Impact of section 50CA on section 56(2)(x)

[Debtosh Dey]

Section 56(2)(x) of Income Tax Act dealing with gifts exempts certain donees (transferees) from tax on income from other sources e.g. gifts from relatives, marriage gifts, etc. Also, section 47 excludes gifts from capital gains tax in the hands of the doner (transferor).

However, it appears from Memorandum to Finance Bill (no.2) 2019 that section 50CA introduced w.e.f. 01-Apr-18 is a special provision requiring valuation of such unlisted shares, makes no exception to transactions exempted under section 56(2)(x). It is clear that memorandum seeks to amend the provisions empowering CBDT to prescribe classes of persons entitled to exemptions under these sections.

My question is : Is there any circular since issued by CBDT for the exemptions? In other words, are exempted transactions u/s 56(2)(x) protected after introduction of section 50CA?

Debtosh Dey

M.Sc (Engg), FIE, Chartered Engg (I), FCMA, FCS, LL.B.

AI Summary

Clarification Sought on CBDT Circulars for Exemptions under Sections 56(2)(x) and 50CA of Income Tax Act. Section 56(2)(x) of the Income Tax Act exempts certain gifts from taxation, such as those from relatives or for marriage, while section 47 excludes gifts from capital gains tax for the giver. However, section 50CA, effective from April 1, 2018, requires valuation of unlisted shares without exceptions for transactions exempted under section 56(2)(x). The Finance Bill 2019 memorandum suggests amendments allowing the CBDT to specify exempted persons. The query seeks clarification on whether any CBDT circulars have been issued to protect these exemptions after section 50CA's introduction.