What is the meaning of the term ‘Gift’
The term ‘Gift’ has not been
defined under the Companies Act, 2013, the Sale of Goods Act, 1930 or the
Indian Contract Act, 1872. However, a reference to the term has been made under
the Transfer of Property Act, 1882.
Section 122 of the Transfer of Property Act, 1882, “Gift” defined
As per Section 122 of the Transfer of Property Act, 1882- “Gift” is the transfer
of certain existing moveable or immoveable property made voluntarily and
without consideration, by one person, called the donor, to another, called the
donee, and accepted by or on behalf of the donee.
Acceptance when to be made. - Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.
If the donee dies before acceptance, the gift is void.
Gift as per the Income Tax Act
According to the Income Tax Act,
money or movable/immovable property that an individual receives from another
individual/organization without making a payment is termed as “gift”.
Thus, from the taxation point of view, gifts can be classified as:
§ Monetary gift or money received in
the form of cash, cheque, draft, bank transfer, etc.
§ Movable property such as shares,
bonds, jewellry, sculptures, paintings, etc. This also includes movable
properties received at reduced price/less than its fair market value.
§ Immovable property like building,
land, residential/commercial property. This also includes immovable properties
acquired at reduced price/less than its stamp duty value.
The term 'gift' denotes the following:
(a)
Any
sum of money received without consideration can be termed as ‘monetary gift’;
(b)
Specified
movable properties received without consideration can be termed as ‘gift of
movable property’;
(c)
Specified
movable properties received at a reduced price (i.e. for inadequate
consideration), can be termed as ‘movable property received for less than its
fair market value’;
(d)
Immovable
properties received without consideration can be termed as ‘gift of immovable
property’;
(e)
Immovable
properties acquired at a reduced price (i.e. for inadequate consideration) can
be termed as ‘immovable property received for less than its stamp duty value’.
NOTE : The most important part of a valid gift is ACCEPTANCE by the DONEE.
Essential requisites to qualify as ‘Gifts’
Three
elements are essential in determining whether or not a gift has been made:
(a)
delivery,
(b)
donative intent, and
(c)
acceptance by the donee.
Essentials of a valid gift under Mohammedan law
The
following are the essentials of valid gift under Mohammedan law :
(a) A clear and unambiguous intention of the donor to make a gift of the property which belongs to him and is in existence at the time of gift.
(c)
Delivery of possession of the subject matter
of gift.
§ Money
received by cash, draft, cheque, bank transfer, UPI payments, etc.
§ Immovable
property like land, building, residential or commercial property.
§ Movable
property such as jewellery, shares, bonds, paintings, sculptures, antique
coins, etc.
Brief History of Gift
Tax in India
|
Legislation |
Period |
Taxability |
|
The Gif Tax Act, 1958 The Gift Tax Act was introduced in the year 1958 and subsequently amended and repealed in the year 1987 and 1998 respectively. |
Up to 30.09.1998 |
Till
01.10.1998, all gifts (including gifts to relatives), barring few exceptions,
were chargeable to Gift Tax in the hands of the Donor under Gift Tax Act. The Gifts were taxed at a flat rate of nearly 30% then with a basic exemption limit of Rs. 30,000/- in a Financial year. |
|
Period of
no Gift Tax |
01.10.1998 to 31.08.2004 |
There was no taxation on gifts
from the period 01.10.1998 to 31.08.2004. Levy stopped for gifts made on or after 01.10.1998 and since then, the gifts were not only used for wealth and income distribution amongst family members / HUFs, but also for conversion of money. |
|
Section 56(2)(v) of Income-tax
Act |
01.09.2004 to 31.03.2006 |
Taxation
on gifts was reintroduced in a new form in the Income Tax Act, where tax was
to be paid by the donee/receiver of the gifts The Finance (No. 2) Act, 2004, with effect from 01.04.2005 inserted clause (v) in section 56(2) whereby any sum of money received without consideration by an individual or a Hindu undivided family from any person exceeding Rs. 25,000 on or after 01.09.2004 was chargeable to tax by treating it as an income. Consequently, Section 2(24) which defines ‘income’ was amended by inserting clause (xiii) to include gifts received as income of a person and Section 56(2) was amended for defining the scope and granting certain exemptions. |
|
Section 56(2)(vi) of Income-tax
Act |
01.04.2006 to 30.09.2009 |
The clause (v) was succeeded subsequently
by different timelines by clause (vi) only sum of money if the same exceeds in aggregate Rs. 50,000 in a year in the hands of the recipient from all donors (Individual or HUF) |
|
Section 56(2)(vii) of Income-tax
Act |
01.10.2009 to 31.03.2017 |
The clause (vi) was succeeded
subsequently by different timelines by clause (vii) Taxable Receipt of sum of Money, Immovable property as well as certain specified movable property if the amount exceeds Rs. 50,000 in aggregate in case of each of such category of assets (Individual or HUF) |
|
Section 56(2)(viia) of Income-tax
Act |
01.06.2010 to 31.03.2017 |
Partnership Firms and companies
in which public are not substantially interested when shares of specified
companies are received without consideration or at inadequate consideration |
|
Section 56(2)(x) of Income-tax
Act |
01.04.2017 onwards |
Section
56(2)(x) of the Act stipulates that any person, which includes everyone,
whether individual, HUF, firm, company, LLP, trust, etc., who receives any
asset (money, immovable property or any property (other than immovable
property)) without consideration or inadequate consideration is liable to pay
tax on the value of such asset under the head of ‘Income from Other Sources’. However, gifts have been made taxable only in those cases where the aggregate value of such gifts is more than Rs. 50,000 during the Financial. The taxability of the gift is determined on the basis of, (I) Aggregate value of gift received during
the year and not on the basis of individual gift, i.e., it can be single time
or multiple times. (II) The total value of the gifts will be
considered for the threshold limit of Rs. 50,000/-, whether they have been
received from a single person or multiple persons. (III) If the aggregate value of gifts received
during the year exceeds Rs. 50,000, then the total value of all such gifts
received during the year will be charged to tax (i.e., the total amount of
gift and not the amount in excess of Rs. 50,000). |
|
Section 9(1)(viii) of Income-tax
Act |
05.07.2019 onwards |
Gifts made by persons resident in
India will be taxable in India in the hands of non-residents or resident but
not ordinary |
|
On or after 05.07.2019 |
Non resident, not being a
company, or to a foreign company is taxable in India |
|
|
On or after 01.04.2023 |
Resident but not ordinary
resident in India is taxable in India |
Taxability of Virtual Digital Asset (VDA) as Gift [Explanation to clause (x) of sub-section (2) of section 56]
In order to
provide for taxing the gifting of virtual digital assets,
the Bill proposed to amend Explanation to section
56(2)(x) of the Act to inter-alia, provide that for the purpose of the said
clause, the expression "property" shall have the meaning assigned to
it in Explanation to clause (vii) and shall include virtual digital asset.
This implies any receipt of virtual digital asset as gifts (other than those received from relatives) would be taxed under section 56(2)(x) at fair market value (FMV) reduced by consideration (if any).
However, when the recipient of such virtual digital asset transfers those virtual digital assets, he will be taxed at 30% on the sale consideration, as there is no cost of acquisition of such virtual digital asset given the fact that he has acquired them as gift. This will expose double taxation.
For example, Mr. A gifted certain virtual digital asset free of cost to Mr. B. The FMV of such virtual digital asset is Rs. 10,00,000. Mr. B paid tax on such virtual digital asset under section 56(2)(x). In the next year, Mr. B transfers these virtual digital asset to Mr. C for Rs, 15,00,000. Mr. B will have to pay tax under section 115BBH at 30% on entire sale consideration of Rs. 15,00,000 as there is no cost of acquisition of such virtual digital asset for Mr. B.
Interplay of clubbing provisions
Even though any gift by an individual to spouse, son's wife, minor child or any gift by member of HUF to HUF is exempted from any tax, however, any income generated through such gift will be added in the income of the transferor and will not be the part of the income of the transferee.
In the following circumstances, even though the gifts are exempted from being received by an individual, due to clubbing provisions, the income from such gifts will be included in the income of the donor, i.e.,
(1) Gift
to the spouse (excluding the transfer in connection with an agreement to live
apart), son's wife, minor child or to any other person or association of
person, directly or indirectly, for the immediately or future benefit of
himself, spouse or son's wife. (Section 64(1)(iv), (vi), (vii), (viii), 64(1A))
Gift from a Spouse
Gifts from a spouse is usually exempted from
gift tax but the income earned from the gift (if any) will be clubbed with the
individual's income and taxed
Gifts Received by a Minor
Gifts received of any asset by a minor will be
taken into consideration and will be clubbed with income if both the parents
are earning taxable income. It will be considered the income of the parent
whose total income is greater.
(2) In case, the house property has been transferred otherwise than for adequate consideration to the spouse or to a minor child (not being a married daughter), the donor will be considered as the owner of such house property and rental income (not the income from other sources) from such property will be considered as the income of the individual. (Section 27(i))
(3) In the case of gift of any property to HUF by
its member, even though such property is exempt from tax as gift, income from
such property will be considered the income of the member.
Gifts by employer to employees including ESOP
There are instances when employers provide a gift to the employee on ceremonial occasion or to boost their morale or when they perform excellently.
Gifts given by an employer to an employee shall be taxable if the value of the gifts exceeds Rs.5,000. An employee is liable to be assessed for gifts received from the employer only if the value of such gift is Rs. 5,000 or more. Gifts below Rs. 5,000 in aggregate during the financial year are exempt from tax.
However, it is to be mentioned that the transfer of any sum of money or property from an employer to an employee under the contractual agreement of employment cannot be considered as a gift and is taxable as perquisites under the head Income from Salary as per the provision thereof.
Property transferred as Gift becomes stock-in-trade for Donee
Section 43(c)(2) of the Act defines the cost of the asset,
where an asset becomes the property of the assessee on the total or partial
partition of a Hindu undivided family or under a gift or will or an irrevocable
trust, is sold by the assessee as stock-in-trade of the business carried on by
him.
The cost of acquisition of the said asset to the assessee in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the transferor or the donor, as the case may be, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any.
Limit of a Cash Gift - Section 269ST is Applicable on Cash Gifts
Any person cannot receive more than Rs. 2,00,000 as cash gift
in India from a person in a day in a single transaction as per the tax law
under Section 269ST
There is clash in the provisions of Section 269ST and Section 56 of the Act, e.g., if a person receives a sum of Rs. 3,00,000 from his friend as gift in cash and Rs. 2,50,000 from a relative in cash. Gift of Rs. 3,00,000 will be included as income from other sources under section 56. Further, a penalty under section 271DA of Rs.3,00,000 shall be imposed as person has received cash in violation of provision of Section 269ST. In case of the gift of Rs.2,50,000 received from relative in cash, then no income will be taxed under section 56 and penalty will also not be levied under section 271DA of the Act.
NOTE : Marriage of the individual is the only occasion when monetary gift received by him will not be charged to tax
Taxability as Income from Other Sources
§ Income of
every kind, which is not chargeable to tax under any other head of income, is
subject to tax under the residuary head of income, i.e., income from other
sources.
§ The amount
received by the assessee does not qualify as a 'gift' and is subject to tax
under the provisions of section 56 of the Act.
§ Any credit
in the books of account which does not have a corresponding liability has to be
either assessed under section 56 or under section 68 of the Act.
Gifts - Exempt from tax
In the following cases, gifts from anyone are exempt from tax
[1] Gifts received from a relative
Gifts
received from relatives, as defined by the Income Tax Act at any time, are not
subject to tax, irrespective of the amount.
For
example, if your sibling gifts you a piece of jewellery worth Rs. 5,00,000, it
would not be taxed.
(a) In the case of an individual
What is considered a relative?
Gifts received from relatives are not taxable
under the Income Tax Act. As per the Income Tax Act, the following list of
persons is defined as a relative of an individual.
(i)
Spouse of the individual.
(ii)
Brother or sister of the individual.
(iii)
Brother or sister of the spouse of the
individual.
(iv)
Brother or sister of either of the parents of
the individual.
(v)
Any lineal ascendant or descendant of the
individual.
(vi)
Any lineal ascendant or descendant of the
spouse of the individual.
(vii)
Spouse of the persons referred to in (ii) to
(vi).
(b) In case of
HUF
The gift received by HUF from its member is
exempt; however, a gift received by a member from HUF is not exempted.
In the event that the gift from the member of
HUF to HUF has been the subject matter of the partition of the HUF, the income
from such property as received by the spouse after such partition will be
considered the income of the individual.
Assessee (Shri Pankil Garg), a member of HUF,
received a sum of Rs. 5.9 Lac from the HUF for Assessment year 2011-12. Noting
that the said gift was more than Rs. 50,000/-, Assessing Officer held it to be
exigible to tax as 'income from other sources' u/s 56(2) (vii) of the Income
Tax Act. However in reopened assessment proceedings, Assessing Officer accepted
assessee’s contentions that gift by HUF to an individual was nothing but a gift
from group of relatives and further as per the exclusion clause 56(2)(vii), the
gift received by the assessee from the 'HUF' was not taxable. Pr. CIT held that
though a gift from a member thereof to the 'HUF' was not exigible to taxation
as per the provisions of section 56(2)(vii) of the Act, however, a gift by the
'HUF' to a member exceeding a sum of Rs. 50,000/- was taxable. Aggrieved,
assessee was in appeal before Chandigarh ITAT.
ITAT holds that gift by HUF to its member [assessee-individual], not taxable under section 56(2)(vii) for AY 2011-12, quashes CIT's 263 order; Rejects Revenue's stand that though the definition of a relative in case of 'HUF' has been extended to include any member of the ‘HUF’, the converse is not true since ‘HUF’ does not fall in the definition of relative in case of an ‘individual’ as provided in Explanation to Section 56(2)(vii); Expounding on the law relating to HUFs, ITAT explains that a member of the ‘HUF’ has a pre-existing right in the family properties, thus holds that when an individual member receives any sum either during the subsistence of the ‘HUF’ or on partition of the ‘HUF’ in lieu of his share in the joint family property, it cannot be considered as a gift without consideration by the ‘HUF’ or by the other members of the ‘HUF’, and hence the provisions of section 56(2) (vii) are not attracted; ITAT further explains that the converse is not true, i.e. in a case where an individual member throws his self-acquired property into common pool of ‘HUF’, it will constitute 'income' of the HUF, however, the same is exempt owing to inclusion of 'member' in the relative definition for ‘HUF’; ITAT remarks that, It is because of this salient feature of the HUF that in case of individual, the HUF has not been included in the definition of relative in explanation to section 56(2)(vii) as it was not so required whereas in case of HUF, members of the HUF find mention in the definition of 'relative' for the purpose of the said section.”; On Section 263 invocation, ITAT observes that Assessing Officer took a plausible view that gift received by assessee from his HUF was not taxable in view of Rajkot ITAT ruling in Vineetkumar Raghavjibhai Bhalodia v. ITO passed in ITA No. 583/Rjt/2007 for assessment year 2005-06 and Hyderabad ITAT ruling in Mr. Biravelli Bhaskar v. ITO ITA No. 398/Hyd/2015 for Assessment year 2008-09, hence Assessing Officer’s order cannot be termed as erroneous, holds CIT’s view that such rulings were not correct decisions would, tantamount to judicial indiscipline”. [In favour of assessee] (Related Assessment year : 2011-12) – [Pankil Garg v. PCIT, Karnal [TS-434-ITAT-2019(CHANDI)] – Date of Judgement : 17.07.2019 (ITAT Chandigarh)]
Karta’s mother not relative of HUF, upholds taxability of gift under section 56(2)(vii)
Subodh Gupta (HUF) (‘assessee’) received
75,000 equity shares of M/s Triveni Polymers (P) Ltd. from mother of Karta of
HUF during Assessment year 2013-14. During relevant Assessment year, the
assessment was completed under section 143(3). The
CIT issued notice under section 263 contending that there was no inquiry made
by the Assessing Officer regarding the applicability of Section 56(2)(vii) for
the gift of shares. The assessee contended that the gift has been received from
the mother of Karta of HUF i.e. the gift is received from the relative of HUF
which would not be taxable under section 56(2)(vii). The CIT rejected the
assessee's contention and held that gift received only from member of HUF would
not be taxable. The CIT noting that the mother of Karta was not the member of
HUF and therefore, gift received from any other person who is not member of HUF
would not come within the definition of relative. Therefore, she held that the
shares received as gift would be taxable under section 56(2)(vii). Hence, she
contended that the Assessing Officer failed to invoke Section 56(2)(vii) and
add FMV of 75,000 shares @ 2375.95 share. Therefore, the order passed by the
Assessing Officer under section 143(3) was erroneous and prejudicial to the
interest of the Revenue as per Explanation 2 to Section 263. The assessee
further contended that the valuation was required to be made as per Rule 11UA
of Income-tax Rules. However, the CIT noted that FMV as defined under section 2(22B)
means
(i) the
price that the capital asset would ordinarily fetch on sale in the open market
on the relevant date; and
(ii) where
the price referred to in sub-clause (i) is not ascertainable, such price as may
be determined in accordance with the rides made under this Act.”
The CIT contended that fair market value in
relation to capital asset means the price this asset would ordinarily fetch on
sale in open market. The CIT observed that within 3 months from the date of
acquiring the shares as gift, the assessee HUF had sold these shares to German
company (unrelated party) @ Rs.2375.82/share. Therefore, CIT adopted Rs. 2375.98/-
share as the FMV as per Section 2(22B) and made addition of Rs. 17.81 Lakhs. Aggrieved,
the assessee appealed before Delhi ITAT.
ITAT upholds revision under section 263 in order to tax gift received by assessee-HUF from mother of Karta (not member of HUF) under section 56(2)(vii) for Assessment year 2013-14; During relevant Assessment year, assessee received 75000 equity shares from mother of the Karta of assessee-HUF, rejects assessee’s stand that the said gift was not covered by 56(2)(vii) taxability as it would qualify as gift from 'relative'; Firstly, ITAT notes that the proviso to Section 56(2)(vii) provides definition of 'relatives' in case of individual and HUF separately, clarifies that the 'relatives' mentioned with respect to an individual cannot be considered when the recipient of the property is an HUF; ITAT observes that Karta's mother was not member of assessee-HUF and accordingly not covered by the 'relative' definition for HUF, thus rejects assessee's stand that gift from karta’s mother amounts to gift from relative; Also rejects assessee's stand that where all the members of the HUF are individuals related to the donor, then they very much also fall within the definition of the term 'relative' on collective basis, further distinguishes assessee's reliance on plethora of rulings on facts; With regards to valuation, ITAT rejects Revenue's adoption of the definition of ‘fair market value’ (‘FMV’) as provided u/s. 2(22B), ITAT notes that specific Rule 11UA shall be applicable which provides for valuation for the purposes of Section 56 and remits matter back to Assessing Officer to verify FMV as per Rule 11UA. [In favour of revenue] - [Subodh Gupta (HUF). [TS-10-ITAT-2018(DEL)] – Date of Judgement : 05.01.2018 (ITAT Delhi)]
[2] Gift received on the occasion of the marriage of the individual
Gifts received on the occasion of his or her marriage of the individual from
anyone on the are not taxable
regardless
of their monetary value. This applies irrespective of the value of the gift. This
does not apply to gifts received by the parents or kin of the bride or groom.
For example, if a friend gifts you a painting
worth Rs 5,00,000 during your wedding, it won't be taxed.
§ Any income earned out of such wedding gifts shall be
taxable. Eg: rental income earned on house property received as wedding gift
shall be taxable.
§ Disclosure of the wedding gifts received shall be
made in the ITR under the Schedule Exempt Income.
Type of Gifts Covered:
This
exemption includes cash, cheques, items, and even immovable property received
as gifts during the wedding.
Any property received as inheritance from a
‘Relative’ as defined under the Act is entirely exempted from gift tax, but the
income derived from the ownership of such property or the amount received from
the sale of such property is not exempted and is taxable under the category of
capital gains.
For
instance, if you inherit a house from your parents worth Rs. 1 crore, this
inheritance is not subject to tax.
Money Received in Contemplation of Death
This will also hold in case someone bequeathes
such a gift in contemplation of death (who is terminally ill and expects to die
shortly from illness).
Applicable
laws relating to inheritance in India
The applicable inheritance laws in India are as
follows –
(a) Hindu Law
- The Hindu Succession Act, 1956 governs inheritance for Hindus, Buddhists,
Jains and Sikhs. The act outlines the distribution of property among family
members, including sons, daughters, wives, and other relatives.
(b) Muslim
Law – Muslims in India are governed by their personal laws, including
inheritance laws.
(c) Christian
Law – Christians in India are subject to the Indian Succession Act, 1925. This
act applies to all Indian Christians, irrespective of their denomination. It
provides for the distribution of property among family members including
spouse, children, parents and other relatives
[4] Gifts
from local authorities
or any recognized religious or charitable organization
Gift
received from any local authority from any fund or foundation or university or
other educational institution or hospital or other medical institution or any
trust or institution subject to certain conditions
The income tax provision of taxation of gifts
will not be applicable if any sum of money or property is received from:
- Any local authority, as
per Explanation to clause (20) of section 10 (defines what kind of
income is exempt from tax) of the Income Tax Act.
- Fund/foundation, university/other
educational institution, hospital/other medical institution, and
trust/institution referred to in Section 10(23)
- Gift received from any trust or
institution registered under section 12A/12AA/12AB;
- Fund/ trust/institution, university/other
educational institution and hospital/other medical institution as per
Section 10(23C)(iv) or (v) or (vi) or (via).
[5] Gift received from an individual by a trust
created or established solely for the benefit of relative of the individual;
Gift received from an individual by a trust
created or established solely for the benefit of relative of the individual.
[6] Gift received from such class of persons and
subject to such conditions, as prescribed under rule 11UAC of the Income-tax Rules, 1962.
Text of Rule 11UAC of the Income-tax Rules,
1962.
11UAC. Prescribed
class of persons for the purpose of clause (XI) of the proviso to clause (x) of
sub-section (2) of section 56
The provisions of clause (x) of sub-section
(2) of section 56 shall not apply to,-
(1) any immovable property, being land or
building or both, received by a resident of an unauthorised colony in the
National Capital Territory of Delhi, where the Central Government by
notification in the Official Gazettee, regularised the transactions of such
immovable property based on the latest Power of Attorney, Agreement to Sale,
Will, possession letter and other documents including documents evidencing
payment of consideration for conferring or recognising right of ownership or
transfer or mortgage in regard to such immovable property in favour of such
resident.
Taxable Value of a Gift
|
Item received |
Threshold limit upto which not taxable |
Amount liable to tax |
|
Sum of money without consideration |
If such sums of money received during the previous year in
question do not exceed & Rs 50000 in the aggregate. |
If threshold of Rs. 50,000 exceeded, entire amount received
(and not just the amount in excess of Rs. 50,000) is liable to tax |
|
Immovable property received without consideration |
Stamp value does not exceed Rs. 50,000 |
Stamp duty value of property received - If stamp duty value
of property received exceeds Rs. 50,000） |
|
Immovable property received for consideration less than
stamp duty value |
Difference between stamp duty value and consideration does
not exceed Rs. 50,000 |
Entire difference between stamp duty value and
consideration (if difference exceeds Rs. 50,000) |
|
Movable property received without consideration |
Aggregate fair market value of movable property received
during the financial year does not exceed Rs. 50,000 |
If threshold of Rs. 50,000 exceeded, entire aggregate FMV
(and not just the amount in excess of Rs. 50,000) is liable to tax. |
|
Movable property received for consideration which is less
than their fair market value |
Difference between aggregate FMV and consideration does not
exceed & 50,000 |
If threshold of Rs. 50,000 exceeded, entire difference is
taxable and not just the difference in excess of Rs.50,000 |
Frequently Asked Questions (FAQ)
Q.-1 : I received a gift from a friend of my spouse, the value of which is Rs.60,000. Will I be taxed for it?
Ans. : Yes, Section 56(2)(x) states that any gift received from a person exceeding Rs. 50,000 will be taxable. Since the spouse’s friend does not come under the exemption entire amount will be fully taxable.
Q.-2 : Can an NRI receive agricultural land as a gift from a relative in India?
Example: Mr. A, a person of Indian Origin Migrated to the U.K. in the year 2019 and acquired citizenship in 2024. Mr. Z, (a resident Indian and Father in law of Mr. A) wants to Gift his agricultural land to Mr. A. Advice Mr. A if he can obtain a gift from Mr. Z.
Ans. : No, please refer Rule 24(b) of Foreign Exchange Management (Non-debt Instruments) Rules, 2019, the law put restrictions on the acquisition of agricultural land, farm house and plantation by an NRI/OCI. Therefore in the instant case, Mr. A cannot acquire agricultural Land as a Gift from his relative in India.
Assessee explained source of loan taken from his minor sons being amount gifted to them by their uncle, since assessee’s brother categorically denied making any gift, amount in question was rightly added to assessee’s taxable income
Assessee was a partner in the firm along with his brother.
The assessee had two minor sons. While doing the scrutiny, the Assessing
Officer noted that the assessee had taken the loan from his minor sons. The
source of loan was explained as gift received by assessee's sons from their
uncle i.e. brother of assessee who received said amount on his retirement from
firm. The Assessing Officer taking a view that gift transaction was bogus,
added amount of loan to assessee’s income. The Tribunal, however, deleted
addition made by Assessing Officer. On revenue’s appeal:
Considering the peculiar facts and circumstances of the case, it is evident that the gifts are not genuine as stated by the Assessing Officer as well as by the First Appellate Authority. The Tribunal has deleted the addition merely only on the ground that no opportunity was provided for cross-examination. But fact remains that assessee never availed it. In the instant case, transaction is not genuine but colorable. Hence the Tribunal has wrongly deleted the addition, and the same is not desirable in the circumstances of the case. The money is routed indirectly from the firm to the assessee's account under the garb of the gifts. Accordingly, High Court held that where assessee claimed to have taken loans from his two minor sons and source of loan was stated to be gift received by assessee’s sons from their uncle i.e., brother of assessee, since assessee’s brother categorically stated that he had not given any gifts to anybody, impugned addition made by Assessing Officer in respect of loan amount was to be confirmed. SLP filed by assessee against said impugned order was to be dismissed. [In favour of revenue] (Related Assessment year : 2001-02) – [Virendra Behari Aggarwal v. CIT (2024) 297 Taxman 378 : 159 taxmann.com 28 (SC)]
Assessee claimed to have received gifts from NRI donors, however, some donors stated these were arranged for a commission and other donors denied gifts, additions made in respect of gifts were justified
Consequent
to search conducted at residence of assessee under section 132, assessee filed
his return indicating his undisclosed income as Rs. 35.39 lakhs. Assessing
Officer held that NRI gifts received by assessee were not genuine and confirmed
addition of Rs. 46.44 lakhs as part of undisclosed income of assessee. Assessee
submitted that such gifts were exempt from payment of tax and addition of Rs.
46.44 lakhs by revenue was illegal and unjustifiable. However, it was found
that assessee had received gifts from 29 persons hailing from Kerala and there
was no acceptable explanation as to nature of relationship he had with those
persons in course of business transaction. Moreover on enquiry with two donors,
former had deposed about arrangement of gifts to assessee on receipt of
commission, whereas latter had stated that no gift was offered by him to
assessee. Therefore, purported gifts received by assessee were not at all gifts
in its real sense and thus additions made in respect of gifts were justified. [In
favour of revenue] (Related
Assessment year : 2002-03) – [P. R. Ganapathy v. DCIT (2023) 290
Taxman 68 : (2022) 143 taxmann.com 122 (Mad.)]
Assessee claimed that sum deposited during demonetization period were gifts of Rs. 1 crore received in connection with his marriage celebrated on 07.12.2015 but had not furnished any material evidence to substantiate said gift, since assessee was an NRI and to prove gifts received on occasion of marriage etc., was nearly impossible, relief of Rs. 50,00,000 out of Rs. 1,00,00,000 to be granted to assessee
During the
assessment year 2017-18, the assessee, a NRI, had made cash deposit in his bank
account and claimed that the sum deposited included gifts of Rs. 1 crore
received in connection with his marriage celebrated on 07.12.2015, and claimed
the same as exempt being gifts received during marriage under the proviso to
section 56(1)(vii)(c).
The Assessing Officer noted that assessee had not furnished any material evidence to substantiate that he had received gift of Rs. 1,00,00,000/- during his wedding in December, 2015 other than the wedding invitation card to prove the genuineness of his claim and accordingly, he made addition of Rs. 1,00,00,000/- deposited during demonetization period as unexplained money as per the provisions of section 69A. The Commissioner (Appeals) observed that in view of facts that assessee was an NRI and to prove gifts received on the occasion of marriage etc., being nearly impossible, Assessing Officer should delete a further amount of Rs. 30,00,000/- out of Rs. 1,00,00,000 added as unexplained money under section 69A. Thus Rs. 70,00,000/- was sustained as unexplained money under section 69A. On appeal:
Held : The assessee himself has deposited cash in his bank account amounting to Rs. 1,00,00,000/- and he has tried to explain the sources through the cash gifts received during the occasion of marriage in December 2015. The argument of the assessee that the cash deposits made in the accounts of the assessee are not income of the assessee for the simple reason that he himself made deposit in bank accounts during demonetization period is not acceptable and hence, the deeming provisions of section 69A is clearly applicable to the facts of the case.
The assessee argued that a reasonable deduction on the basis of reasonable estimation should be made but he could not produce any sort of evidence to substantiate his claim either the names or their address or anything relating to gift received in cash. The assessee’s marriage happened on 07.12.2015, which is an admitted fact and not denied by the revenue. Even the deletion of Rs. 30,00,000/- by the Commissioner (Appeals) is not challenged by the revenue in appeal before the Tribunal. Admittedly, this cash was deposited by assessee during demonetization period whereas the claim of assessee is that this was received as gifts in cash in marriage on 07.12.2015. There is no direct evidence available with the assessee to substantiate his claim but going through the customary system in Indian society, the observations of Commissioner (Appeals) that no economic transaction can be divorced from the underlying social cultural factors is to be agreed with. It is customary in Indian society and according to status that one receives gifts in marriage. Hence, a further estimation is to be made by looking into the fact that assessee might not have received cash gift of Rs. 1,00,00,000/- and Commissioner (Appeals) has already allowed relief of Rs. 30,00,000/-, a further estimate is made and the amount of Rs. 20,00,000/- is deleted. Thereby, the total deletion i.e., deleted by Commissioner (Appeals) of Rs. 30,00,000/- plus deletion now by the Tribunal of Rs. 20,00,000/-, aggregate comes to Rs. 50,00,000/-. Hence, the balance addition of Rs. 50,00,000/- is unexplained money under section 69A. In term of the above, the first two grounds raised by the assessee are partly allowed as indicated above. [Party In favour of assessee] (Related Assessment year : 2017-18) – [Karthick Natarajan v. DCIT(International Taxation) [2023] 202 ITD 552 : 154 taxmann.com 136 (ITAT Chennai)]
Assessee received gift by way of cash, since initial onus of establishing identity, genuineness and creditworthiness of donor was discharged by assessee by producing relevant documents and Assessing Officer had failed to bring any positive material to show that gift was not genuine, Commissioner (Appeals) as well as Tribunal had rightly deleted addition made on account of said gift amount
During
year, assessee received a gift by way cash of certain amount. Assessing Officer
treated same as bogus and made addition on account of same. The CIT(A)
considered the specific issue as to whether the assessee has been able to
establish the identity and creditworthiness of the donor. The CIT(A) in his
order dated 19th February, 2010 records the fact that the donor had a NRE
account in ING Vysya Bank and the said Bank directly addressed to the Assessing
Officer confirming about the NRE account maintained by the donor and a cheque
for Rs. 25 Lacs in favour of the assessee was debited to the NRE account. The
CIT(A) also notes that the assessee has furnished his business details directly
to the Assessing Officer and on the other hand, the Assessing Officer has
failed to bring any positive material on record to show that the gifts are not
genuine and there was no material brought on record by the revenue to suggest
any nexus between the assessee and the gift received by his wife. Thus, on
appreciation of the facts the CIT(A) allowed the appeal.
The learned Tribunal on its part re-appreciated the factual position and noted that the identity of the donor has been well established by the documents produced and thus the assessee has discharged the initial onus cast upon the assessee to establish the identity, genuineness as well as the creditworthiness of the donor. In such circumstances, the burden shifts on the revenue to establish it otherwise. This having not been done by the revenue, we are of the view that the CIT(A) as well as the Tribunal rightly deleted addition made under section 68 on account of gift received by assessee. In the result, the appeal is dismissed and the substantial questions of law are answered against the revenue. [In favour of assessee] (Related Assessment year : 2003-04) – [CIT v. Sanjeev Jain (2023) 150 taxmann.com 487 (Cal.)]
House gifted to father ‘colourable device’; Denies Section 54F benefit
Hyderabad
ITAT dismisses Assessee’s appeal, holds that gift of house to father just prior
to sale of land was a camouflage to claim Section 54F deduction as the Assessee
owned two house properties; Remarks that “Though, gift deed, on a standalone
basis seems to be a natural act on the part of son to gift home to his father,
but when the gift deed is to be examined in the light of the prior and
subsequent acts and prevailing circumstances, then it is clear that the real
intention of the assessee, was to claim the deduction under section 54F” and
upholds CIT(A) order disallowing deduction of Rs. 2.63 Cr; For Assessment year
2015-16, Assessee-Individual claimed deduction under Section 54F against
capital gains arising on sale of land for a consideration of Rs. 4.41 Cr;
Revenue observed that the Assessee gifted his self-occupied house to his father
and within a gap of 7 days sold the land, thus, held that the gift was a
colourable device to ensure that the Assessee had only one house property in
his books to claim Section 54F benefit; CIT(A) opined that the gift was a
colourable device since designed in a manner to avail the benefit of exemption
under Section 54F while not parting with the property, thus upheld the denial
of Section 54F deduction; ITAT peruses the sale agreement and notes that Rs.2.18
Lakh was received in cash prior to entering into the agreement, observes that
there is no evidence as to when this cash amount was received by the Assessee
i.e. whether it is prior to executing the gift deed or at the time of execution
of the agreement of sale; Opines that the gift deed was “merely a paper gift
deed as it was not covered with the transfer of possession and it was not
executed on account of love and affection but was executed only for the purpose
of taking undue benefit of the provision of law”, as even after executing the
gift deed, the Assessee continued to live on the same property with his father;
Notes that Assessee had two house properties – one self-occupied and one
let-out property and the self-occupied property was gifted just prior to
signing the sale agreement, after investing the proceeds from sale in buying
new residential house property; Remarks that “From the conduct of the assessee
and in view of the circumstances prevailing at the time of the agreement of
sale, more particularly giving gift to his father just before the date of
agreement, it is clear that the act of the assessee to gift the house is
nothing but a concerted effort to avoid the due payment of taxes to the
Government.”; Observes that the fact that the Assessee continued to stay in the
same property along with his father clearly shows that the gift deed executed
by the Assessee was merely a camouflage to claim the deduction under Section
54F; Refers to Sections 23 and 24 of the Indian Contract Act, 1872 whereby
contracts entered into with the object to defeat provisions of law, the
contract would be void and holds that per se gift deed was not executed on
account of natural love and affection but was pre-arranged step for execution,
served no commercial purpose and was motivated to avoid taxes; Accordingly,
upholds CIT(A) order denying Section 54F deduction. [In favour of revenue] (Related Assessment
year : 2015-16) – [Rachit V Shah v. ITO [TS-127-ITAT-2023(HYD)] – Date of
Judgement : 15.03.2023 (ITAT Hyderabad)]
Term ‘relative’ defined under section 2(g) of Senior Citizen’s Act could not be read at par with section 2(41) of Income Tax Act for purpose of allowing exemption on gifts received by assessee
Petitioner
filed instant writ seeking a direction that a ‘relative’ under section 2(g) of
Maintenance and Welfare of Parents and Senior Citizens Act, 2007 [‘Senior
Citizens Act’] be treated at par with 'relative' under section 2(41) and
section 56. A statutory definition in one context could not be imported in
another Act especially when two Acts define same term differently. Term ‘relative’
under section 2(g) of Senior Citizens Act could not be read at par with section
2(41) of Income Tax Act for purpose of allowing exemption on gifts received. Intent
and object of Senior Citizens Act and Income Tax Act are different and also,
term 'relative' wholly context-specific. To avoid misuse of gift of properties,
expression ‘relative’ was defined in a narrow and restricted manner in Income
Tax Act; Legislature deliberately left out gifts received from people other
than those specified in provisions from being exempted from getting taxed. Since
real intent of petitioner in writ was to ensure that gift tax was not levied on
donee and instant petition in no manner promotes maintenance and welfare of
senior citizens, instant petition was to be dismissed. [In favour of revenue] –
[Miss Indira Uppal v. Union of India (2022) 447 ITR 683 : 289 Taxman 487 : 143
taxmann.com 239 (Del.)]
Assessee received gift of Rs. 50 lacs from his uncle but same was transferred by uncle's son and daughter-in-law, who were residing at Singapore, since son and daughter-in-law were not alien to donor-uncle but very close relatives, gift so received by assessee could be construed as a constructive gift from uncle and, thus, impugned additions made under section 56(2)(vii) were liable to be deleted
Assessee
received a gift of Rs. 50 lacs from his uncle and claimed same as exempted. Assessing
Officer invoked provisions of section 56(2)(vii) on ground that assessee failed
to furnish capacity of donor and genuineness of transactions and thus made
addition to assessee’s total income. It was noted that said gift had been
received as per instructions of assessee's uncle through transfer by his son
and daughter-in-law, residing at Singapore. It was further noted that
donor-uncle had confirmed that gift was out of love and affection for welfare
of brother's son and family. Since son and daughter-in-law were not alien to
donor-uncle but very close relatives, it could be construed that gift was given
by son and daughter-in-law first to uncle and thereafter it was remitted to
assessee and, thus, gift so received by assessee could be construed as a
constructive gift from uncle. Therefore, addition made under section 56(2)(vii)
could not be considered to be income of assessee and same was liable to be
deleted. [In favour of assessee] (Related Assessment year : 2014-15) – [P.
Srinivasan v. ITO (2023) 198 ITD 287 : (2022) 144 taxmann.com 141 (ITAT Chennai)]
Assessee received jewellery from her grandmother which was credited as gift in capital account by assessee, since gift was received in kind and no cash or cheque was received by assessee as gift, provisions of section 68 would not be applicable and additions were to be deleted
Assessee
received jewellery from her grandmother which was credited as gift in capital
account by assessee. During assessment, Assessing Officer treated same as
unexplained cash credit on ground that no occasion or reason was mentioned for
grant of gift. It was noted that assessee furnished gift deed from grandmother
together with an affidavit in non-judicial stamp paper confirming fact of gift
- Also said affidavit, clearly stated that grandmother had given said gift out
of her streedhan. Since gift was received in kind and no cash or cheque was
received by assessee as gift, provisions of section 68 would not be applicable
and additions were to be deleted. [In favour of assessee] (Related Assessment
year : 2015-16) – [Mrs. Jyoti R. Raut v. DCIT (2022) 197 ITD 552 : 143
taxmann.com 280 (ITAT Mumbai)]
Donor’s paltry income no reason to hold gift as bogus
Mumbai ITAT
holds gift of Rs. 30 lakhs received by Kushal Tandon (Assessee) from his father
during his days of struggle as an actor, not taxable u/s 68; Assessee, a
film actor/ model by profession was assessed to tax for AY 2014-15 during which
received a gift of Rs. 30 lakhs from his father; Revenue observed from the
return filed by Assessee’s father that he had earned an income of Rs. 4 lakhs
and held that Assessee failed to establish donor’s capacity to gift as well as
genuineness of the transaction and made an addition of Rs. 30 lakhs as
unexplained cash credit u/s 68, also confirmed by CIT(A); ITAT finds admission
of irrevocable gift made by Assessee's father out of love and affection from
his accumulated savings evidenced by a gift deed; Remarks such gift transaction
was duly disclosed by donor in his financial statements and the gift deed and
thus it could be inescapably concluded that primary onus on Assessee to prove
nature and source of the impugned amount was discharged; Observes that Revenue
without dislodging Assessee’s explanation, summarily held the gift transaction
as bogus on the standalone reason that a paltry sum was returned as income;
ITAT remarks a material fact not considered by lower authorities is that the
amount was gifted from past accumulated saving, which could not be summarily
rejected by doing away with examination of the donor qua the gift transaction;
ITAT holds in absence of any material dislodging or disproving the factual
position, the basis of addition is without merit and the same cannot be
sustained: [In favour of assessee] (Related Assessment year :
2014-15) – [Kushal
Virendra Tandon v. ACIT [TS-848-ITAT-2021(Mum)] – Date of Judgement : 03.09.2021 (ITAT Mumbai)]
Gift of
shares held as stock-in-trade not taxable as business income; Deletes Rs. 219
Cr addition
Delhi ITAT
holds that gift of shares, held as stock-in-trade, by assessee (O. P. Jindal
Group Co.) to its sister concern cannot be charged to tax as business income in
the absence of any consideration; Revenue had held that the gift of shares held
in group cos. (Jindal Steel and Power Ltd., Jindal Saw Ltd., Hexa Tradex
Ltd., Nalwa Sons Investments Ltd., JSW Steel Ltd.) to 4 other group
cos. for Assessment year 2014-15 was a tax evasion scheme since the shares
were held as stock in trade, taxed Rs. 219 Cr (difference between FMV and cost
of such shares) business income; Rejects assessee’s contention that the gift of
shares was part of O. P. Jindal family realignment and could not be considered
as 'transfer', clarifies that a company being a separate and distinct entity
cannot be considered to be a part of family for 'family
realignment'; Further states that the objective/purpose of family
settlement would restrict itself only to the persons who entered into the
family arrangement and are part of the settlement and the same cannot extend to
the persons who are strangers to the settlement; States that although the
term family settlement is not limited to the meaning conferred by succession
laws, it cannot be so farfetched that a different corporate entity merely, if
the shares are held by some of the members of family is also part of Family for
considering tax impact under the family arrangement; Refers to the
essential elements of gift envisaged under section 122 of the Transfer of
Property Act, 1882 i.e. absence of consideration, existence of donor, existence
of donee, voluntary, transfer & acceptance; Observes that there is no
dispute that there was a transfer of movable property and also that the assessee-company
which is a separate independent entity as a donor has not received any
consideration or benefit in lieu of the above gift; States that Merely because
the shareholders of the appellant company are some of the corporate and the
family members of OP Jindal family .amendment to the articles of association,
passing of the resolution by the board of directors of the appellant company
(none of them belong to the family member of the OP Jindal family) and passing
of the resolution by the shareholders in an extraordinary general meeting
cannot be said to be a non-voluntary act by the appellant. ; Finds that the
requisite conditions were satisfied in the present case to constitute a valid
gift; Explains that only real income can be taxed in the hands of the assessee
and there is no scope for taxing any hypothetical income, unless law mandates
to do so; Remarks that As the assessee has gifted the share, there is no
accrual of any revenue to the assessee . there is not any inflow of cash,
receivables or other consideration, there is no question of accrual of any
consideration to the assessee. ; States that prior to insertion of Chapter
X- A (GAAR provisions), there is no provision in the Income tax Act which
provides for taxation of gift of stock in trade in the hands of the Donor by
imputing market value; Relies on the Supreme Court ruling by a 5
judge-bench in Kika Bhai Premchand v. CIT (1953) 24 ITR
506 (SC)] where it
was held that no income arose to the assessee in settling a trust by withdrwal
of shares and silver bars from its business. [In favour of assessee] (Related Assessment
year : 2014-15) – [Manjula
Finance Ltd. v. ITO [TS-678-ITAT-2020(DEL)]
– Date of Judgement : 18.12.2020 (ITAT
Delhi)]
Confirms Section 68 addition for gift from father-in-law despite receipt through banking channels
Pendurthi
Chandrasekhar (assessee) was one of the Directors of Dakshin Shelters (P) Ltd.
Pursuant to a Search and seizure operation under section 132 in the premises of
Ambiance Properties (P) Ltd. and its sister concerns, assessee’s residential
premises was also searched. Assessing Officer noticed unexplained credit of Rs.
11,97,267/- which assessee claimed to be a gift from his father-in-law and
thus, not taxable. However, Assessing Officer rejected assessee's claim on the
ground that the existence of the Donor, his source of income and the occasion
for the gift were not verifiable. Assessing Officer concluded that the assessee
must have routed his undisclosed income to his father-in-law and brought it
back. Accordingly, amount was added as income for Assessment year 2005-06
CIT(A) relying on Rajasthan High Court ruling
for Chain Sukh Rathi v. CIT Chain
Sukh Rathi (2004) 270 ITR 368 : 134 Taxman 56 : (2003) 185 CTR 56 (Raj.)
upheld Assessing Officer’s order observing that gifts were received by the
assessee on several occasions in the past and that except the gift received at
the time when the assessee started his business operations, the other gifts
could not be treated as genuine. ITAT also upheld CIT(A)’s order and relying on
decisions of the Punjab & Haryana High Court in Tirath Ram Gupta v.
CIT (2008) 304 ITR 145 (P&H) and another in Jaspal Singh v. CI T (2007)
290 ITR 306 (P& H) held that the mere identification of the Donor and
the movement of the gift through banking channel were not enough to prove the
genuineness of the gift. Aggrieved, assessee filed an appeal before Andhra
Pradesh and Telangana High Court.
Andhra
Pradesh and Telangana High Court confirms ITAT order to uphold Section 68
addition for gifts received by assessee-individual from his father-in-law for Assessment
year 2005-06, rejects assessee’s reliance on co-ordinate bench ruling in
context of gift received by assessee from his maternal
aunt; Clarifies that this is not a case where we can import the
principle ‘what is sauce for the goose is sauce for the gander’, also points
out that gift from maternal aunt which was held non-taxable in view of Section
56(2)(v), was received after the amendment to Section 56(2) unlike gift from
father in law which was received prior, refuses to apply spirit of said
amendment to grant relief; Also rejects assessee's contention that genuineness
of gift cannot be questioned when the identity of the donor is established, payment
is through banking channels and a letter of confirmation is also available,
clarifies that these three facts could establish the truth of the transaction,
but not genuineness, states that ‘If somebody has made payment to someone else,
a statement regarding the same will be true. But the payment need not be
genuine.’; Takes note of Revenue’s contention that undisclosed income
earned by the assessee could have been used for round tripping and routed
through father-in-law to bring it back as gift, also rejects assessee’s
contention that he had no source of income, observing that assessee was a
director of real estate company and therefore, raid was carried out at his
premises. – [Pendurthi Chandrasekhar v. DCIT(C) [TS-411-HC-2018(AP)] – Date of Judgement : 26.04.2018 (AP)]
Reverses
ITAT order; Holds gift from brother via nephew’s bank account, taxable
Rajasthan High
Court reverses ITAT order of deleting disallowance made on account of gift
received by assessee-individual (partner in Jewellery firm) from his brother
(NRI, residing in Hong Kong) through nephew's bank account, holds that the
amount transferred by nephew as a gift to the brother of father (Uncle) cannot
be exempted; Pursuant to search operation over assessee group, Revenue made
impugned disallowance taking stand that assessee received the
gift from a person who is not covered within the meaning of relative as given
in Section 56(2), High Court observes that alleged disallowance is just and
proper; Remarks that ITAT, while interpreting the definition of relative
extended the meaning of gift by including gift made by the brother which was
transferred from nephew's bank account; Relies on Supreme Court ruling for Smt.
Tarulata Shyam & Ors. v. CIT (1977) 108 ITR 345 (SC) and CIT v. Calcutta Knitwears, Ludhiana
(2014) 6 SCC 444 (SC);
Further, in respect of disallowance of foreign gifts under section 56(2)
received from the brother, High Court upheld ITAT order that this amount
was required to be accepted under section 56(2). [In favour of revenue] - [Shri
Gulam Farooq Ansari v. PCIT, Jaipur [TS-600-HC-2017(RAJ)]
– Date of Judgement : 22.11.2017
(Raj.)]
Corporate gifts non-taxable capital receipt; Natural love affection not a pre-condition
Assessee,
KDA enterprises (P) Ltd, a private limited company, was engaged in the business
of investment. Assessee filed its return for Assessment year
2009-10, and declared income of Rs 16.60 crores under the normal provisions of
the act and book profit of Rs 48.41 crores under section 115JB of the
act. During the relevant Assessment year assessee received gift of
over Rs 161. 86 crores from four companies namely – (a) Amul trading (b)
Medhuban Merchandise (P) Ltd. (c) Tresta trading pvt ltd and d) Ornate
traders (P) Ltd . These companies were the shareholder of Reliance
Industries (P) Ltd and use to receive dividends from them. Also,
all the four companies were governed by their respective MOA and AOA and the
MOA provided that there can be exchange of gifts between the parties. Thus
following the objects laid down in the MOA, one of the four companies, gave
instructions to the Reliance industries to pay dividend directly to the
assessee. Thus the assessee received gift of dividend from the above four
companies. The gift so received was claimed as capital receipt and credited to
capital reserve account in the books.
During assessment, Assessing Officer
raised query w.r.t to the gifts received in the form of dividend from the
corporate bodies. Assessee submitted that the gifts received were in the nature
of capital receipt and thus was not required to be credited to the “Profit and
loss” account. Assessee further submitted that it prepared its books of account
as per the requirement of companies act and thus the same had been audited and
approved by the auditor and thus no adjustment was required be made to the book
profit under section 115JB on account of
gift received by the assessee.
However, Assessing Officer did not accept the
contentions of Assessing Officer and added the gift received to the total
income of the assessee. Assessing Officer further added the amount of gift
received to the book profit under section 115JB of the assesse. Assessing Officer
submitted that assessee entered into the dubious transaction and thus the gifts
received was used to bring the unaccounted money in the books by avoiding tax
payment. Assessing Officer thus claimed that as gifts were not evidenced by
deeds and so they cannot be held as genuine. On appeal, CIT(A) deleted the
additions made by Assessing Officer on account of gifts. Aggrieved Revenue,
than filed an appeal before Mumbai ITAT.
ITAT
dismisses Revenue’s appeal, holds gift (of over Rs. 160 crore) received by
assessee company from other corporate bodies (all Indian entities), a
non-taxable capital receipt for Assessment year 2009-10;
Evaluates taxability of gift under the Income-tax Act, holds that “the gift
received by one corporate body from another ….do not come under the ambit of
income as contemplated under section 2(24) of the Act or any other provisions
of the Act” as gift are voluntary payments made by the donors to the assessee;
Relies on co-ordinate bench ruling in D.P. World (P) Ltd. v. DCIT
[TS-767-ITAT-2012(Mum)] to hold that gifts are capital receipts, not
taxable unless expressly provided under the Act, further since identity of
donors/source not in dispute, taxability not justified under section 68 as
unexplained cash credits; Moreover notes, assessee and donor companies
authorized for receiving and making gifts respectively by their Memorandum and
Articles of Association; ITAT concludes that “companies are competent to make
and receive gifts and natural love and affection are not necessary
requirement…Only requirement for company is to make gifts as per respective
memorandum and article of association..” [In favour of assessee] (Related Assessment year : 2009-10) – [DCIT v. KDA
Enterprises (P) Ltd. [TS-310-ITAT-2015(Mum)]
– Date of Judgement : 03.03.2015 (ITAT
Mumbai)]
NOTE
Section
56(2)(viia) inserted vide Finance Act, 2010 provides that gift of shares
between companies shall be treated as 'other income'. Such amended Section
56(2)(viia) is applicable from Assessment year 2011-12 onwards. AAR in case of
Goodyear Tire and Rubber Company [TS-178-AAR-2011] had ruled that transfer of
shares without consideration', by the holding company in USA to its wholly
owned subsidiary in Singapore, not taxable. Delhi High Court had further
confirmed the AAR ruling.
Receipt of gift in cash not violative of Section 269SS; Section applicable to receipt of loans, deposits other than by way of account payee cheque; No penalty under section 271D can be levied on gift received from wife
The
assessee, an individual, had received a total sum of Rs. 70,000 by way of gift
from his wife. During the assessment proceedings for Assessment year 2006-07,
the Assessing Officer considered the amount to be a
loan given that there was no occasion to make a cash gift. Accordingly, the
Assessing Officer levied a penalty under section 271D for violation of
provisions of Section 269SS (receipt of loan other than by way of account payee
cheque). On appeal, CIT(A) upheld Assessing Officer’s order. Aggrieved, the
assessee filed an appeal before ITAT. The Mumbai bench of ITAT pronounced an
ex- parte ruling in favour of the assessee. ITAT held that the assessee had
categorically claimed that the amount received from his wife was by way of
gift. ITAT observed that the letter from the wife of the assessee clearly
indicated that the cash was given by way of gift. ITAT observed that the
capacity of the donor and genuineness of the transaction were beyond doubt
since no addition u/s 68 was made. ITAT further observed that the receipt some
gift in cash does not set the provisions of Section 269SS in action. ITAT held
that those provisions are applicable only on receipt of loan or deposit
otherwise than through the account payee cheque. Hence, ITAT held that in the
instant case, there was no violation of Section 269SS. Based on the above, ITAT
directed the deletion of penalty levied under section 271D. [In favour of assessee] (Related
Assessment year : 2006-07) – [Prakash Pradhan v. ITO [TS-239-ITAT-2013(Mum)] – Date of Judgement : 05.06.2013 (ITAT
Mumbai)]
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