Taxmann’s Taxation of Loans, Gifts & Cash Credits provides a ready referencer along-with FAQs on the taxability arising from the following: • Undisclosed Income – Covering all aspects and complexity involved under Section 68 to Section 69D • Donee-Based Taxation of Gifts of Money Received by any Person (Taxation of Gifts of Money) • Taxation of Gifts of Immovable Property Received by any Person • Taxation of Gifts of Movable Property Received by any Person The Present Publication is the 10th Edition which incorporates all the changes made by the Finance Act, 2021.

1. Sample
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4. Frequently Asked Questions (FAQs) I-9
DIVISION ONE
UNDISCLOSED INCOME
INTRODUCTION 3
CHAPTER 1 : SCHEME OF TAXATION OF UNDISCLOSED
INCOME COVERED BY SECTIONS 68 TO 69D 5
CHAPTER 2 : VOLUNTARY DISCLOSURE OF UNDISCLOSED
INCOME 17
CHAPTER 3 : DETECTION OF UNDISCLOSED INCOME BY
DEPARTMENT 27
CHAPTER 4 : CASH CREDITS UNDER SECTION 68 30
CHAPTER 5 : SHARE APPLICATION MONEY/SHARE CAPITAL/
SHARE PREMIUM IN CASE OF CLOSELY-HELD
COMPANIES - WHEN UNEXPLAINED CASH
CREDIT 84
CHAPTER 6 : SHARE APPLICATION MONEY/SHARE CAPITAL/
SHARE PREMIUM IN CASE OF WIDELY-HELD
COMPANIES - WHEN UNEXPLAINED CASH CREDIT 96
CHAPTER 7 : WHETHER CAPITAL GAINS FROM SHARES TAX-
ABLE U/S 68? 99
CHAPTER 8 : LOANSANDDEPOSITS-WHETHERUNEXPLAINED
CASH CREDITS? 104
CHAPTER 9 : DEPOSITS FROM TENANTS - WHETHER AND
WHEN UNEXPLAINED CASH CREDITS 109
CHAPTER 10 : CREDITS IN FIRM’S BOOKS - WHEN UN-
EXPLAINED CASH CREDITS 111
CHAPTER 11 : SUNDRY CREDITORS/TRADE CREDITORS -
WHEN UNEXPLAINED CASH CREDITS 120
CHAPTER 12 : UNEXPLAINED INVESTMENTS UNDER SECTION
69 122
CHAPTER 13 : UNEXPLAINED INVESTMENT IN LOTTERY
TICKETS 173
PAGE
I-5
Contents

5. CHAPTER 14 : ADDITIONS U/S 69 ON THE BASIS OF STOCK
STATEMENTS SUBMITTED TO BANKS 175
CHAPTER 15 : UNEXPLAINED MONEY, BULLION, ETC. - SECTION
69A 181
CHAPTER 16 : AMOUNT OF INVESTMENTS ETC. NOT FULLY DIS-
CLOSED IN BOOKS - SECTION 69B 203
CHAPTER 17 : UNEXPLAINED EXPENDITURE ETC. - SECTION
69C 211
CHAPTER 18 : AMOUNT BORROWED OR REPAID ON HUNDI -
SECTION 69D 214
DIVISION TWO
DONEE-BASED TAXATION OF GIFTS OF
MONEY RECEIVED BY ANY PERSON
CHAPTER 19 : DONEE-BASED TAXATION OF GIFTS 223
CHAPTER 20 : TAXABILITY OF GIFTS OF SUMS OF MONEY
RECEIVED 237
CHAPTER 21 : RECEIPT OF SUMS OF MONEY 242
CHAPTER 22 : SUM OF MONEY RECEIVED WITHOUT CONSI-
DERATION 247
CHAPTER 23 : HOW TO COMPUTE THE LIMIT OF ` 50,000 255
CHAPTER 24 : TAX-EXEMPT GIFTS 261
CHAPTER 25 : ‘ANY PERSON OR PERSONS’ 294
DIVISION THREE
TAXATION OF GIFTS OF IMMOVABLE
PROPERTY RECEIVED BY ANY PERSON
CHAPTER 26 : IMMOVABLE PROPERTY - SCOPE OF THIS TERM 299
CHAPTER 27 : CONDITIONS FOR TAXABILITY OF GIFTS
RECEIVED OF IMMOVABLE PROPERTIES 305
CHAPTER 28 : RECEIVED WITHOUT CONSIDERATION OR FOR A
CONSIDERATION LESS THAN SDV 313
CHAPTER 29 : DATE OF RECEIPT OF IMMOVABLE PROPERTY 316
CHAPTER 30 : VALUATION OF THE IMMOVABLE PROPERTY
RECEIVED 319
CHAPTER 31 : HOW TO COMPUTE THE LIMIT OF ` 50,000 FOR
GIFTS OF IMMOVABLE PROPERTY RECEIVED 321
PAGE
CONTENTS I-6

6. CHAPTER 32 : COMPUTATION OF CAPITAL GAINS ON TRANSFER
OF IMMOVABLE PROPERTY TAXED AS GIFT 325
DIVISION FOUR
TAXATION OF GIFTS OF MOVABLE
PROPERTY RECEIVED BY ANY PERSON
CHAPTER 33 : ‘PROPERTY’ (OTHER THAN IMMOVABLE PRO-
PERTY) (i.e. MOVABLE PROPERTY) 331
CHAPTER 34 : CONDITIONS FOR TAXABILITY OF MOVABLE
PROPERTY RECEIVED WITHOUT CONSIDER-
ATION OR FOR CONSIDERATION BELOW FMV 341
CHAPTER 35 : MOVABLE PROPERTY RECEIVED WITHOUT CON-
SIDERATION/FOR CONSIDERATION LESS THAN
FMV 343
CHAPTER 36 : DATE OF RECEIPT OF SHARES AND SECURITIES,
JEWELLERY, ETC. 348
CHAPTER 37 : DETERMINATION OF FAIR MARKET VALUE 350
CHAPTER 38 : TAXATION OF SHARES AND SECURITIES
RECEIVED 351
CHAPTER 39 : VALUATION OF JEWELLERY 370
CHAPTER 40 : VALUATION OF ARTISTIC WORK 373
CHAPTER 41 : VALUATION OF BULLION 376
CHAPTER 42 : HOW TO COMPUTE THE LIMIT OF ` 50,000 FOR
MOVABLE PROPERTY GIFTS 377
APPENDICES
APPENDIX 1 : RELEVANT PROVISIONS OF INCOME-TAX ACT,
1961 383
APPENDIX 2 : RELEVANT PROVISIONS OF INCOME-TAX
RULES, 1962 403
APPENDIX 3 : GUIDELINES FOR SEIZURE OF JEWELLERY
AND ORNAMENTS IN COURSE OF SEARCH 410
APPENDIX 4 : TAXATION AND OTHER LAWS (RELAXATION
AND AMENDMENT OF CERTAIN PROVISIONS)
ACT, 2020 411
APPENDIX 5 : SECURITIES CONTRACTS (REGULATION) ACT,
1956 427
PAGE
I-7 CONTENTS

7. IMMOVABLE PROPERTY -
SCOPE OF THIS TERM
26.1 Immovable property
The scope of the term ‘immovable property’ for the purposes of section
56(2)(x) is ‘land or building or both’. This needs to be contrasted with the
definition of immovable property given in Chapter XX-C of the Act
[Section 269UA(d)].
According to section 269UA(d), ‘immovable property’ means —
(i) any land or any building or part of a building, and includes, where
any land or any building or part of a building is to be transferred
together with any machinery, plant, furniture, fittings or other
things, such machinery, plant, furniture, fittings or other things
also.
Explanation.—For the purposes of this sub-clause, ‘land, building,
part of a building, machinery, plant, furniture, fittings and other
things’ include any rights therein;
(ii) any rights in or with respect to any land or any building or a part
of a building (whether or not including any machinery, plant,
furniture, fittings or other things therein) which has been con-
structed or which is to be constructed, accruing or arising from
any transaction (whether by way of becoming a member of, or
acquiring shares in, a co-operative society, company or other
associationofpersonsorbywayofanyagreementoranyarrange-
ment of whatever nature), not being a transaction by way of sale,
exchange or lease of such land, building or part of a building.
26
275
299

8. In the absence of any definition along the lines of section 269UA(d) in
section 56(2)(x), it can be argued that if immovable property is received
without consideration along with any machinery, plant, furniture, fit-
tings or other things, such machinery, plant, furniture, fittings or other
things shall not attract tax under section 56(2)(x) in the hands of the
recipient. Further, ‘land or building or both’ will not include any rights
therein. In other words, if any right in land or building or both is received
without consideration, the same will not be taxed in the hands of the
recipient.
It may be noted that in Dy. CIT v. Tejinder Singh [2012] 19 taxmann.com
4/50 SOT 391 (Kol.), the Tribunal held that the phrase ‘land or buildings
or both’ will not include rights in land or buildings or both such as ten-
ancy rights. In ITO v. Yasin Moosa Godil [2012] 20 taxmann.com 424
(Ahd. - Trib.), it was held that transfer of ‘booking rights’ in a flat is not
transfer of ‘land or buildings or both’. So, if instead of gifting a flat
directly, if donor books a flat and before execution of sale deed in his
name and before taking possession makes full payment and renounces
booking rights in donee’s name in a tripartite agreement between donor,
donee and builder and sale deed is executed by builder direct in donee’s
name, it would appear that section 56(2)(x) is not attracted as what is
gifted is not ‘land or buildings or both’ but only an interest in ‘land or
buildings or both’. Perhaps, the provisions of sections 50C and 56(2)(x)
need to be amended to include rights or interest in land or building or
both within the scope of the expression ‘land or building or both’ to plug
this loophole.
26.1-1 ‘Immovable property’ includes only immovable property which
is capital asset of the recipient
Immovable property received being land or buildings or both received
without consideration is taxable in the hands of the recipient provided
it is capital asset to the recipient. In other words, immovable property
received will not be taxed if it is :
(a) stock-in-trade of business or profession carried on by recipient; or
(b) rural agricultural land - See para 26.2 below.
There is a view that receipt of gift of agricultural land is not exempt from
tax under section 56(2)(x) since:
u Property is defined to mean inter alia capital asset of the assessee
being land or building or both.
Para 27.2 IMMOVABLE PROPERTY - SCOPE OF THIS TERM 266
Para 26.1 IMMOVABLE PROPERTY - SCOPE OF THIS TERM 300

9. u Section 56(2)(x)(b)/Section 56(2)(vii)(b) uses ‘immovable prop-
erty’ instead of ‘property being immovable property’.
In view of the reference to ‘immovable property’ in sub-clause (b) of
clause (vii)/Clause (x) of sub-section (2) of section 56 rather than
‘property being immovable property’, a view is expressed that tax under
clause (x) will apply to gifts received of immovable property whether
they are capital assets or not. This view is not supported by a plain
reading of provisions in their proper context.
If ‘immovable property’ in sub-clause (b) does not fall within the
definition of ‘property’ in clause (d) of Explanation beneath section
56(2)(vii)/56(2)(x), then there was no need to use the words ‘any prop-
erty, other than immovable property’ in sub-clause (c). Workable inter-
pretation of sub-clause (b) is it applies to ‘property being immovable
property’. Sub-clauses (b) and (c) be read together. While interpreting
provisions, one cannot attribute meanings to words totally divorced
from the context in which they occur.
The Explanatory Memorandum to the Finance Bill, 2010 clarifies as
under:
‘B....... . It is, therefore, proposed to amend the definition of property so as to
provide that section 56(2)(vii) will have application to the ‘property’ which is
in the nature of a capital asset of the recipient and therefore would not apply
to stock-in-trade, raw material and consumable stores of any business of such
recipient.’
The Explanatory Memorandum clearly states ‘section 56(2)(vii) will
have application to the ‘property’ which is in the nature of a capital asset
of the recipient’. It means all the clauses of the provision shall apply only
to ‘capital assets’. None of the clauses shall apply to items excluded from
the definition of ‘capital asset’.
Para 13.4 of CBDT’s Circular No. 1/2011 dated 6-4-2011 also clarifies to
the same effect as under:
‘13.4 The provisions of section 56(2) (vii) were introduced as a counter evasion
mechanism to prevent laundering of unaccounted income. The provisions
were intended to extend the tax net to such transactions in kind. The intent is
not to tax the transactions entered into in the normal course of business or
trade, the profits of which are taxable under specific head of income.
Therefore,thedefinitionofpropertyhasbeenamendedtoprovidethatsection
56(2)(vii) will have application to the ‘property’ which is in the nature of a
capital asset of the recipient and therefore would not apply to stock-in-trade,
raw material and consumable stores of any business of such recipient.’
267 GIFT RECEIVED OF RURAL AGRICULTURAL LAND Para 27.2
301 IMMOVABLE PROPERTY Para 26.1

10. The clarifications by CBDT in Circular No. 1/2011 clinches the issue that
clauses (vii) and (x) of section 56(2) shall apply only to properties which
are capital assets.
In Ram Prasad Meena v. Income Tax Officer, Ward 1(2) Kota [2020] 119
taxmann.com 217 (Jaipur - Trib.) [03-09-2020], it was held that any
property which is not a capital asset is not covered within meaning of
movable or immovable properties under section 56(2)(vii). Agricultural
land purchased by assessee being situated at a distance of 28 km from
municipal limits, was not a capital asset as per provisions of section2(14)
and, thus, it was not covered by definition of ‘property’ given in Expla-
nation to section 56(2)(vii)(b).
In ITO v. Trilok Chand [IT Appeal No. 449 (JP) of 2018, dated 26-5-2020],
the ITAT held as under :
“On reading of provisions of section 56(2)(vii)(b), we find that it refers to
any immovable property. Further, provision of section 56(2)(vii)(c)
refers to any property other than immovable property. The meaning of
the term “property” has been provided in Explanation (d) to section
56(2)(vii) where the term “property” has been defined to mean capital
asset of the assessee namely immovable property being land or building
or both. It has been contended by ld AR that all immovable properties of
any nature are not covered in the definition of property. Only those
immovable properties which are held as capital assets and is in nature
of land or building or both are only covered u/s 56(2)(vii). We agree with
the contention of ld AR that where the term “property” has been defined
tomeanacapitalassetassospecifiedandwhereanimmovableproperty
as so specified being land, building or both is not held as an capital asset,
it will not be subject to the provisions of section56(2)(vii)(b) of the Act.”
In Satendra Koushik v. Income-tax Officer, Ward-2, Jhunjhunu [2019]
106 taxmann.com 244 (Jaipur - Trib.), provisions of section 56(2)(vii)
have application to ‘property’ which is in nature of a capital asset of
recipient and, thus, where assessee purchased a piece of land as stock-
in-trade, impugned addition made by AO in respect of said transaction
by invoking provisions of section 56(2)(vii)(b)(ii), was to be set aside.
26.2 Gift received of rural agricultural land is exempt
If immovable property received by any person without consideration is
rural agricultural land, the same is exempt from taxation. Rural agricul-
tural land is land situated in Indian which is not urban agricultural land.
Para 27.3 IMMOVABLE PROPERTY - SCOPE OF THIS TERM 268
Para 26.2 IMMOVABLE PROPERTY - SCOPE OF THIS TERM 302

11. Urban agricultural land means agricultural land situated in India in—
(A) any area within the jurisdiction of a municipality (whether known
asamunicipality,municipalcorporation,notifiedareacommittee,
town area committee, town committee, or by any other name) or
a cantonment board and which has a population of not less than
10,000
(B) any area within the distance, measured aerially (shortest aerial
distance),
(i) notbeingmorethan2kilometres,fromthelocallimitsofany
municipality or cantonment board referred to in item (A)
and which has a population of more than 10,000 but not
exceeding 1,00,000; or
(ii) notbeingmorethan6kilometres,fromthelocallimitsofany
municipality or cantonment board referred to in item (A)
and which has a population of more than 1,00,000 but not
exceeding 10,00,000; or
(iii) notbeingmorethan8kilometres,fromthelocallimitsofany
municipality or cantonment board referred to in item (A)
and which has a population of more than 10,00,000
The expression ‘population’ shall mean population according to the last
preceding census of which the relevant figures have been published
before the first day of the previous year.
The shortest aerial distance i.e. distance as the crow flies is defined as
under:
‘A straight line distance between two places. A human would have to travel
further to get from one point to another due to obstacles or lack of roads or
trails, but a Crow can go in a straight line between them.’
‘The“distanceasthecrowflies”isawaytodescribethedistancebetweentwo
locations without considering all the variable factors. As an example, travel-
ing from California to Maine involves a rather indirect route around, over
and through mountain ranges and so forth. The driving distance might be
about 3,500 miles, but the distance ‘as the crow flies’ is about 2,800 miles.
Why is there such a big difference? The crow flies in a straight line, while
drivershavetofollowtheroadswhicheverwaytheytwistandturn.Thecrow
always flies in a straight line, so telling a distance is much easier using the
crow than the car’.
303 GIFT OF AGRICULTURAL LAND IS EXEMPT Para 26.2

12. All agricultural land received without consideration or for consider-
ation less than SDV shall not be taxed only if revised conditions as above
are complied with.
26.3 Gift received is exempt if immovable property is the stock-in-
trade of the recipient
If immovable property is the stock-in-trade of the business or profession
carried on by the recipient, the receipt of any immovable property
without consideration will not be taxed in his hands as income from
other sources. This is because, in such a case, immovable property will
not be regarded as capital asset under section 2(14) of the Act.
Para 26.3 IMMOVABLE PROPERTY - SCOPE OF THIS TERM 304

13. Description
Taxmann’s Taxation of Loans, Gifts & Cash Credits provides a ready
referencer along-with FAQs on the taxability arising from the following:
 Undisclosed Income – Covering all aspects and complexity involved
under Section 68 to Section 69D
 Donee-Based Taxation of Gifts of Money Received by any Person (Tax-
ation of Gifts of Money)
 Taxation of Gifts of Immovable Property Received by any Person
 Taxation of Gifts of Movable Property Received by any Person
The Present Publication is the 10th Edition which incorporates all the
changes made by the Finance Act, 2021.
Rs. 1250 | USD 48
Author : Taxmann
Edition : 10th Edition
ISBN No : 9789390831661
Date of Publication : April 2021
Weight (Kgs) : 0.46
No. of papers : 440
Taxation of
Loans Gifts &
Cash Credits
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