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THE GIFT-TAX ACT, 1958

Title : THE GIFT-TAX ACT, 1958

Year : 1958



1*[(1) With a view to rectifying any mistake apparent from the record-

(a) The 2*[Assessing Officer] may amend any order of assessment or of refund or any other order passed by him;

3*[(aa) A gift-tax authority may amend any intimation sent by it under sub-section (1) of section 15 or enhance or reduce the amount of refund granted by it under that sub-section;]

4*[(b) The Deputy Director or Deputy Commissioner or Director or Commissioner or Deputy Commissioner (Appeals) or Commissioner ( Appeals) may amend any order passed by him under section 17A;

(c) The Deputy Commissioner (Appeals) or Commissioner (Appeals) may amend any order passed by him under Section 22 5[***];

(d) The Commissioner may amend any order passed by him under section 24;

(e) The Appellate Tribunal may amend any order passed by it under section 23 or section 25.]

(2) Subject to other provisions of this section, the authority concerned-

(a) May make an amendment under sub-section (1) of its own motion; and

(b) Shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the 6*[Deputy Commissioner (Appeals)] 7*[or the Commissioner (Appeals)] or the Appellate Tribunal by the 2*[Assessing Officer] also.

(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

(4) Where an amendment is made under this section, an order shall be passed in writing by the gift-tax authority concerned.

(5) Subject to the provisions of sub-section (2) of 8[section 33A], where any such amendment has the effect of reducing the assessment, the 2*[Assessing Officer] shall make any refund which may be due to such assessee.

(6) Where any such amendment has the effect of enhancing the assessment or reducing are fund already made, the 2*[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 31 and the provisions of this Act shall apply accordingly.

(7) No amendment under this section shall be made after the expiry of four years 9*[from the end of the financial year in which the order sought to be amended was passed].]

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1. Substituted by Act 53 of 1962, section 26 w.e.f. 1-4-1963.

2. Substituted by Act 4 of 1988, section 161, for "Gift-tax Officer" w.e.f. 1-4-1988.

3. Inserted by Act 4 of 1988, section 181 w.e.f. 1-4-1989.

4. Substituted by Act 4 of 1988, section 186 (3) w.e.f. 1-4-1989.

5. The words "or section 22A" omitted by Act 3 of 1989, section 91 w.e.f. 1-4-1989.

6. Substituted by Act 4 of 1988, section 161, for "Appellate Assistant Commissioner" w.e.f. 1-4-1988.

7. Inserted by Act 29 of 1977, section 39 and Schedule V, Pt III w.e.f. 10-7-1978.

8. Substituted by Act 5 of 1964, section 52 (c), for "section 33" w.e.f. 1-4-1963.

9. Substituted by Act 67 of 1984, section 76, for "from the date of the order sought to be amended" w.e.f. 1-10-1984.

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(1) If any person fails without reasonable cause,-

(a) To furnish in due time any return of gifts under this Act;

(b) To produce, cause to be produced, on or before the date mentioned in any notice under 1[* * *] sub-section (4) of section 15, such accounts, records and documents as are referred to in the notice;

2[***] he shall, on conviction before a magistrate, be punishable with fine which may extend to rupees ten for every day during which the default continues.

(2) If a person makes a statement in a verification in any return of gifts furnished under this Act or in a verification mentioned in section 22, 23or 25 which is false, and which he either knows ,or believes to be false, or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to one year, or with fine which may extend to rupees one thousand, or with both.

3*(2A) If a person abets or induces in any manner another person to make and deliver an account, statement or declaration relating to any gifts chargeable to tax which is false and which he either knows to be false or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to six months or with fine which may extend to one thousand rupees or with both.]

4*[(3) A person shall not be proceeded against for an offence under this Act except with the previous sanction of the Commissioner or Commissioner (Appeals):

Provided that the Chief Commissioner or, as the case may be, Director General may issue such instructions or directions to the aforesaid gift-tax authorities as he may deem fit for institution of proceedings under this sub-section.

(4) Any such offence may, either before or after the institution of proceedings, be compounded by the Chief Commissioner or Director-General.]

5*[6*[Explanation 1].- For the purposes of this section, "Magistrate" means a Presidency Magistrate or a Magistrate of the first class.]

7*[Explanation 2.-For the removal of doubts, it is hereby declared that the powers of the Board to issue orders, instructions or directions under this Act shall include and shall be deemed always to have included the power to issue instructions (including instructions or directions to obtain the previous approval of the Board) to other gift-tax authorities for the proper composition of offences under this section.]

35A - Offences by companies

8*[(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.-For the purposes of this section,-

(A) "Company" means a body corporate, and includes-

(i) A firm, and

(ii) An association of persons or a body of individuals, whether incorporated or not; and

(b) "Director", in relation to-

(i) A firm, means a partner in the firm,

(ii) An association of persons or a body of individuals, means any member controlling the affairs thereof.

35B - Offences by Hindu undivided families

(1) Where an offence under this Act has been committed by a Hindu undivided family, the Karta thereof shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render the karta liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (I), where an offence under this Act has been committed by a Hindu undivided family and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any member of the Hindu undivided family, such member shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

35C - Section 360 of the Code of Criminal Procedure, 1973, and the Probation of Offenders Act, 1958, not to apply

Nothing contained in section 360 of the Code of Criminal Procedure, 1973 (2 of 1974), or in the Probation of Offenders Act, 1958 (20 of 1958), shall apply to a person convicted of an offence under this Act unless that person is under eighteen years of age.]

35D - Presumption as to culpable mental state

9*[(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

Explanation.-In this sub-section, "culpable mental state" includes intention, motive or knowledge of a fact, or belief in, or reason to believe, a fact.

(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.]

35E - Proof of entries in records or documents

10*[Entries in the records or other documents in the custody of a gift-tax authority shall be admitted in evidence in any proceedings for the prosecution of any person for an offence under this Act, and all such entries may be proved either by the production of the records or other documents in the custody of the gift-tax authority containing such entries, or by the production of a copy of the entries certified by the gift-tax authority having custody of the records or other documents under its signature and stating that it is a true copy of the original entries and that such original entries are contained in the records or other documents in its custody.]

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1.The words "sub-section(2) or" omitted by Act 41 of 1975, section 119(i) w.e.f. 1-4-1976.

2. Clause (c) omitted by Act 41 of 1975, section 119(ii) w.e.f. 11-4-1976.

3. Inserted by Act 53 of 1962, section 27 (ii) w.e.f. 1-4-1963.

4. Substituted by Act 49 of 1991, section 90(a) w.e.f. 1-10-1991.

5. Substituted by Act 53 of 1962, section 27(ii) w.e.f. 1-4-1963.

6. Explanation re-numbered as explanation 1 by Act 49 of 1991, section 90(b)w.r.e.f. 1-4-1963.

7. Inserted by Act 49 of 1991, section 90(b) w.r.e.f. 1-4-1958.

8. Inserted by Act 41 of 1975, section 120 w.e.f. 1-10-1975.

9. Inserted by Act 46 of 1986, section 41 w.e.f. 10-9-1986.

10. Inserted by Act 3 of 1989, section 92 w.e.f. 1-4-1989.

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1*[(1) The 2*[Assessing Officer], the 3*[Deputy Commissioner (Appeals)], 4*[the Commissioner (Appeals),] the 5[Chief Commissioner or Commissioner] and the Appellate tribunal shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:-

(a) Discovery and inspection;

(b) Enforcing the attendance of any person, including any officer of a banking company and examining him on oath;

(c) Compelling the production of books of account and other documents; and

(d) Issuing commissions.

6*[(1A) If the Director-General or Director or Deputy Director or Assistant Director has reason to suspect that any gifts chargeable to tax under this Act have been concealed, or are likely to be concealed, by any person or class of persons within his jurisdiction, then for the purposes of making any inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the gifts-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other gift-tax authority.]

5[***]

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1. Substituted by Act 53 of 1962, section 28 w.e.f. 1-4-1963.

2. Substituted by Act 4 of 1988, section 161, for "Gift-tax Officer" w.e.f. 1-4-1988.

3. Substituted by Act 4 of 1988, section 161, for "Appellate Assistant Commissioner" w.e.f. 1-4-1988.

4. Inserted by Act 29 of 1977, section 39 and Schedule V, Pt. III w.e.f. 10-7-1978.

5. Sub-section (2) omitted by Act 4 of 1988, section 182(b) w.e.f. 1-4-1989.

6. Inserted by Act 26 of 1988, section 70 w.e.f. 1-6-1988.

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1*[Where, for the purposes of this Act, it appears necessary for any gift-tax authority to obtain any statement or information from any person or banking company,] 2*[such gift-tax authority] may serve a notice requiring such person, on or before a date to be therein specified, to furnish such statement or information on the points specified in the notice, and that person shall, notwithstanding anything in any law to the contrary, be bound to furnish such statement or information to 2*[such gift-tax authority]:

Provided that no legal practitioner shall be bound to furnish any statement or information under this section based on any professional communications made to him otherwise than as permitted by section 126 of the Indian Evidence Act, 1872(1 of 1872).

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1. Substituted by Act 4 of 1988, section 183 (a), for certain words w.e.f. 1-4-1989.

2. Substituted by Act 4 of 1988, section 183 (b), for "the Gift-tax Officer" w.e.f. 1-4-1989.

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Whenever in respect of any proceeding under this Act any gift-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises such jurisdiction, the authority so succeeding may continue the proceeding from the stage at which the proceeding was left by this predecessor:

1*[Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.]

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1. Inserted by Act 53 of 1962, section 29 w.e.f. 1-4-1963.

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1*[In computing the period of limitation prescribed for an appeal or an application under this Act, the day on which the order complained of was served and if the assessee was not furnished with a copy of the order when the notice of the order was served upon him, the time requisite for obtaining a copy of such order, shall be excluded.]

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1. Substituted by Act 53 of 1962, section 30 w.e.f. 1-4-1963.

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(1) A notice or a requisition this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908).

(2) Any such notice or requisition may, in the case of a firm or a Hindu undivided family, be addressed to any member of the firm or to the manager or any adult male member of the family, and in the case of a company or association of persons be addressed to the principal officer thereof.

1*[(3) After a finding of total partition has been recorded by the 2*[Assessing Officer] under section 20 in respect of any Hindu family, notices under this Act in respect of the gifts made by the family shall be served on the person who was the last manager of the Hindu family, or if such person is dead, then on all surviving adults who were members of the Hindu family immediately before the partition.

(4) Where a firm or other association of persons is dissolved, notices under this Act in respect of the gifts made by the firm or association may be served on any person who was a partner (not being a minor) or member of the association, as the case may be, immediately before its dissolution.]

3[***]

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1.Inserted by Act 53 of 1962, section 31 w.e.f. 1-4-1963.

2.Substituted by Act 4 of 1988, section 161, for "Gift-tax Officer" w.e.f. 1-4-1988.

3.Section 41 omitted by Acts of 1964, section 52 (e) w.e.f. 1-4-1964. Earlier it was Substituted by Act 53 of 1962, section 32 w.e.f. 1-4-1963.

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1[***]

41A - Publication of information respecting assessees

2*[(1) If the Central Government is of opinion that it is necessary or expedient in the public interest to publish the names of any assessees and any other particulars relating to any proceedings 3*[or prosecutions] under this Act in respect of such assessees, it may cause to be published such names and particulars in such manner as it thinks fit.

4*[(2) No publication under this section shall be made in relation to any penalty imposed under this Act until the time for presenting an appeal to the 5*[Deputy Commissioner (Appeals)] 6*[or, as case may be, the Commissioner (Appeals)] has expired without an appeal having been presented or the appeal, if presented, has been disposed of.]

Explanation.- In the case of a firm, company or other association of persons, the names of the partners of the firm, directors, managing agents, secretaries and treasurers, or managers of the company, or the members of the association, as the case may be, may also be published if, in the opinion of the Central Government, the circumstances of the case justify it.

41B - Disclosure of information respecting assessees

7*[Where a person makes an application to the 8*[Chief Commissioner or Commissioner] in the prescribed form for any information relating to any assessee in respect of any assessment made under this Act, the 8*[Chief Commissioner or Commissioner] may, if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for in respect of that assessment only and his decision in this behalf shall be final and shall not be called in question in any court of law.]

41C - Return of gifts etc., not to be invalid on certain grounds

9*[No return of gifts, assessment, notice summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of gifts, assessment, notice, summons or other proceeding, if such return of gifts, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.]

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1. Section 41 omitted by Acts of 1964, section 52 (e) w.e.f. 1-4-1964. Earlier it was Substituted by Act 53 of 1962, section 32 w.e.f. 1-4-1963.

2. Section 41A Substituted by Act 5 of 1964, section 52 (f) w.e.f. 1-4-1964. Earlier it was Inserted by Act 28 of 1960 section 13 w.e.f. 1-4-1960 and was amended by Act 53 of 1962, section 33 w.e.f. 1-4-1963.

3. Inserted by Act 41 of 1975, section 121 (i) w.e.f. 1-10-1975.

4. Substituted by Act 41 of 1975, section 121 (ii) w.e.f. 1-10-1975.

5. Substituted by Act 4 of 1988, section 161, for "Appellate Assistant Commissioner" w.e.f. 1-4-1988.

6. Inserted by Act 29 of 1977, section 39 and Schedule V, Pt. III w.e.f. 10-7-1978.

7. Section 41B Substituted by Act 5 of 1964, section 52 (f) w.e.f. 1-4-1964. Earlier it was Inserted by Act 28 of 1960, section 13 w.e.f. 1-4-1960.

8. Substituted by Act 4 of 1988, section 161, for "Commissioner" w.e.f. 1-4-1988.

9. Inserted by Act 41 of 1975, section 122 w.e.f. 1-10-1975.

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No suit shall lie in any civil court to set aside or modify 1*[any proceeding taken or order made] under this Act, and no prosecution, suit or other legal proceeding shall lie against 2*[the Government or] any officer of the Government for anything in good faith done or intended to be done under this Act.

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1. Substituted by Act 26 of 1988, section 71, for "any order made" w.e.f. 1-3-1988. Earlier the words "any order made" were Substituted by Act 11 of 1987, section 91 w.e.f. 1-3-1987.

2. Inserted by Act 5 of 1964, section 52 (g) w.e.f. 1-4-1964.

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1*[An assessee who is entitled to or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any proceeding under this Act, except where he is required under this Act to attend in person, may attend by a person who would be entitled to represent him before any Income-tax authority or the Appellate Tribunal under section 288 of the Income-tax Act.]

43A - Appearance by registered valuer in certain matters

2*[Any assessee who is entitled or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any matter relating to the valuation of any asset, except where he is required under this Act to attend in person, may attend by a registered valuer.

Explanation-In this section "registered valuer" has the same meaning as in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957)].

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1. Substituted by Act 53 of 1962, section 34 w.e.f. 1-4-1963a

2. Inserted by Act 45 of 1972, section 24 w.e.f. 1-1-1973.

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1*[The Central Government may enter into an agreement with the Government of any reciprocating country-

(a) For the avoidance or relief of double taxation with respect to gift-tax payable under this Act and under the corresponding law in force in the reciprocating country, or

(b) For exchange of information for the prevention of evasion or avoidance of gift-tax chargeable under this Act or under the corresponding law in force in that country or investigation of cases of such evasion or avoidance, or

(c) For recovery of tax under this Act and under the corresponding law in force in that country,and may, by notification in the Official Gazette, make such provision as may be necessary for implementing the agreement.]

Explanation.- The expression "reciprocating country" for the purposes of this Act means any country which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating country.

44A - Rounding off of taxable gifts

2*[The amount assessed in accordance with the foregoing provisions of this Act as being the value of all taxable gifts shall be rounded off to the nearest multiple of ten rupees and, for this purpose, any part of a rupee consisting of paise shall be ignored and thereafter, if such amount is not a multiple of ten rupees, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and, if the last figure is less than five, the amount shall be reduced to the next lower amount which is a multiple of ten; and the amount so rounded off shall be deemed to be the value of all taxable gifts of the assessee for the purposes of this Act:

44B - Rounding off of tax, etc

The amount of gift-tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act, shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee, and if such part is less than fifty paise, it shall be ignored.]

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1. Substituted by Act 16 of 1972, section 54 w.e.f. 1-4-1972.

2. Inserted by Act 42 of 1970, section 70 w.e.f. 1-4-1971.

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1*[No tax shall be levied under this Act in respect of gifts made by]-

2*[(a) A company in which the public are substantially interested;

(b) Any company to an Indian company in a scheme of amalgamation;]

(e) Any institution or fund the income whereof is exempt from income-tax under 3[section 11 or section 12] of Income-tax Act.

4*[Explanation 1.-For the purposes of clause (b) the term "amalgamation" shall have the meaning assigned to it in clause (1B) of section 2 of the Income-tax Act.]

5*[Explanation 3.-For the removal of doubts, it is hereby declared that the exemption admissible under clause (e) in relation to gifts made by an institution or fund referred to in that clause shall not be denied merely on either or both of the following grounds, namely:-

(i) That, subsequent to the gift, any part of the income of the institution or fund has become chargeable to tax due to non-compliance with any of the provisions of 6*[section 11 or section 12 or section 12A] of the Income-tax Act;

(ii) That, under clause (c) of sub-section (1) of section 13 of the Income-tax Act, the exemption under 6*[section 11 or section 12] of that Act is denied to the institution or fund in relation to any income arising to it from any investment referred to in clause (h) of sub-section (2) of section 13 of the said Act where the aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed five per cent, of the capital of that concern.]

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1. Substituted by Act 4 of 1988, section 184(a), for "The provisions of this Act shall not apply to gifts made by" w.e.f. 1-4-1984.

2. Substituted by Act 4 of 1988, section 184 (b) w.e.f. 1-4-1989.

3. Substituted by Act 16 of 1972, section 55(a), for "section 11" w.e.f. 1-4-1973. Earlier "section III" was Substituted, by Act 53 of 1962 section 35, for" clause (i) of subs-section 3 of section 4: w.ef. 1-4-1963.

4. Substituted by Act 3 of 1989, section 93 w.e.f. 1-4-1989, for Explanations 1 and 2. Earlier Explanation was remembered as Explanation 1 and Explanation 2 was Inserted by Act 20 of 1967, section 35 (8) (ii) w.e.f. 1-4-1967.

5. Inserted by Act 32 of 1971 section 37(c) w.e.f. 1-4-1971.

6. Substituted by Act 16 of 1972, section 55(b)< for "section 11" w.e.f. 1-4-1973.

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(1) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, rules made under this section may provide for-

(a) The manner in which the value of any property may be determined;

(b) The form in which returns under this Act shall be made and the manner in which they shall be verified;

(c) The form in which appeals and applications under this Act may be made, and the manner in which they shall be verified;

1*[(cc) the circumstances in which, the conditions subject to which and the manner in which, the 2[Deputy Commissioner (Appeals)] 3*[or the Commissioner (Appeals)] may permit an appellant to produce evidence which he did not produce or which he was not allowed to produce before the 4[Assessing Officer];

(d) The form of any notice of demand under this Act;

(e) The refunds of gift-tax paid in respect of gifts which are revoked on the happening of any specified event which does not depend on the will of the donor or of any amount paid under section 18;

5*[(ee) The procedure to be followed in calculating interest payable by assessees or interest payable by the Government to assessees under any provision of this Act, including the rounding off of the period for which such interest is to be calculated in cases where such period includes a fraction of a month, and specifying the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored:]

(f) The areas for which lists of values may be drawn up;

(g) Any other matter which has to be, or may be, prescribed for the purposes of this Act.

6*[(3) The power to make rules conferred by this section shall include the power to give retrospective effect, from a date not earlier than the date of commencement of this Act, to the rules or any of them and, unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect shall be given to any rule so as to prejudicially affect the interests of assessees.]

7*[(4) The Central Government shall cause every rule made under this Act to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session 8*[or in two or more successive sessions], and, if, before the expiry of the session 9*[immediately following the session or the successive sessions aforesaid], both Houses agree in making any modifications in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]

46A - Power to make exemption, etc., in relation to certain Union territories

10*[If the Central Government considers it necessary or expedient so to do for avoiding any hardship or anomaly or removing any difficulty that may arise as a result to the application of this Act to the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, or in the case of the Union territory of Pondicherry, for implementing any provision of the Treaty of Cession concluded between France and India on the 28th day of May, 1956, the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of gift-tax in favour of any class of gifts or in regard to the whole or any part of the gift made by any assessee or class of assessees:

Provided that the power conferred by this section shall not be exercisable after the 31st day of March, 1967, except for the purpose of rescinding an exemption, reduction or modification already made.]

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1. Inserted by Act 16 of 1972, section 56 w.e.f. 1-4-1972.

2. Substituted by Act 4 of 1988, section 161, for "Appellate Assistant Commissioner" w.e.f. 1-4-1988.

3. Inserted by Act 29 of 1977, section 39 and Sch. V, Pt III w.e.f. 10-7-1978.

4. Substituted by Act 4 of 1988, section 161, for "Gift-tax Officer" w.e.f. 1-4-1988.

5. Inserted by Act 42 of 1970, section 71 w.e.f. 1-4-1971.

6. Substituted by Act 26 of 1974, section 17 w.e.f. 18-8-1974.

7. Substituted by Act 53 of 1962, section 36 w.e.f. 1-4-1963.

8. Substituted by Act 41 of 1975, section 123 (i), for "or in two successive sessions" w.e.f. 1-4-1976.

9. Substituted by Act 41 of 1975, section 123 (ii), for "in which it is so laid or the session immediately following" w.e.f. 1-4-1976.

10. Inserted by the Taxation Laws (Extension to Union Territories) Regulation, 1963, section 3 and Schedule w.e.f. 1-4-1963.

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1*[(1) If any difficulty arises in giving effect to the provisions of this Act as amended by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), the Central Government may, by order, do anything not inconsistent with such provisions for the purpose of removing the difficulty:

Provided that no such order shall be made after the expiration of three years from the 1st day of April, 1988.

(2) Every order made under sub-section (1) shall be laid before each House of Parliament.]

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1. Inserted by Act 4 of 1988, section 185 w.e.f. 1-4-1988.

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Schedule

1*[2*[THE SCHEDULE-I]
3*[[See section 3(1)]]

Rates of Gift-tax

(1)  Where the value of all taxable gifts does not exceed Rs. 20,000     5 percent. of the value of such gifts;

(2) Where the value of all taxable gifts exceeds, Rs. 20,000 but does not exceeds Rs. 50,000     Rs. 1,000 plus 10 percent. of the amount by which the value of such gifts exceeds Rs. 20,000;

(3) Where the value of all taxable gifts exceeds, Rs. 50,000 but does not ex¬ceed Rs. 1,00,000     Rs.4,000 plus 15 percent. of the amount by which the value of such gifts exceeds Rs. 50,000;

(4) Where the value of all taxable gifts exceeds Rs. 1,,00,000 hut does not ex-ceed Rs.2,00,000     Rs. 11,500 plus 20 percent. of the amount by which the value of such gifts exceeds Rs. 1,00,000;

(5) Where the value of all taxable gifts ex¬ceeds Rs. 2,00,000 but does not exceed Rs. 5,00,000     Rs. 31,500 plus 25 percent. of the amount by which the value of such gifts exceeds Rs. 2,00,000;

(6) Where the value of all faxable gifts exceeds Rs. 5,00,000 but does not ex-ceed Rs. 10,00,000     Rs. 1,06,500 plus 30 per cent. of the amount by which the value of such gifts exceeds Rs. 5,00,000;
 
(7) Where the value of all taxable gifts exceeds Rs. 10,00,000 but does not exceed Rs. 15,00,000     Rs. 2,56,500 plus 40 per cent. of the amount by which the value of such gifts exceeds Rs. 10,00,000;

(8) Where the value of all taxable gifts exceed Rs. 15,00,000 but does not ex-ceed Rs. 20,00,000     Rs. 4,56,500 plus 50 per cent. of the amount by which the value of such gifts exceeds Rs. 15,00,000;

(9) Where the value of all taxable gifts exceeds Rs. 20,00,000     Rs. 7,06,500 plus 75 percent, of the amount by which value of such gifts exceeds Rs. 20,00,000.]

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1. Substituted by Act 19 of 1970, section 27 (c) w.e.f. 1-4-1971. Earlier the Schedule was Substituted by Act 13 of 1966 section 41(c) w.e.f. 1-4-1966 and still earlier Substituted by Act 5 of 1964 section 52 (h) w.e.f. 1-4-1964.

2. The Schedule renumbered as Schedule I by Act 3 of 1989, section 94 w.e.f. 1-4-1989.

3. Substituted by Act 23 of 1986, section 46, for "(see. section 3)" w.e.f. 1-4-1987.

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Schedule

1*[THE SCHEDULE II]

[See section 6(1)

RULES FOR DETERMINING THE VALUE OF PROPERTY GIFTED
2*[1. Value of gifted property how to determined.-

3*[Subject to the provisions of rules 2 to 7, the value of any property], other than cash, transferred by way of gift shall, for the purposes of this Act, be determined in accordance with the provisions of Schedule III to 4*[the Wealth-lax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act)], which shall apply subject to the following modifications, namely:-
In the said Schedule,-

(a) References by whatever form of words to the Wealth-tax Act shall be construed as references to this Act;

(b) In rule 5, the reference to the year ending on the valuation date shall be construed as a reference to the previous year as defined in this Act;

(c) Save as provided in clause (b), references, to the valuation date shall be construed as references to the date on which the gift was made;

(d) Reference to section 7 of the Wealth-tax Act shall be construed as references to section 6 of this Act;

(e) References to section 16A of the Wealth-tax Act shall be construed as references to subsection (6) of section 15 of this Act
5*[2. Quoted shares and debentures of companies.-

The value of an equity share or a preference share in any company or a debenture of any company which is a quoted share or a quoted debenture shall be taken as the value quoted in respect of such share or debenture on the date on which the girt was made or where there is no such quotation on such date, the quotation on the date closest to such date and immediately preceding such date.

Explanation-The words and expressions used in this rule and rules 3 to 7 but not defined and defined in rule 2 of Schedule 111 of the Wealth-tax Act shall have the meanings respectively assigned to them in rule 2 of that Schedule.

3. Special provision for quoted shares of companies.-

Notwithstanding anything in rule 2, the value of an equity share in any company which is a quoted share may, at the option of the assessee or a company, be taken on the basis of the average of the value quoted on the 31st day of March immediately preceding the assessment year and the values quoted in respect of such share on the said dates in relation to each of the immediately preceding nine assessment years, or where there is no such quotation on any of the aforesaid dates, the quotation on the date closest to the said date and immediately preceding such date:

Provided that where for any reason the value of such share is quoted in relation to lesser number of assessment years than the said nine assessment years, then the value or values so quoted shall be taken into account for the purposes of the aforesaid average:

Provided further that where the assessee opts for the average of the values so quoted, he shall get such values certified by an accountant and attach the certificate to the return of gifts in respect of the relevant assessment year.

Explanation.-For the purposes of this rule, "accountant" shall have the same meaning as in the Explanation below sub-section (2) of section 288 of the Income-tax Act.

4. Unquoted preference shares.-

(1) Subject to the provisions of sub-rule (2), the value of an unquoted preference share in any company shall,-

(a) Where the preference share is issued before the date on which the gift was made at a rate of dividend of not less than eight per cent., be the paid-up value of such share; and

(b) Where the preference share is issued before the said date at a rate of dividend of less than eight per cent., be the adjusted paid-up value of such share.

(2) Where no dividend has been paid in respect of an unquoted preference share by any company continuously for not less than three accounting years ending on the date on which the gift was made or, in a case where the accounting year of the company does not end on that date, for not less than three continuous accounting years ending on a date immediately before the date on which the gift was made, the paid-up value or, as the case may be, the adjusted paid-up value shall be reduced-

(a) In the case of a non-cumulative preference share, as indicated in the Table below:-

TABLE

---------------------------------------------------------------------------
Number of accounting years ending on the date on which the gifts was made or, in a case where the accounting year does not end on that date, the number of accounting years ending on a date immediately preceding the date on which the gift was made, for
which no dividend has been paid    Rate of reduction
 
----------------------------------------------------------------------------
(1)                                  (2)
----------------------------------------------------------------------------
Three years
Four years
Five years
Six years and above    10%
20%
30%
40%    of the paid-up value or the
adjusted paid-up value, as the
case may be.
 
(b) In the case of a cumulative preference share, by one-half of the rates specified in the aforesaid Table.

Explanation-For the purposes of this rule, "adjusted paid-up value", in relation to a preference share, means an amount which bears to the paid-up value of the preference share the same proportion as the stipulated rate of dividend [being the rate of dividend on the preference share specified in the terms of issue of such share, and in a case where such dividend is required to be increases under the provisions of section 3 of the Preference Shares (Regulation of Dividends) Act, 1960 (63 of 1960), the rate of dividend as so increased] on such share bears to the rate of eight per cent.

5. Unquoted equity shares in companies other than investment companies.-

(1) The value of an unquoted equity share in any company, other than an investment company, shall be determined in the manner set out in sub-rule (2).

(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet; the result multiplied by the paid-up value of each equity share shall be the break up value of each unquoted equity share, and an amount equal to eighty per cent. of the break-up value so determined shall, be the value of the unquoted equity share for the purposes of this Act.

(3) For the purposes of sub-rule (2),-

(a) The following amounts shown as assets in the balance-sheet shall not be treated as assets, namely:-

(i) Any amount paid as advance tax under the Income-tax Act;

(ii) Any amount shown in the balance-sheet including the debit balance of the profit and loss account or the profit and loss appropriation account which does not represent the value of any asset;

(b) The following amounts shown as liabilities in the balance-sheet shall not to be treated as liabilities, namely:-

(i) The paid-up capital in respect of equity shares;

(ii) The amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date on which the gift was made at a general body meeting of the company;

(iii) Reserves, by whatever name called, other than those set apart towards depreciation; (iv) credit balance of the profit and loss account;

(v) Any amount representing provision for taxation, other than the amount referred to in sub-clause (i) of clause (a), to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

(vi) Any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

Explanation.-For the purposes of this rule "balance-sheet", in relation to any company, means the balance-sheet of such company (including the Notes annexed thereto and forming part of the accounts) as drawn up on the date on which the gift was made and, where there is no such balance-sheet, the balance-sheet drawn up on a date immediately preceding that dale, and, in the absence of both, the balance-sheet drean up on a date immediately after the date on which the gift was made.

6. Unquoted equity shares in investment companies.-

(1) Subject to rule 7, the value of an unquoted equity share in an investment company shall be determined in the manner specified in sub-rule (2).

(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total paid-up equity share capital of the company as shown in the balance sheet, and the result multiplied by the paid-up value of each equity share shall be the value of the unquoted equity share in that investment company for the purposes of this Act,

(3) For the purposes of sub-rule (2), the value of an asset disclosed in the balance-sheet of the company shall be taken to be its value determined in accordance with the rules as applicable to that particular asset and, in the absence of any such rule, the value of such asset shall be its value as determined under rule 20 of Schedule 111 of the Wealth-tax Act.

(4) For the purposes of this rule,-

(a) "Balance-sheet'' has the same meaning as in rule 5;

(b) The amounts referred to in sub-rule (3) of rule 5 shall not be treated as assets or liabilities.

(5) For the purposes of facilitating the valuation of unquoted equity shares under this rule and rule 7, the company concerned shall have such valuation made by its auditors appointed under section 224 of the Companies Act, 1956 (1 of 1956), and a certificate of the auditors relating to such valuation in the prescribed form shall be furnished to the Assessing Officer and the shareholders of the company; and the valuation made by the auditors shall be taken into account in the assessment of the shareholders of the company.

7. Unquoted equity shares in interlocked companies.-

(1) The value of an unquoted equity share in one of the two interlocked companies held by the other interlocked company for the purposes of rule 6 shall be equal to the paid-up value of such share or the value determined under sub-rule (2), whichever is higher.

(2) For the purpose of sub-rule (1), the aggregate value of all the equity shares in interlocked company shall be arrived at by multiplying the maintainable profits of such company by-

(a) The fraction 100/8.5 in a case where the gross total income of the company consists, to the extent of not less than 51 percent of income chargeable under the head "Income from house property" under the Income-tax Act; or

(b) The fraction 100/10, in the case of any other interlocked company,and the resultant amount divided by the number of such equity shares shall be the value of such an equity share in such company.

(3) The maintainable profits of the company, for the purpose of sub-rule (2), shall be computed in the following manner, namely:-

(a) The book profits of the company for the five accounting years of the company immediately preceding the date on which the gift was made shall first be ascertained;

(b) Adjustments shall be made to the book profits for each of the said five years for all nonrecurring and extraordinary items of income and expenditure and losses;

(c) Adjustments shall be made to the book profits for expenditure which is not of a revenue nature but is debited in the accounts and for receipts which are in the nature of revenue receipts but are not accounted for in the profit and loss account;

(d) Any development rebate or investment allowance debited in the books of account shall be added back to the book profits;

(e) The tax liability of the company on the book profits, arrived at after the adjustments at items (a), (b), (c) and (d), shall be deducted from such book profits;

(f) Amounts required for paying dividends on preference share or shares with prior rights shall be deducted from such book profits;

(g) The aggregate of the book profits for the accounting years so arrived at, divided by 5, shall be the maintainable profits of the company.

Explanation.-For the purposes of this rule, "interlocked companies" means any two investment companies each of which holds shares in the other company.]

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1. Inserted by Act 3 of 1989, section 94 w.e.f. 1-4-1989.

2. Numbered by Act 38 of 1993 section 42 w.e.f. 1-4-1993.

3. Substituted by Act 28 of 1993, section 42 (a) (i), for "The value of any property".

4. Substituted by Act 38 of 1993, section 42(a)(ii), for "the Wealth-tax Act" w.e.f. 1-4-1993.

5 . Inserted by Act 38 of 1993, section 42 (b) w.e.f. 1-4-1993.

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Last updated on July, 2016

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