Taxability of Certain Gifts

[hitendra_bhatia]

Hi I have some questions regarding the taxability of gifts which is pointed below:

1.   Can a person who has not shown some property in his books submitted to income tax deptt, make a gift to his wife or some other person of the said property? Whether this gift would be taxable under income tax act or gift tax act to the donor or donee? Assumptions (that the donor has got that property in 1986 from govt. and since then he has not shown the same in his books of accounts. Current stamp duty value of the same is 24, 00,000)

2.   Take the same thing in above mentioned question whether that person can make a gift of the said property to his wife, then his wife gifts this property to her father's sister (BUA) and then that BUA gifts this to her grand son. What would be the income tax liability on each gift on either donor or donee? Further whether it is advisable to go with this option in the same financial year or to do these transactions in the one by one in subsequent years or one should avoid this option? And further whether as per income tax can the first donor makes this gift directly to the last donor as per relative definition under income tax act which includes lineal ascendants or descendants as a relative. My main objective is to make as minimum to minimum transaction in a legal and smooth way.

3.   (Most Important) Further in the 1st question assume that person has made a un registered gift deed in 1989 to his wife's Bua's son and that Bua's son is in the possession of the said property and the donee has constructed the house on gifted land and the donee has deceased in 2006 and now his legal heirs are in the possession of the same property and now the donor want to make a duly stamped & registered gift deed to the legal heirs of the deceased donee, whether this transaction will attract gift tax or income tax on original donor or deceased donee or surviving donee?

[satyanveshi]

if the donor has proof for holding property since 1986 taxing the siad amount, even if unaccounted in his hands, doesnot arise because the incometax recognises the unaccounted income only for six assessment years. If the donor has proof that he is holding the said property prior to six assessment years taxability of the said amount in his hands donot arise at all. Let us see in the hands of donee. If the relationship of the donor and donee is not the one specified in sec. 56(2), then there is every possibility to tax that gift in the hands of the donee. With regard to the second query, if the transactions are  arranged in only one financial year, an intelligent officer can pierce through the layers and he will prove that the ultimate aim of the transaction is to travel of the gifted property from A to Z and their relationship is naturally the one which is not specified in sec. 56(2) and therefore, he can say that the transaction is intended to dupe the government and accordingly, can invoke the famous case law of Mcdowell & Co  and he can tax the same. Then to get relief also U  have to really fight before appellate authorities. But the transactions are arranged in two  or more  financial years then no body can prove the real intention of the donor and ultimate donee. with regard to ur third query also, there is no possibility of taxing the same under normal circumstances. If the officer is very intelligent and extraordinary then he will tax it but you may get relief before appellate authorities. 

[hitendra_bhatia]

Hi,

Thanks for your reply.

can you please let me know whether the 3rd query is legal under income tax or gift tax tax. and also if you can site any court judgements on the 3rd or may be similar to the query, if you know.

Thanks in advance for your kind support.

Hitendra Bhatia