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1 lakh gift exemt

abhishek (STUDENT) (162 Points)

17 April 2010

hi friends

i came across a question in V.K.singhania

as ,if Rs. 50000 is received in sept09 from a friend as gift is exempt under 56(2)(vi)

and if Rs. 50000 is received in oct 09 from a friend as gift is exempt under 56(2)(vii) as inserted by finance act no.(2),2009

so in total gift of Rs. 1 lakh is exempt in one P.Y.

please comment

i am not able to digest this exemption criteria

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9 Replies

Amir (Learner) (4016 Points)
Replied 17 April 2010

Dear Abhishek,

First I would like to appreciate Singhania Sir because he is too good in picking up cases like this...

Actually if u carefully notice the WAY in which AMENDMENT is made by Finance Act(No.2) 2009 u will find that instead of amending clause(vi) , a new clause (vii) has been introduced.

Now clause (vi) was operativee till 30.09.2009 & after that clause (vii) becomes operative..

Now both these clause themselves provide exemption upto Rs. 50,000 separately.

So in FY 2009-2010 both can be claimed & if gifts received before and after 30.09.2009 does not exceed Rs. 50,000 each (though in aggregate they may exceed) Nothing shall be taxable.........:)

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 17 April 2010

Dear Abhishek,

Changes Proposed In new Budget 2009 from 01.10.2009
Individuals receiving shares, jewellery, valuable artefacts or even property valued at over Rs 50,000 as gifts from non-relatives, will have to start paying tax from October 1,2009 The budget has extended the provision to tax cash gifts in the hands of the recipient to all non-cash gifts as well. These will include shares, jewellery, archaeological collections, valuable drawings, paintings or sculptures. If the value of these assets exceeds Rs 50,000, it will be treated as income for the recipient and taxed according to his or her taxslab.

regards,

ratan

Amit Agrawal (Chartered Accountant) (75 Points)
Replied 17 April 2010

Dear Amir,

In my opinion only 50000 will be allowed.

The intention of the legislature also has to be seen.

Actually in practice we had tried to do the same but the AO has refused to accept the contention.

Also such addition is direct and hence risk to the assessee.

If we litigate it is possible that we may win after 15-20 years.(Insensible option)

Your opinion

Regards

Amir (Learner) (4016 Points)
Replied 17 April 2010

Dear Amit Sir,

I understand that it could never be the intention but Law doesn't sop u in doing it..(So unethical or u can say a loophole or Tax avoidance or whatever u may like)

As far as giving effect to the Intention is concerned it is a settled principle, (which I also came to know during discussion in this forum only) that it has no place unless on literal reading two or opinions are possible.

So as far as literal meaning is concernred, which is the first rule of interpretation the above anomoly noticed by Shinghania Sir is very much possible (though I agree that not an ethical one)......:)

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Alex Sharma (CA & ICWA Final student; CS & CFA completed) (194 Points)
Replied 17 April 2010

But AO said no to CA. Amit

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abhishek (STUDENT) (162 Points)
Replied 17 April 2010

amir bhai,i have interpreted the intentions of ca. singhania ,but its purely unethical

the intention is not to provide 1 lakh exemption

so,what should we do?

should we follow the singhania sir's interpretation?

and amir bhai please explain

"As far as giving effect to the Intention is concerned it is a settled principle"

that means intention has no role to play?

preeti (student) (143 Points)
Replied 17 April 2010

I agree with Amir.

jatin kapoor (CA FINAL) (1586 Points)
Replied 17 April 2010

hi,

as per income tax act, the section 56(vi) is applicable till 30.09.2009, thus exemption of 50,000 will be taken till 30.09.09 . also the new section 56(vii) which is introduced w.e.f from 01.10.2009 the exemption of Rs. 50,000 will be given from 01.10.2009 till 31.03.2010 as this provision did not exist before that date.

thus for p.y. 2009-10 the assessee can take exemption of Rs. 100000.