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QUESTIONS & ANSWERS
Gifts: when treated as income?
In The Hindu dated July 27, 2009, you have stated that gift to non-relatives under Sec. 56(2)(vii) has been extended to gifts in kind as well with effect from October 1, 2009. It has, no doubt, been extended to property other than immovable property but has listed the movable property, which is liable, so that the unlisted items such as a car, ship, air plane, cattle and horse races are not covered. The statement made in your answer that movable properties are also covered would need explanation.
The reader is right that Sec. 56(2)(vii) as substituted by October 1, 2009, would treat gift of any sum of money or any property from any non-relatives as income. Explanation (d) to the clause defines property as:
“‘Property’ means (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; or (viii) any work of art.”
It follows that there could be movable property, other than those listed above, which could not be deemed, when gifted, as income. It may be possible to circumvent the law by purchasing, say, cattle or any other unlisted valuable and gift the same. Apparently, the object of spelling out only the usual item is that the other gifts from non-residents should ordinarily be unusual and not be of any significant value. But then, any valuable gift, where they are not genuine, but in effect cash converted to such unlisted asset solely to evade law could be treated as a measure of tax avoidance so as to enable revenue to treat it as gift of sum of money.
S. RAJARATNAM
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