Gift from spouse abroad. documentary proof of donor

Tax queries 743 views 3 replies

Jayesh Patel

Business

24 Points Joined September 2008

During PY 2008-09 my relative lady at Mumbai (RNOR) has received Rs. 1.51 crore gift from her husband (NRE) in Dubai through 12 tranches of bank transfers, telegraphic transfers, RTGS, drafts drawn in favour of builder on her behalf, etc. (reflected in bank statements) etc. RBI approved banking channels mode. She has submitted all bank statements to the assessing ITO. Also Gift Declaration signed by her husband covering all gifts through this bank mode for all 12 transactions for Rs. 1.51 crore total amount of gift is also submitted to the ITO.

She has a status of Resident but Not Ordinarily Resident. Her husband in Dubai has Non Resident Status. She neither has any source of income nor holds any property abroad. Her husband has neither any source of Income nor holds any property in India.

Case is amply clear. However, ITO insists on bank statements of her husband at Dubai. Also he doubts on gift declaration, insists the gift deed must be registered in India.However, due to merger of banks in Dubai, 2998 statements are not available to her husband immediately.

We have cited following case law also.

In the case law Decided by: ITAT, BENCH `C’, CHENNAI, about the case of: Sushila Ramasamy v. ACIT, Appeal No.: ITA No. 1616/Mds/2007, Decided on: April 2, 2009, it was observed that “..Therefore, in the cases of remittances through banking channel the nature and source of the funds get explained and the onus on the assessee u/s 69 gets discharged, and consequently such remittances cannot be taxed u/s 5(2)(b) of the Act…” Also CBDT Circular No.5 dated 20.02.1969 was discussed and it was observed that “…The obvious logic is that in the case of remittances by banking channel the onus on the assessee u/s 69 stands discharged, and therefore section 5(2)(b) does not apply…”.

NOW I SEEK YOUR HELP AND ADVICE AS UNDER.

1. Is there any other case law, CBDT circular, Appelate or High Court Judgement, which can be helpful in this matter?

2. What is correct legal position about Gift Declaration and Registration of Gift Deed?

Thanks

Jayesh B Patel

Replies (3)

CS RAJESH C.CHOUDHARY

ASSISTANT MANAGER

14607 Points Joined July 2011

According to Transfer of Property Act, the Gift Deed for movable property need not be registered.The genuineness of the person should be satisfied. In this case you may submit copy of the marriage registration certificate, copy of passport, copy of Visa.For vefication you may submit the copy of the bank statement of the husband.It shall be better if you asked the husband to make an affidavit in Dubai and despatch the same to you for its onward submission to the assessing officer.I think in this process the onus of the assessee shall stand discharged.There are lot of judgment in this respect. Since the lady is not an assessee section 68 is not applicable to her.

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

doubt of the ITO is that the money is generated in india and brought to india by sending that to tax heaven by unofficial routes, thats why he is insisting for bank statements to ensure that such amount was held by the person making gift from back periods or desposted in cash at the time of transaction.

Mere receipt by banking channel does not discharge the duty of tax, as the case is of tax free gift, cetain procedural compliances are needed to be maintained.

registration of gift deed in india may not be forced to initiated by the ITO on production of bank statements.

CS RAJESH C.CHOUDHARY

ASSISTANT MANAGER

14607 Points Joined July 2011

1. Monetary gift is not required to be registered in India. A simple letter of declaration is sufficient. You can ask the AO to substantiate his requirement of registration of gift deed in India from relevant clause of Registration Act or TOPA.2. The genuineness of gift has to be established by way of identity, and creditworthiess of the donor. In this case by way of remittance of banking channel and RTGS copy advices, the identity and transaction integrity is verified but the capability of husband to gift such amount remains disputed which has to be discharged by recipient. Donor is in a jurisdiction where there is no income tax. Hence the creditworthiness can be substantiated by bank statements and employers letter.3. This case will has to be tested on facts.4. I disagree with Mr Basu on one point. Section 68 is very much applicable in this case. The lady is very much an assessee in India. She may or may not be liable to tax on certain incomes.