,creditors,inventory ,capital etc.

"A " sold the inventory of 1 Cr to a partnership firm "QR Ents" in which her daughter is a partner so that her daughter can show her capital in the firm received from his father as an inventory sold to its firm.

What are the remedies available in such a case so that his daughter can show her capital in the firm

Please advise.

AI Summary

Gift exemption permits transfer of business capital to a daughter, via asset transfer or assignment of receivables as capital.
A proprietor wishing to transfer business capital to his daughter may transfer cash or gift inventory; gifts to a daughter are exempt from tax. A sale of inventory to the partnership makes the proprietor a creditor and does not convert the item into the daughter's capital; sale at profit yields taxable profit to the proprietor. To make the inventory capital of the daughter, reverse the sale and execute a registered gift deed enabling the daughter to introduce the inventory as capital in kind, with the proprietor recording drawings. Alternatively assign the receivable arising from the sale to the daughter by gift deed.