Tax liability

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 November 2011 RAM, AN ENGINEER, GETS A LUXURY (COST 28 LACS)CAR AT HIS MARRIAGE ENGAGEMENT, BUT HE DOES NOT MARRY AND THE OPPOSITE SIDE DID NOT TAKE THE CAR BACK AFTER 1 YEAR HE SOLD THE CAR FOR RS.21 LACS

TELL ME WHO IS LIABLE TO PAY TAX WHILE OWNERSHIP OF THE CAR IS NOT OF RAM.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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30 November 2011 Firstly, the gift on the occasion of engagement is not taxable in the hands of Ram since the car is not an immovable property as defined in Section 56(2)(vii).

Secondly sale of car is not within the perview of Capital Gains since car is a personal asset.

Accordingly, no tax liability arises either on the receipt of car or sale thereof.

Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2011 siddhartha bhardwaj, i know that tax liability is not arise in this case but the ownership of the car was the opposite side and this is a movable assets.

transfer would take place in this case.

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madhur gupta

madhur gupta (Expert)
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01 December 2011 Hello friendz
As per my view only gifts received at time of marriage are exempt under sec 56 but this is on engagement so it should be taxable one
but since ownership is not transferred so it wont be treated as gift as most probably gift deed also not been executed in this case
So it is not the property of Mr.Ram
Further i would like to ask one quest over here that if ownership was not transferred then how he sold the car as sign on sale has to be made by owner only
Plz clarify more in this regard
Thx

sunil nanda

sunil nanda (Expert)
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02 December 2011 Mr.Author,
i also agree with madukar gupta that the gift received on the time of marriage is exempted but this gift is received on the time of engagement and taxable one.
If the ownership is not transferred to ram how he sold the car, without ownership no one sold any item because many legal proceeding are there. So, in my view this is the liability of Ram.

Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2011 hello all i'm not agree of all of urs statement because the car was opposite side. and ram has no marital status to the opposite party.

i think that tax liability should be arisen in that case.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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02 December 2011 You are right when you say that a transfer has taken place.

BUT, CAPITAL GAIN ARISES ON THE TRANSFER OF A CAPITAL ASSET.

Section 2(14) of the Income Tax Act defines capital asset as "property of any kind held by the assessee

BUT DOES NOT INCLUDE PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROPERTY HELD FOR PERSONAL USE BY THE ASSESSEE"

Car fall in the definition of personal asset and is accordingly excluded from the perview of Capital Gain. So, there is no tax liability on Ram.

Further, those of you who say that receiving a gift on the occassion of engagement is taxable, let me tell you that as per Section 56(2)(vii), gift is taxable only when it is of the following nature:

1. Cash
2. Immovable property

Since, car is a movable property, car received as gift will not be taxable in the hands of the recipient.

CONCLUSION: NO TAX LIABILITY ARISES EITHER ON THE RECEIPT OF CAR AS GIFT
OR
ON THE TRANSFER OF SUCH CAR