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Taxability of gift

Max Payne (employed) (2569 Points)

30 June 2010

Pls need confirmation

Mr. B's minor son, Junior B, received a gift of Rs. 75,000 from Mr. B's brother (RELATIVE) on his birthday.

This is not chargeable as per proviso to section 56?

Since it cannot be charged under sec 56, there is no need to club the same with Mr. B's income under sec 64(1A)?

Pls respond ASAP!

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5 Replies

HARIHARAN KRISHNAMURTHY (Service) (97 Points)
Replied 30 June 2010

Hi,

In my opinion , this would be clubbed with the Income B , since this is not received by B's son by way of any manual work or activity involving application of skill, talent etc.

Extracts of relevant paragraph reproduced :

[(1A) In computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child ⁹⁶[, not being a minor child suffering from any disability of the nature specified in section 80U] :

Provided that nothing contained in this sub-section shall apply in respect of such income as arises or accrues to the minor child on account of any—

(a) manual work done by him ; or

(b) activity involving application of his skill, talent or specialised know-ledge and experience.

Regards

Hariharan

Max Payne (employed) (2569 Points)
Replied 30 June 2010

Dear Hariharan Sir,

Thanks for ur response...

Pls note here that Mr.B's brother would be a relative of both Mr. B as well as Junior B....

So is it necessary to club an exempt income?

I mean i am aware of Suresh Chand Talera's case where agricultural income of minor is clubbed with parent for rate purpose,

but is it necessary to include exempted gift which is outside the purview of charging section 56?

Amir (Learner) (4016 Points)
Replied 30 June 2010

Hi,

It cannot be clubbed.

Since clubbing provisions takes effect only if the receipt in question is the "income" with in the meaning of income tax act.

Sec 64 (1) reads as under -

In computing the total income of any individual, there shall be included all such income as arises directly or indirectly—

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Max Payne (employed) (2569 Points)
Replied 30 June 2010

Thanks Amir for ur reply,

But the words are there shall be included all such income as arises or accrues to his minor child

So gift is accruing to minor child, but it is not an income - because it is a gift that is excluded from the scope of income by a charging section??

Will that be the correct stance?