Income Tax / Gift / Accounting / Law
This query is : Resolved
12 December 2007
The Balance Sheet of A shows a Loan from his mother of Rs. 25 lacs borrowed 15 years ago.Now the mother wants to gift this money to A. A wants to pass book entries for this transaction as follows:
Loan a/c Dr. 2500000
To Capital a/c 2500000
(Being loan from mother converted into Gift vide 'Gift Deed' Dated .....)
Is gift by book entries prohibited under any Act?
Loan a/c Dr. 2500000
To Capital a/c 2500000
(Being loan from mother converted into Gift vide 'Gift Deed' Dated .....)
Is gift by book entries prohibited under any Act?
12 December 2007
All the gifts are now dealt by Income Tax Act 1961 as far as its commercial sense is concerned.Income Tax Act nowhere prohibits gifts by book entries however it is taxable in the hand of the receiver if it exceeds Rs 100,000 and is taken from a non-specified relative.Also such gift must be supported by a proper duly stamped deed to be an authentic gift.
12 December 2007
The prerequisites mentioned by you are there in my question namely:the gift should be from a specified relative for no taxability.It is.It should be supported by properly stamped deed.Yes it is.
Is gift by book entry not allowed is a question.Any case law on this ? Please quote if any.
Is gift by book entry not allowed is a question.Any case law on this ? Please quote if any.
12 December 2007
I do not find the reason in saying that "such gift (must be) supported by a proper duly stamped deed to be an authentic gift".
Now, coming to the question that, whether gift can be received by book entry? I am of the opinion that there is no bar in accepting Gift by book entries. There is no any bar in the Act. You may please refer following case Laws:-
01. CIT vs. Popatlal Mulji 1975 CTR (Bom) 92
02. P.A.C. Ratnaswamy Nadar & Sons vs. CIT (1962) 46 ITR 1148 (Mad)
Further, your attention is also drawn on the Hon’ble Supreme Courts Judgement in CIT vs. Dr. R.S. Gupta (1987) 60 CTR (SC) 115, wherein hon’ble apex court held that- In order to constitute a valid gift there must be an existing property. In case of entries in the books of account by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited.
Now, coming to the question that, whether gift can be received by book entry? I am of the opinion that there is no bar in accepting Gift by book entries. There is no any bar in the Act. You may please refer following case Laws:-
01. CIT vs. Popatlal Mulji 1975 CTR (Bom) 92
02. P.A.C. Ratnaswamy Nadar & Sons vs. CIT (1962) 46 ITR 1148 (Mad)
Further, your attention is also drawn on the Hon’ble Supreme Courts Judgement in CIT vs. Dr. R.S. Gupta (1987) 60 CTR (SC) 115, wherein hon’ble apex court held that- In order to constitute a valid gift there must be an existing property. In case of entries in the books of account by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited.
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12 December 2007
Mr.Aagrwalla,
Sir, to prove that a particular transaction is 'Gift', you need to enter into a 'Deed of Gift'.To produce any such deed before any Judicial or quasi judicial authority like The Income Tax Officer, it should have been properly stamped as per the Stamp Act. If it is not so stamped, the ITO has the power to impound it and send it to the Collector of your District to recover the Duty and the penalty on such duty which is sought to be evaded.
In view of this the opinion given by Mr.Ankur is proper in so far as it relates to the Deed part of it.
I thank all the experts for the valuable contributions made.
Sir, to prove that a particular transaction is 'Gift', you need to enter into a 'Deed of Gift'.To produce any such deed before any Judicial or quasi judicial authority like The Income Tax Officer, it should have been properly stamped as per the Stamp Act. If it is not so stamped, the ITO has the power to impound it and send it to the Collector of your District to recover the Duty and the penalty on such duty which is sought to be evaded.
In view of this the opinion given by Mr.Ankur is proper in so far as it relates to the Deed part of it.
I thank all the experts for the valuable contributions made.
19 December 2007
I think, Mr. Pushkraj, Deed of Gift is not compulsory, even one self declaration by the donor may be sufficient evidence. To be on moe safer side such declaration or affidavit may be made on Stamp paper (10 Rs.).
I will be thankful if you can kindly point out the probable problem in this.
I will be thankful if you can kindly point out the probable problem in this.
19 December 2007
Dear Mr.Agarwalla,
Thank you for your inquisitiveness.Suppose tomorrow I give you a Cheque of Rs. 2500000/-(of course if I have that much money) and you and me call it a gift.Would a mere cheque prove that it is towards a Gift? It could be for a loan also from me to you.It could be for a repayment of a loan from me to you.It could be for an advance from me to you.It could be in any form.A mere cheque will not prove that it is a Cheque for Gift.Registration of Gift deed for moveable property is not compulsory whereas Gift deed for an immovable property is compulsory and it is compulsory to register it as per registration act.But when you want to prove gift of a movable property, before a judicial authority,it should be evident by way of a Deed in a proper manner and executed on a stamp paper of the value as mentioned in the Stamp Act.If you produce an affidavit for a gift and is accepted by an ITO it is his sweet will to accept.But if you want that any piece of paper be accepted by the judicial or quasi judicial authority as an evidence then it should be properly stamped if it is a document on which any stamp duty is payable.
After all an affidavit sworn by you would become a gift deed even if you use the nomenclature 'Affidavit'.
Another point,a gift should be accepted by the donee.Unless it is so accepted it is not complete.Would your affidavit contain such an acceptance?If yes ,then it is not an affidavit it is a gift deed.
Thank you for your inquisitiveness.Suppose tomorrow I give you a Cheque of Rs. 2500000/-(of course if I have that much money) and you and me call it a gift.Would a mere cheque prove that it is towards a Gift? It could be for a loan also from me to you.It could be for a repayment of a loan from me to you.It could be for an advance from me to you.It could be in any form.A mere cheque will not prove that it is a Cheque for Gift.Registration of Gift deed for moveable property is not compulsory whereas Gift deed for an immovable property is compulsory and it is compulsory to register it as per registration act.But when you want to prove gift of a movable property, before a judicial authority,it should be evident by way of a Deed in a proper manner and executed on a stamp paper of the value as mentioned in the Stamp Act.If you produce an affidavit for a gift and is accepted by an ITO it is his sweet will to accept.But if you want that any piece of paper be accepted by the judicial or quasi judicial authority as an evidence then it should be properly stamped if it is a document on which any stamp duty is payable.
After all an affidavit sworn by you would become a gift deed even if you use the nomenclature 'Affidavit'.
Another point,a gift should be accepted by the donee.Unless it is so accepted it is not complete.Would your affidavit contain such an acceptance?If yes ,then it is not an affidavit it is a gift deed.
19 December 2007
Mr.Agarwalla,
After the amendment in Section 56 of the Income Tax Act,whether a unilateral self declaration or an affidavit by any person to the effect that he has gifted an amount to you would be accepted by you? Suppose tomorrow I swear in an affidavit that I have gifted Rs.2500000/- to you.Will it not be included in your hands as income from other sources? Self declaration or affidavit are unilateral and have no meaning.Do not take my questions personally Please.
After the amendment in Section 56 of the Income Tax Act,whether a unilateral self declaration or an affidavit by any person to the effect that he has gifted an amount to you would be accepted by you? Suppose tomorrow I swear in an affidavit that I have gifted Rs.2500000/- to you.Will it not be included in your hands as income from other sources? Self declaration or affidavit are unilateral and have no meaning.Do not take my questions personally Please.
03 March 2008
gift by book entries is not prohibited under any Act
11 February 2013
What would be situation when gifting of shares is made through duly executed share transfer deed? Shall a separate gift deed be required to proof the gift?
04 April 2013
Yes She gives gift
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