Sec 56(2)vii

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rishi (Querist)

10 August 2017 Hello, I have a query on sec 56 (2)vii a. When we sell jewelry of 1 crore for a low consideration say 10 lakh to another party, and took black money of 1 crore against it from the another party. And later the party sold the jewelry in the market for 1cr (in order to convert his black money into white). But when he will sell, capital gains provisions will be applied and he needs to pay taxes, taking the cost of acquisition as 10 lakes.

My question is that, even if we don't apply Section 56(2)vii in the above case, then also money laundering can take place, since when the party will be selling the jewelry, later on, he needs to pay CG tax on it, taking 10 lakhs as COA. So, what is a need of Section 56(2)vii which states that, if jewelry is purchased for a low consideration, then the difference of consideration and FMV (if exceeded 50k), will be taxable as IFOS in the hand of the recipient?

Amol S Joglekar

Amol S Joglekar (Expert)

10 August 2017 01. From 01/04/2017, in place of 56(2)(vii), please read 56(2)(x)
02. When let us say, MR A sells jewellery to Mr B (Who are not relative as said in the said section), then 1crore minus 10 lakh i.e. 90 lakh is considered as the income from other sources of Mr A.
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