We have a joint family. We want to divide our jewellery. Can we pool in and then divide the jewellery or can we give gifts to each other? Now that there is no gift-tax we want to use this opportunity. How should we go about it. Please advise.
Since jewellery is owned jointly by the family, the question of pooling in the same should not arise. To this extent the query is unclear. There is no bar in gifting jewellery owned individually to family members and there would be no tax liability as there is no law imposing tax on gifts now.
You answer several questions in this column. Is the assessing officer bound to follow your advise? Occasionally, the Central Board of Direct Taxes issues circulars or clarifications. How and on whose request are these issued?
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The views expressed in this column are not binding on the assessing officers. However, in the circumstances mentioned in Section 119 of the Income Tax Act, the CBDT can issue circulars or instructions for the benefit of the taxpayer, and the field officers are bound to follow even if these go against the provisions of the Act.
Two individuals, being husband and wife, floated a private limited company in 1996, subscribing Rs 1,000 each as share capital and became directors of the company. Few weeks later, they advanced an interest-free deposit of Rs 20,00,000 to the company and with that fund, the company purchased a residential house.
After the purchase in mid-1996 till March 1997, the house was unoccupied. It was decided that the house be given to both the husband and wife, who had advanced loan-free interest, to occupy the house with their family free of rent though all maintenance and municipal taxes were to be paid by the occupiers.
Incidentally, both the parties, who had advanced the loan were husband and wife and were directors as well.
Around November 1997, the lady director retired due to ill health and her two sons joined as directors but the interest-free loan continued for both husband and wife with the husband as director-cum-shareholder and the lady as shareholder only as she had resigned as director.
Her sons were staying there and they were both directors and shareholders. Both the husband and wife continue to pay the municipal tax and maintenance charges and also continue to occupy the house with their two sons and their families, free of rent.
Will such a situation create any problem in the assessment of tax for both the company and the individuals?
The facts narrated indicate that the company is merely a cover for the property which, in fact, belongs to the husband and wife