Introduction

It is always a pleasure to give gifts and more pleasure to receive it. Gifts means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth. Thus a gift does not have the character of income. Accordingly, in the hands of donee, ordinarily a gift does not come within the definition of “Income”. Generally gift receiving was not subject to income tax. But it was found that many individuals used the loopholes in this act, to launder money. Therefore, Ministry of Finance introduced a New Provision u/s 2(24)(xii) r.w.s. 56(2)(vii). Therefore, after 1st September, 2004, as per Income Tax Act, 1961 receiver of gift is charged to taxation u/s 56(2)(vii) under the head “Income from Other Sources”. Giver/Donor of gift is not chargeable to tax except few situations. Let’s understand the various situations relating to gifts & the provisions of Income Tax Act, 1961 for those situations.

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1. What is Hindu Undivided Family

The expression “Hindu Undivided Family” has not defined under the Income Tax Act  or in any other statute.  When we dissect – essentials are (1) One should be Hindu, Jains, Sikhs and Buddhists are considered as Hindus  but not Muslims or Christians; (ii) There should be a family i.e group of persons – more than one and (iii) They should be undivided i.e living jointly and having commonness amongst  them.  All these three essentials are  cumulative.  It is a body consisting of persons lineally descended from a common ancestor and  include their wives and unmarried daughters, who  are living together, joint in food, estate and, worship (not now  necessary).  The daughter, on her marriage, ceases to be a member of her father’s HUF and becomes a member of her husband’s HUF. However, after  1-9-2005, daughter married or unmarried, is a co-parcener like a son.

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WILLS AND ITS ADVANTAGES

Considerable confusion prevails in the minds of even educated persons and some time even amongst Tax Practitioners as to the law of Wills in India.

Every person who has assets and property and a family should make a Will whether he is young or aged. It is an erroneous impression in the minds of persons that one should make a Will only when he is aged and not in good health.

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1. What is Family Settlement?

Halsbury’s Laws of England, Volume 18, Fourth Edition, deals with this subject at length.
Para 301 defines a family arrangement as follows :-
“A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed right or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour”.

“The agreement may be implied from a long course of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term family agreement is applied”.

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Chorus from all quarters has started pouring in for simplification of the Income Tax Act as the budget day is drawing close. But in my opinion Indian Income Tax laws are most simple in the World, unless they are made complicated by the executing officers. Most of the issues under Income Tax Act are settled by various courts of law, therefore, any kind of tinkering with basic structure of Income Tax Act might lead to quantum jump in litigation, but few irritants of Income Tax Act need to be resolved.
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1. Introduction – Legislative history of section 14A

Section 14A of the Income-tax Act, 1961 (the “Act”) was Legislature’s response to a host of judicial decisions which did not differentiate between expenditure incurred for earning taxable income and for earning exempt income for the purpose of allowability of expenditure as deduction. To overcome the Supreme Court decision in the case of Rajasthan State Warehousing Corporation v. CIT [2000] 242 ITR 450 (SC) wherein it was held that in case of an indivisible business, some income wherefrom is taxable while some exempt, entire expenditure would be permissible deduction and the principle of apportionment would apply only for an indivisible business. Read more ›

1. Introduction

Bombay High Court in Mahalaxmi Cotton Ginning Pressing and Oil Industries v The State of Maharashtra & Others (2012) 51 VST 1 (Bom.) (HC) (SLP dismissed by the Supreme Court) dealing with set off under section 48(5) and 51(7) of the Maharashtra Value Added Tax Act, 2002. Issue before the court was when dealer collects the taxes and does not deposit it in the Government Treasury, can the purchased be entitled to set off of the said taxes. Validity of the provision was challenged. Upholding the validity of the provision the court held that .Section 48(5) uses the expression “actually paid” in to the Government treasury. The words “actually paid” must receive their ordinary and natural meaning. There is no reason for the court to depart from the plain and ordinary meaning of these words when used in the context of section 48(5). To accept the contention that “actually paid…in the Government Treasury” should be read to mean the tax that ought to have been deposited but has not been deposited in the treasury would amount to rewriting the legislative provision.

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Executive and Judiciary are up for collision course or there is any possibility of mutual understanding to solve this monumental constitutional crisis?
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1. The AAR decision in the case of Steria (India) Ltd, reported in [2014] 364 ITR 381 (AAR), poses an interesting challenge to tax professionals in evaluating the role of a Protocol in interpreting Tax Treaties.

2. The Applicant in this case, Steria (India) Ltd [‘S’] is an Indian public company stated to be a leading provider of IT driven business services for its clients’ core business processes.

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Disallowance u/s 14A of the Income Tax Act 1961 has always been the subject matter of dispute before the tax authorities, Appellate Tribunal and the courts. Recently, certain decisions have been delivered by the courts which have great impact on the scope of disallowance u/s 14A of the Act.

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