Gift

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This discussion explores whether a laptop received by a company as a gift from its director is considered a fixed asset and examines the associated tax implications. While a tribunal case suggests gifts to companies are capital receipts and not taxable, Section 56(2)(x) of the Income-tax Act may apply if the property's fair market value exceeds ₹50,000, potentially taxing the company. The applicability of this section to gifts from directors is also debated.

badrinarayanan

badrinarayanan (Querist)

25 January 2021 Hi experts,
Company received a laptop as gift from its director.
Is it considered as fixed asset?
Also specify the tax implication on the same for company as well as the director.

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)

26 January 2021 The Mumbai Bench of the Income-tax
Appellate Tribunal (the Tribunal) in the case of KDA
Enterprises Pvt Ltd.1
(the taxpayer) held that a gift
received by a company is a capital receipt and cannot be
charged to tax under the Income-tax Act, 1961 (the Act)
since there is no specific provision for taxability of such
receipts in the statute.
The Tribunal observed that companies are competent to
make and receive gifts, and natural love and affection
are not a necessary requirement. Under the Act, only the
income of the taxpayer is subject to tax and not each
and every receipt of the taxpayer, where the other
receipts are not in the nature of income

badrinarayanan

badrinarayanan (Querist)

27 January 2021 But, As per Section 56(2)(x)
the following incomes, shall be chargeable to income-tax under the head "Income from other sources",

where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,— inter alia

(c) any property, other than immovable property,—
(A) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(B) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

According to the above provision, the term "Any person" includes company also.
So, will the gift by director to the company is not attracted by this section?

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)

29 January 2021 No. As per the above decision

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