CHAPTER III
DIRECT TAXES
Income-tax
Amendment of section 56.
21. In section 56 of the Income-tax Act, in sub-section (2),
(a) in clause (vii),
(i) for sub-clause (b), the following sub-clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 2009, namely:
"(b) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;";
(ii) in the Explanation, in clause (d),
(A) in the opening portion, for the word "means", the words "means the following capital asset of the assessee, namely:" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 2009;
(B) in sub-clause (vii), the word "or" shall be omitted with effect from the 1st day of June, 2010;
(C) in sub-clause (viii), the word "or" shall be inserted at the end with effect from the 1st day of June, 2010;
(D) after sub-clause (viii), the following sub-clause shall be inserted with effect from the 1st day of June, 2010, namely:
"(ix) bullion;";
(b) after clause (vii), the following shall be inserted with effect from the 1st day of June, 2010, namely:
'(viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:
Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47.
Explanation.For the purposes of this clause, "fair market value" of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);'.
Notes on Clauses:
Clause 21 of the Bill seeks to amend section 56 of the Income tax Act relating to income from other sources.
Under the existing provisions contained in sub-clause (b) of clause (vii) of sub-section (2) of the aforesaid section, if an assessee being an individual or a Hindu undivided family receives any immovable property without consideration or for inadequate consideration, the value of the said property shall be treated as income in the hands of assessee and shall be liable to tax.
It is proposed to substitute the aforesaid sub-clause (b) of clause (vii) of sub-section (2) of the aforesaid section so as to provide that clause (vii) of sub-section (2) of section 56 would apply only if the immovable property is received without any consideration and to remove the stipulation as regards inadequate consideration.
This amendment will take effect retrospectively from 1st October, 2009, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
Under the existing provisions contained in clause (d) of the Explanation to clause (vii) of sub-section (2) of the aforesaid section, certain properties have been enumerated within the definition of "property".
It is proposed to amend the aforesaid clause (d) of the Explanation to clause (vii) of sub-section (2) so as to specify that clause (vii) of sub-section (2) of the aforesaid section will have application to "property" which is in the nature of capital asset of the assessee.
This amendment will take effect retrospectively from 1st October, 2009, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
It is also proposed to amend clause (d) of the said Explanation to insert a new sub-clause (ix) so as to include "bullion" within the specified categories of property.
This amendment will take effect from 1st June, 2010, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
Under the existing provisions contained in clause (vii) of subsection (2) of the aforesaid section, if an assessee who is an individual or a Hindu undivided family receives specified property without consideration or for inadequate consideration from persons other than relatives defined in the said section, the value of the
said property shall be treated as income in the hand of assessee and shall be taxed.
It is proposed to insert a new clause (viia) in sub-section (2) of the aforesaid section so as to include the transactions undertaken in shares of a company not being a company in which the public are substantially interested where the recipient is a firm or a company not being a company in which the public are substantially interested.
This amendment will take effect from 1st June, 2010, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
