Gift

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 June 2014 sir in section 47 of income tax act all gift are exempt....

so if a individual is gifting to company shares, gold, cash, etc then is it exepmt....

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 June 2014 yes..but the receiver will end up getting hit by section 56 if the donor and donee are not related...

Rupesh Jain

Rupesh Jain (Expert)
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27 June 2014 you gift to your relative in form of cash cheque, in kinds , but to non relative it is taxable in hand of recipient.

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Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2014 why section 56....it is applicable only to individual & huf

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 June 2014 please refer section 56(2)(viia)

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2014 it apply only to shares of unlisted co. not to immovable property given free of cost

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 June 2014 it applies to shares friend...

plus a company cannot accept immovable assets as gifts...please refer section 122 of the Transfer of the Property Act, 1882 requires that transfer of property by way of gift must be accepted by the donee and inter alia such acceptance must be made during life time of the donor and before the donee dies. The provisions using the words like death of donee are logically in the context of an individual and not in the context of an artificial person. In such a view of the matter, it is not possible for a company to claim gift and therefore receipts of sums of money without consideration may not escape taxation in the hands of a company under other provisions of the Income Tax Act, 1961.

So I don't think company can claim it as a gift.

refer file at
http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&cad=rja&uact=8&ved=0CEsQFjAG&url=http%3A%2F%2Fxa.yimg.com%2Fkq%2Fgroups%2F11488745%2F1278243071%2Fname%2F2.Budget10%2BGifts%2Cdeemed%2Bgifts%2Cdeemed%2Bundervaluations.doc&ei=pYiXU5TkFYrn8AXmsYGgBw&usg=AFQjCNHkX5A18Pfa-G-F05jAd5wBv4BucQ&bvm=bv.68693194,d.dGc

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2014 very nicely explained....
but it arosed in me 1 more doubt....the doubt is....

the link you had shared tells....

A gift necessarily involves a contract because the gift to be valid and complete has to be accepted by the donee to be valid and complete. Section 25 of the Indian Contract Act, 1872 lays down a very basic law that a contract without consideration is void ab initio. Relevant exception for the contract to be valid without consideration is for an agreement in writing, registered under the provisions of the Registration Act, 1908 and such an agreement is on account of natural love and affection. The section does not affect to the gift actually made by the donor to the donee.

if this is the situtaion then all the gift given to company/firm is void ab inition as there is no consideration nor love & affection....

in that situation what is the need to introduce section 56(2)(viia)

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 June 2014 1. Income tax act doesnt deal with the legality of the contract. whether it is illegal or not, tax-men doesn't care...you got the benefit, you pay tax!!

2. Thus, 56(2)(viia) comes into picture.

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2014 then we can applyb same thing on transfer of property to company though illegal

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 June 2014 income-tax applies to bribes, protection money etc etc...so if there is any transfer without adequate consideration for shares, income tax will apply...for other assets not covered in Income-tax act under "other incomes" impact wont be of tax. in case of immovable property, I have already explained how companies wont be able to take asset under its control through gift...