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Doubt scope of 'Income from other sources'

ajith (Article) (293 Points)

26 January 2011

Hi, i'm having a doubt regarding a provision in Income Tax:-

As per section 56(2), transfer of a property as fre gift or at a consideration lesser than its FMV, by non-relatives is taxable under the head Income from other sources.

"Property" is defined as (i)immovable property being land or building or both, (ii)shares and securities, (iii)jewellery, (iv)archaeological collections, (v)drawings, (vi)paintings, (vii)sculptures, (viii)any work of art, (ix)bullion.

Then, if any other asset not in the definion, say a Motor Car,is given as gift, it should not attract tax under Income from other sources.

But I have referred to multiple authors and each has a different view. Please advise on it's appropriate treatment.

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12 Replies

Resham (Carpe Diem !!!) (6535 Points)
Replied 26 January 2011

I think the definition of goods is inclusive and not exhaustive...

So motor car can be taken as taxable gift..

This is my view...

You said you referred multiple authors each having diff view... what were their views??

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 26 January 2011

From 1.10.2009, new clause [Sec. 56(2)(vii)] introduced for charging of Gifts received

by individual/HUF. Earlier, only gifts received in the sum of money was chargeable

under Income Tax Act. However w.e.f. 01.10.2009 gift received in kind is also

chargeable subject to certain conditions.

The new provisions is described as under :

I. If any sum of money received without consideration, the aggregate of which

exceeds Rs.50,000, the whole of such sum will be chargeable.

II. If any immovable property received –

(a) without consideration, the stamp duty value of which exceeds Rs.50,000,

the stamp duty value of such property will be chargeable.

(b) For a consideration, which is less than stamp duty value of property by an

amount exceeding Rs.50,000, the stamp duty value of such property as

exceeds such consideration will be chargeable.

III. if any property other than immovable property received –

(a) without consideration, the aggregate fair market value (FMV) of which

exceeds Rs.50,000, the whole of aggregate FMV of such property will be

chargeable.

(b) For a consideration, which is less than the aggregate FMV by an amount

exceeding Rs.50,000, the aggregate FMV as exceeds such consideration

will be chargeable.

However any such gifts received from relatives shall not be treated as income.

For the purpose of this, ‘relative’ means : ‐

(a) spouse of the Individual;

(b) brother or sister of the individual;

(d) brother or sister of the either of the parents of the individual;

(e) any lineal ascendant or descendant of the individual;

(f) any lineal ascendant or descendant of the spouse of the individual;

(g) spouse of the person referred to in clause (ii) to (vi).

1 Like

Vikash Maheshwari (learner) (6358 Points)
Replied 26 January 2011

this question was asked in may 2010 may final old syllabus........the list is inclusive...........jst those items mentioned can b taxed if gifted with out consideration and other criterias fulfilled............so motor car cannot b taxed as IFOS............resham u r incorrect in tht..............it leads to a conclusion that evrything wud b taxable as a gift...then wat was d purpose of providing d list...............i hope it's clear nw.............

1 Like

Resham (Carpe Diem !!!) (6535 Points)
Replied 26 January 2011

Ya thanks so much.... Sharma SIr and Vikash...

Actually i had doubt thats why i forwarded the link...

Thanks for this prompt reply.

CA.Pravinchandra (Executive (F&A)) (2387 Points)
Replied 26 January 2011

100% agree with US sharma

1 Like

Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 26 January 2011

Originally posted by : vikash maheshwari
	this question was asked in may 2010 may final old syllabus........the list is inclusive...........jst those items mentioned can b taxed if gifted with out consideration and other criterias fulfilled............so motor car cannot b taxed as IFOS............resham u r incorrect in tht..............it leads to a conclusion that evrything wud b taxable as a gift...then wat was d purpose of providing d list...............i hope it's clear nw.............

agree list is exhaustive , motor car given free of cost or at reduced price is not taxable as gift

1 Like

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 26 January 2011

Originally posted by : Pravinchandra
	100% agree with US sharma

1 Like

gautam.k.r (PCC) (78 Points)
Replied 27 January 2011

1) motor car used for business or profession purpose discarded will be taxed as business income or loss subject to block of asset concept

2) used for personal purpose will not be taxed as it is not a capital asset which is specifically excluded from the perview of the definition of capital asset.

1 Like

CS LLB Pulkit Gupta (https://www.facebook.com/pages/Life-and-Promises/553962034682487) (16631 Points)
Replied 27 January 2011

Originally posted by : Pravinchandra
	100% agree with US sharma

1 Like

ajith (Article) (293 Points)
Replied 27 January 2011

Originally posted by : U S Sharma
	III. if any property other than immovable property received – (a) without consideration, the aggregate fair market value (FMV) of which exceeds Rs.50,000, the whole of aggregate FMV of such property will be chargeable. (b) For a consideration, which is less than the aggregate FMV by an amount exceeding Rs.50,000, the aggregate FMV as exceeds such consideration will be chargeable.

immovable property is defined in the act to the list i mentioned above. And it starts with "immovable property MEANS", so it must be an exhaustive list.

My teacher referred to the issue to publishers of TN Manoharan sir's book, and they confirmed that the list is exhaustive too. So gifting items other than those in the list shall not attract tax under Income from other sources.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 27 January 2011

@ ajith

Teacher is not lawmaker,

laws are made always right , only interpretations change, and the person who has closest understanding to the actual law is ranked as topper :)

Rules are made to ease the life of common people, for taxing the high income groups and relax to lowers - not for tricky games :)

ajith (Article) (293 Points)
Replied 28 January 2011

Well what I mean is, under the circumstances, when I was confused in finding different views by different authors, I'm glad to see one of the more popular of them have acknowledged that my teacher's view(who i think is a pretty skilled practitioner himself) is right. They had misprinted a question or two, and agreed to make changes to the same(I don't know about how they are going to follow up with the current edition).